Richmond Engineering in China Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Richmond Engineering in China

Problem Statement

Finn is in a dilemma that how she can tackle the deviations in drafted contract from original agreement, which was reached after prolonged negotiations; meanwhile, she has to make sure that her decision works towards the best interest of Richmond Engineering and impact the efforts of entering into China.

Analysis

Current State of Joint Venture Relationship

However, the current relationship between Finn and the three of potential Chinese joint ventures partners is quite challenging because of the aggressive negotiation approach of Chinese. Moreover, Chinese negotiators have used group of 28 Chinese negotiators in order to complete the negotiation process, which shows that this has really undermined the negotiation power of Finn.

Factors of International Joint Venture

Trust

Finn has been negotiating previously with Chinese representatives and she knows that they are hard negotiators; hence, they are not willing to trust on foreigners. Moreover, she has been facing the Chinese tactics of monitoring her activities in order to negotiate good terms of agreements; which again confirms that they lack trust in Finn and Richmond Engineering.

Mutually Shared Goals

The goals of joint venture are mutually shared, where township government will provide the land and infrastructure, Minzhong will contribute capital investment and marketing of poles, Beifang will supply the raw steel, and Richmond Engineering will use the technology and skills in production of poles and will train the Chinese personnel in order to make the joint venture successful. Moreover, each partner is committed towards the accomplishment of mutual goals.

Control Issues

Richmond Engineering is looking for an opportunity to enter Chinese market and the proposed joint venture is the first step towards establishing Richmond Engineering’s own manufacturing facility; therefore, Richmond Engineering may show its concern of about 35% and 30% equity interest of Beifang and Minzhong respectively. As it wants the majority control of joint venture in order to buyback the venture in future, hence, Richmond Engineering may argue on the distribution of equity share.

Tactics to Counter Aggressive Chinese Approach to Negotiation

Finn should show determination when faced with the aggressive negotiation and she should clearly state her point without showing flexibility unless the Chinese negotiators make the agreement according to her point or at least show some compromise on their point. Moreover, Finn should not fix a date for signing the final contract before citing the final agreement, so that she can avoid the dilemma of signing the deviated contract within limited time.

Advice for Finn

Finn will be advised to show her concerns over the deviations and try to bring some mutually agreed changes into the final draft but this opportunity to enter into Chinese market should not be foregone whether Chinese partners agree to reconfirm the draft with negotiations or not.

However, the joint venture will bring the fringe benefits to Richmond Engineering in the form of Minzhong’s international marketing expertise in order to access Middle East market because in Middle East they are building their infrastructure; therefore, it will be an attractive market to sell steel made and custom made poles. Moreover, the joint venture will help Richmond Engineering in developing relationship with Chinese enterprises in order to overcome the trust deficit between Chinese negotiators and Richmond Engineering for future investments. Additionally, the provision of training to Chinese engineers will require extensive efforts because of the cultural and language differences but by the passage of time Richmond Engineering staff will become familiar with Chinese culture, which will help them to complete the training successfully.

Meanwhile, loosing this joint venture opportunity will a risky decision for Richmond Engineering because they have been struggling to enter Chinese

market to exploit the Asian market and the low labor cost will bring the manufacturing cost down, making its products more competitive in the Asian and Middle East market. Moreover, the conversion of Chinese RMBs into Canadian dollars will be an issue for Richmond Engineering because there is an upper limit for conversion of RMBs into foreign currency.

Discussion of Alternatives

Accept the Draft Contract with Deviations

An easy alternative for Finn will be to accept the draft contract with deviations from the agreement, which has been reached through negotiations and sign the contract with the view that once the relationship of trust is built between the Richmond Engineering and Chinese joint venture partners; they will adjust the contract terms to better suit Richmond Engineering. Moreover, the joint venture will bring other advantages such as marketing expertise of.............................

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Richmond Engineering has decided to expand in Asia, rather than trying to compete in Eastern Canada or the United States. The process of finding and qualifying prospects for joint ventures, the stages of an agreement, according to Chinese business practices, and the pressure of negotiations with the Chinese all described in detail. "Hide
by Neil Abramson, Janet X. Ai Source: Richard Ivey School of Business Foundation 13 pages. Publication Date: November 4, 1997. Prod. #: 97G021-PDF-ENG