Wahaha and Danone:   How (Not) to Make Allies Enemies <ul><li>Dr. Binsheng Teng </li></ul><ul><li>Cheung Kong Graduate Sch...
<ul><li>Trust: </li></ul><ul><ul><li>Goodwill Trust:   </li></ul></ul><ul><ul><ul><li>From the very beginning, Mr. Zong wa...
<ul><li>All business-transactions need to have some elements of trust – alliances are particularly so. </li></ul><ul><li>A...
<ul><li>Complementary Fit </li></ul><ul><ul><li>Providing different resources </li></ul></ul><ul><li>Supplementary Fit </l...
<ul><li>Relationship: Potential Competitors </li></ul><ul><ul><li>e.g.The US West – Time Warner alliance </li></ul></ul><u...
Alliance Formation <ul><li>Negotiation Difficulties </li></ul><ul><ul><li>51% controlled by Danone and Peregrine Investmen...
Alliance Formation <ul><li>Structure: </li></ul><ul><ul><li>Too many small joint ventures create unnecessary complication ...
Changing Situation <ul><li>For Danone: </li></ul><ul><ul><li>The Wahaha brand is being abused. </li></ul></ul><ul><ul><li>...
Possible Outcomes <ul><li>Lawsuit in Europe and the U.S. </li></ul><ul><li>Danone gives up the battle due to political and...
How to Make Allies Enemies? <ul><li>Start with someone whom you do not highly trust. </li></ul><ul><li>Start with someone ...
How to Make Allies Enemies? <ul><li>Operate an alliance with a hidden agenda. </li></ul><ul><li>Show little respect to you...
Thank You Please visit  www.CKGSB.com  to find out more about the Cheung Kong Graduate School of Business www.ChineseBusin...
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CKGSB Presents... Wahaha and Danone: How (Not) to Make Allies Enemies

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Cheung Kong Graduate School of Business' Dr. Binsheng Teng gave his views on the Wahaha-Danone relationship problems to date. To find out more about CKGSB, visit www.CKGSB.com . Or if you would like to give your thoughts on this topic, head on over to www.ChineseBusinessMagazine.com

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CKGSB Presents... Wahaha and Danone: How (Not) to Make Allies Enemies

  1. 1. Wahaha and Danone: How (Not) to Make Allies Enemies <ul><li>Dr. Binsheng Teng </li></ul><ul><li>Cheung Kong Graduate School of Business </li></ul>www.ChineseBusinessMagazine.com www.CKGSB.com
  2. 2. <ul><li>Trust: </li></ul><ul><ul><li>Goodwill Trust: </li></ul></ul><ul><ul><ul><li>From the very beginning, Mr. Zong was worried about losing control to Danone (hidden agenda). </li></ul></ul></ul><ul><ul><ul><li>The continued acquisitions of Wahaha’s competitors deepened the concern. </li></ul></ul></ul><ul><ul><li>Competence Trust: </li></ul></ul><ul><ul><ul><li>Initially Danone was highly respected as an experienced industry leader. </li></ul></ul></ul><ul><ul><ul><li>The trust was lost due to disputes over bottled water, Future Cola, and the fate of Robust. </li></ul></ul></ul>Partner Selection Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  3. 3. <ul><li>All business-transactions need to have some elements of trust – alliances are particularly so. </li></ul><ul><li>Alliances that start with a high level of trust are much more likely to be successful. </li></ul><ul><li>When inter-partner trust starts to deteriorate, it is hard to regain confidence. </li></ul><ul><li>e.g. the Microsoft – Sendo alliance </li></ul>Points Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  4. 4. <ul><li>Complementary Fit </li></ul><ul><ul><li>Providing different resources </li></ul></ul><ul><li>Supplementary Fit </li></ul><ul><ul><li>Adding similar resources </li></ul></ul>Resource Fit Wahaha and Danone: How (Not) to Make Allies Enemies In the Wahaha-Danone alliance, a complementary fit between money and local knowledge provided a solid start. www.ChineseBusinessMagazine.com www.CKGSB.com
  5. 5. <ul><li>Relationship: Potential Competitors </li></ul><ul><ul><li>e.g.The US West – Time Warner alliance </li></ul></ul><ul><li>Alliances with competitors are the most powerful and yet risky type </li></ul><ul><ul><li>Combining market power </li></ul></ul><ul><ul><li>Resource availability </li></ul></ul><ul><ul><li>Potential for conflict </li></ul></ul>Strategic Fit Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  6. 6. Alliance Formation <ul><li>Negotiation Difficulties </li></ul><ul><ul><li>51% controlled by Danone and Peregrine Investment </li></ul></ul><ul><ul><li>Joint ventures instead of direct equity investment </li></ul></ul><ul><ul><li>Wahaha runs the company, instead of joint management </li></ul></ul>Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  7. 7. Alliance Formation <ul><li>Structure: </li></ul><ul><ul><li>Too many small joint ventures create unnecessary complication for the partners. </li></ul></ul><ul><li>Structural Flexibility vs. Rigidity: </li></ul><ul><ul><li>Too much flexibility </li></ul></ul><ul><li>Control: </li></ul><ul><ul><li>Separation of ownership and management i.e. a lack of control by Danone </li></ul></ul><ul><li>No clear exit clauses </li></ul>Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  8. 8. Changing Situation <ul><li>For Danone: </li></ul><ul><ul><li>The Wahaha brand is being abused. </li></ul></ul><ul><ul><li>The joint ventures are being undermined by Mr. Zong’s own businesses. </li></ul></ul><ul><li>For Mr. Zong: </li></ul><ul><ul><li>The Wahaha brand became more valuable. </li></ul></ul><ul><ul><li>The need for capital became less urgent. </li></ul></ul><ul><ul><li>Family businesses are booming. </li></ul></ul>Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  9. 9. Possible Outcomes <ul><li>Lawsuit in Europe and the U.S. </li></ul><ul><li>Danone gives up the battle due to political and legal pressures. </li></ul><ul><li>Mr. Zong sells the various businesses to Danone. </li></ul><ul><li>These businesses are folded into the joint ventures. </li></ul><ul><li>Mr. Zong pays Danone a lump-sum and stops using the Wahaha name in other businesses. </li></ul>Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  10. 10. How to Make Allies Enemies? <ul><li>Start with someone whom you do not highly trust. </li></ul><ul><li>Start with someone who may have a major conflict of interest with yourself. </li></ul><ul><li>Negotiate an alliance that gives too much power and control to one side. </li></ul><ul><li>Form an alliance that is structurally either too rigid or too loose. </li></ul>Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  11. 11. How to Make Allies Enemies? <ul><li>Operate an alliance with a hidden agenda. </li></ul><ul><li>Show little respect to your partner. </li></ul><ul><li>Seek private benefit at the expense of public benefit. </li></ul><ul><li>Run a long term alliance with a short term perspective. </li></ul><ul><li>Aim to control your partner. </li></ul>Wahaha and Danone: How (Not) to Make Allies Enemies www.ChineseBusinessMagazine.com www.CKGSB.com
  12. 12. Thank You Please visit www.CKGSB.com to find out more about the Cheung Kong Graduate School of Business www.ChineseBusinessMagazine.com www.CKGSB.com

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