A joint venture between Groupe Danone, a French MNE, and Wahaha Group, the largest beverage maker in China, illustrates the trials and tribulations of forming alliances. The joint venture (JV), known as the Wahaha Joint Venture Company, began in 1996 with great fanfare. By 2005, however, trouble began to brew as Danone executives suspected Wahaha CEO Qinghou Zong of operating secret companies that mimicked the JV. After protracted legal battles, the two firms decided to terminate their relationship in September 2009, with Danone selling its 51 percent stake to Wahaha. So, what went wrong? Zong and Wahaha were guilty of opportunism in setting up mirror companies. Danone, however, is not an innocent victim, since they did not have a single executive at Wahaha’s headquarters and they did not oversee day-to-day operations in China. Moreover, political tensions between China and France, stemming largely from France’s criticism of China’s human rights policies, complicated French firms’ efforts to do business in China. (Source: David Barboza “Danone Exits Chinese Venture After Years of Legal Dispute,” New York Times, September 29, 2009, B8, New York Edition, http://www.nytimes.com/2009/10/01/business/global/01danone.html; David Barbazoa and James Kanter “A Chinese Company Fights Its French Partner,” New York Times, June 13, 2007, http://www.nytimes.com/2007/06/13/business/worldbusiness/13danone.html?pagewanted=all)
With these details, discuss the following questions: What preparations leading up to the alliance could have made it more effective? Was dissolution the only viable option? Which firm is responsible for the failure of the JV, and why?
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