Reference no: EM133178836

In 1996, Danone, the giant French food company, entered into a joint venture for bottled water with Hangzhou Wahaha-a leading Chinese milk-based beverage company originally owned by Hangzhou city government but controlled by a local entrepreneur Zong Qinghou.

Wahaha owned 49 percent of the new venture (in exchange for contributing its trademark and four out often subsidiaries), with Danone and Peregrine (a Hong-Kong investment company) holding the rest. Following the 1998 Asian financial crisis, Danone bought out Peregrine's share and took control of the JV's board-but Mr. Zong continued to run the JV operations. Within just a few years, Wahaha became the leading bottled water brand in China-but the JV collapsed in 2007 amid unusually bitter recriminations between the two partners.

Danone accused Wahaha of competing with the JV through its other subsidiaries controlled by Zong's family but sharing the same trademark and distribution network. In turn, Wahaha accused Danone of competing against the JV by investing in other local beverage companies, and that Danone's part-time representatives on the board did not understand the reality of business in China. Indeed, when Danone attempted to take a legal action against Zong, it came out that the authorities never approved the original trademark transfer. After Zong resigned from the JV, the employees refused to recognize the authority of the new chairman appointed by Danone. To settle the dispute, Danone sold its interests in what has become nearly $2 billion business back to Wahaha at a substantial discount to its market value.

Questions:

1. Initially considered only as means of securing market access, alliances today are an integral part of global strategies in all parts of the value chain. What alliances are needed to generate new knowledge that deems increasingly important?
2. Alliances are mostly transitional entities; therefore, longevity is a poor measure of success. The aim is not to preserve the alliance at all costs but how to contribute to the organizations competitive position?
3. There are four types of alliances: complementary, learning, resource, and competitive. Alliances are dynamic, migrating from one strategic orientation to another. Very few alliances remain complementary for long. Alliances among competitors are increasingly frequent, but they are also the most complex and why?
4. The approach to HRM alliance depends largely on the strategic objectives of the partnership. How can a focus on managing the interfaces with the parent organization, as well as managing and leading internal stakeholders inside the alliance itself?
5. The firm's HRM skills and reputation are assets when exploring and negotiating alliances. The greater the expected value from the alliance, the more HR function support is required, why?