Case Study Presentation for MS International Marketing/Management 2010

1. Clariant & Tianjin #8 Negotiations Andy Lo Bethan Thomas BJ McCahill Daniel Malone

2. Criteria for the Joint Venture Interdependencies Analysis of Negotiations Process Future Challenges

3. The Perfect Partnership Alternative Options Balance between financial superiority and superior strategic traits Legitimacy Favourable Background Factors Complementary Expertise

4. Clariant Overview A world Leader in specialty chemicals Headquartered in Muttenz near Basel, Switzerland Approximately 17 500 employees Sales of approximately CHF 6.6 billion in 2009 International Presence on 5 Continents Four Operating Divisions... Future of the Organic Pigments Industry?

6. Higher labour costs

7. Experienced and established in dye production especially Copper Phthalocyaninespigments

8. Contact with suppliers

9. Wanted to build a new Greenfield plant

10. Wanted state of the art technology transferred to China

12. Developmentally behind larger cities

13. Low labour costs

14. Good reputation

15. Neither state nor governing Bohai group provided appropriate support

16. Promises utilities and running factory

17. Approved for JV by state

18. Estimated Payback: Less than 5 Years The Chemical Factory Tianjin No. 8.

19. Interdependencies Clariant’s prior experience in China Lower cost structures Joint Venture Law Reasons for entering China Corporate Tax Incentives Growth Potential No8’s need for investment

20. Objectives

21. Negotiations

23. Memorandum of Understanding- ensure negotiations would run smoothly

24. Problems outlined: face-to-face negotiations began.

25. Negotiations conducted over two yearsProcess

27. NEED FOR AN AGENT: Asia Link helped the two negotiating teams to communicate and understand each other better

28. No.8 violated the trust created and undermined their position in the negotiations.

29. No.8’s weaker position due to bankruptcy

30. Clariant employed a tougher stance by expecting concessions from No.8.

33. AsiaLink mediated in understanding cultural differences

34. No.8 reps more reserved and complicit to hierarchy to maintain harmony

35. Hofstede’s dimensions show high power distance for Chinese and low individualism

36. Chinese give few concessions early in negotiations

38. ClariantGermany would buy large amount of JV production = calm No.8’s desire for complex portfolio and high payout

39. Clarianttook over key management positions but left positions closer to community for No.8: Avoid appearance of takeover

40. No new sales organisation for JV

41. Decreased workforce but high severance payments

42. Clariantas JV’s majority partner (40/60)Outcomes

44. Should Clariant open a new plant in a new location or not?

45. Should Clariant strike up a new joint venture with a different partner or not?

46. Should Clariant remain in China or venture into a new country for example Vietnam?Future Challenges

47. Possible Solutions Remain in Current JV Pursue New JV within China New JV outside China

49. Chinese workers are demanding higher wages than neighboring countries so futile to simply change partners

50. Conduct preliminary assessment of low-cost alternative production markets

51. Open low-end production in Vietnam with appropriate technical staff

52. Maintain Chinese JV due to its success and proximity to huge Chinese market Recommendations

54. Demand in Europe and North America drops but emerging markets continue to grow steadily, albeit at a slower pace than during the first six months of 2008.

55. Industrialized markets such as the E.U. and U.S. will see further migration of industries to emerging markets in Asia

56. Paper pigment sales in China weakened substantially but strong sales in Indonesia and India balanced the shortfall.

57. turnaround or cut non-profitable plants, shift production closer to market needs and rationalize our production capacitiesActual Findings