Case Study MINI-CASE: Conflict between Canadian and Venezuelan partners A Canadian engineering company and a Venezuelan firm are holding negotia- tions to set up a joint venture in Venezuela to produce and market a range of domestic electrical products. The Canadian negotiating team points out that their patents, know-how and trademark are very well known internationally and would help the IJV market its products throughout South America. The Venezuelan team responds positively to this argument and on this basis agrees to the Canadian negotiators' proposal that the IJV should pay a fee to the Canadian company to use the trademark. After several more rounds of negotiation, the two firms sign an agreement to establish a 50/50 joint venture. But the IJV starts to experience problems almost immediately. Within a few months of the IJV company's becoming operational, Canadian managers in the IJV are becoming embroiled in culturally loaded disputes with their Venezuelan counterparts. The two sides start to blame each other for poor marketing and procurement decisions and for unrealistic production sched- uling. A more basic problem is how the IJV managers can achieve a better understanding of a market that is becoming more complex by the day. Some of the complexity arises from a trickle of new government regulations, and also from intense competitive pressures as other local and foreign manufacturers jostle for a piece of the market, Matters are brought to a head when the Venezuelan parent company learns that many of the Canadian company's patents have in fact expired so that their value is considerably less than was assumed during the negotiations
Case Study MINI-CASE: Conflict between Canadian and Venezuelan partners A Canadian engineering company and a Venezuelan firm are holding negotia- tions to set up a joint venture in Venezuela to produce and market a range of domestic electrical products. The Canadian negotiating team points out that their patents, know-how and trademark are very well known internationally and would help the IJV market its products throughout South America. The Venezuelan team responds positively to this argument and on this basis agrees to the Canadian negotiators' proposal that the IJV should pay a fee to the Canadian company to use the trademark. After several more rounds of negotiation, the two firms sign an agreement to establish a 50/50 joint venture. But the IJV starts to experience problems almost immediately. Within a few months of the IJV company's becoming operational, Canadian managers in the IJV are becoming embroiled in culturally loaded disputes with their Venezuelan counterparts. The two sides start to blame each other for poor marketing and procurement decisions and for unrealistic production sched- uling. A more basic problem is how the IJV managers can achieve a better understanding of a market that is becoming more complex by the day. Some of the complexity arises from a trickle of new government regulations, and also from intense competitive pressures as other local and foreign manufacturers jostle for a piece of the market, Matters are brought to a head when the Venezuelan parent company learns that many of the Canadian company's patents have in fact expired so that their value is considerably less than was assumed during the negotiations
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Transcribed Image Text:Case Study
MINI-CASE: Conflict between Canadian and Venezuelan partners
A Canadian engineering company and a Venezuelan firm are holding negotia-
tions to set up a joint venture in Venezuela to produce and market a range of
domestic electrical products. The Canadian negotiating team points out that
their patents, know-how and trademark are very well known internationally
and would help the IJV market its products throughout South America.
The Venezuelan team responds positively to this argument and on this basis
agrees to the Canadian negotiators' proposal that the IJV should pay a fee
to the Canadian company to use the trademark. After several more rounds
of negotiation, the two firms sign an agreement to establish a 50/50 joint
venture. But the IJV starts to experience problems almost immediately.
Within a few months of the IJV company's becoming operational, Canadian
managers in the IJV are becoming embroiled in culturally loaded disputes with
their Venezuelan counterparts. The two sides start to blame each other for poor
marketing and procurement decisions and for unrealistic production sched-
uling. A more basic problem is how the IJV managers can achieve a better
understanding of a market that is becoming more complex by the day. Some
of the complexity arises from a trickle of new government regulations, and also
from intense competitive pressures as other local and foreign manufacturers
jostle for a piece of the market,
Matters are brought to a head when the Venezuelan parent company
learns that many of the Canadian company's patents have in fact expired so
that their value is considerably less than was assumed during the negotiations
to establish the venture. Moreover, the Venezuelan parent company will be
selling at least three-quarters of the IJV's products inside Venezuela, and so
will not need to use the Canadian company's trademark. There is no reason,
therefore, why the IJV should pay the trademark licence fee as specified in the
agreement. The agreement will have to be renegotiated. Do the Canadians
agree?
The Canadian parent company in Toronto is unsure how to respond to this
suggestion.
Questions:
1. How should the Canadian company respond to the Venezuelan proposal for a
renegotiation?
2. What ways other than renegotiation could be found to deal with the patent and
trademark problems identified by the Venezuelans? How might these alternative
approaches help resolve the conflict?
3. What arguments might be used to support the point of view that renegotiation
would be damaging for the IJV and for the partnership between the two parent
companies?
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