DANONE MANAGERIAL PROBLEMS
- The first managerial problem with bounded reliability is some subsidiaries managers may pursue their own goals in the place of the overall MNE goals. This challenge means that there are individuals in working at the subsidiaries, which will lead to failure in the overall goals of the company. The solution to this challenge is empowering the subsidiaries to advance on the innovation and invention while remaining in line with the MNE’s goals. For example, Wahaha accused Danone of to lack of commitment. Wahaha group claimed that they did not receive managerial and technological expertise from the Danone group. Besides, Danone did not have a clear understanding of the Chinese market (Verbeke, 2013, p.331).
- The long term relationship between Wahaha and Danone failed to lead to more trust but growing and constant suspicion. Both sides were continually accusing one another of misbehaving that resulted in the fallout. They started the cooperation to benefit from one another in which Danone was to gain entry into a new market while Wahaha was to learn from the western company. However, the companies started having different views on the roles as well as the opinions about each other, leading to disputes. For instance, Danone tried taking over Wahaha through working with Wahaha’s competitors. Also, Wahaha could sell products of the joint venture under their own brand name. This means that there was poor communication about usage of brand products thus differences.
- Companies wanted to benefit from each other’s FSAs while pursuing different objectives. The contrary actions led to more disputes. Both seemed to keep their knowledge to themselves. There was also an increase in the threat of losing market share due to increasing competitors.
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SOLUTIONS
- the solution to lack of management depth for Danone to grow in the Chinese market challenge was the integration of Danone Company into day to day activities. In the joint venture, Danone left Wahaha to be in charge of the joint venture and therefore failing to acquire the knowledge.
- The solution to Wahaha’s accusation about Danone not sharing technical and managerial knowledge with them could be solved by both taking initiatives to learn from one another.
- Managerial Problems
- The first problem is one of property rights (Verbeke, 2013, p.52). The management needs to figure out how to combine their services to fit into the local community in all the host countries. They also have to understand how to connect those services with other international assistance to be seamless For Wal-Mart; it had to figure out how it can offer cheap products and remain profitable in the host countries.
- The second problem is that despite having sufficient critical information, MNEs management faces the challenge of processing the information (Verbeke, 2013 p.53). The administration faces the challenge of determining the relevance and implications the information has to the company’s strategy. For example, Wal-Mart in 2004 and 2005, made changes in the newspapers inserts about its products targeting the traditional Japanese holidays (Verbeke, 2013 p.53). Newspaper insert seems a minor issue to the management of this giant company, but then the company could not find an ideal for Japan newspaper. The challenge of incomplete information and problems interpreting the information brings about complexity and uncertainty. The solution to these problems is choosing various teams to focus their energy on different issues. For instance, the marketing team in Wal-Mart should have considered local marketing experts in their team.
- The third problem is German zoning laws regarding store hours, antitrust laws, and German fair trading. Stores were to operate only 80 hours per week and had to close Sundays and holidays. Besides, the antitrust laws barred retailers from selling products below the cost. Since Wal-mart had to outsource its products to Germany, the inability to expand rapidly and the small size of the store made it difficult to even sell the products at low prices (Verbeke, 2013 p.146)
Similarities
- problems related to both Bounded reliability and bounded rationality is as a result of information overload. The huge load of information utilized by MNEs leads to these challenges (Verbeke, 2013, p.88). While it is true that MNEs can gain economies of scale, it is also true that there should be limited instances of miscommunication and poor coordination.
Differences
- the main difference in managerial problems for the two companies is that Wal-Mart had gathered information about the local market and entered directly into it to face the competition. However, Danone chose to enter the Chinese market through a joint venture and did not try to learn about the local market to operate in it successfully.