Example 2
Puzzle
We helped a European dairy company set up a joint venture with a Chinese partner in a county of Shanxi province. During our first visit, the boss of the Chinese side promised that he would acquire all dairy companies in his home region within a year. A year later, he had almost accomplished his goal, but for one company.
Solution
That particular company belonged to another ‘system’ than the one in which the Chinese partner was operating. In Chinese parlance, ‘system’ refers to that part of the economy that is run by a particular central ministry. The Chinese partner, as most of the other dairy companies in that county, belonged to the system of the Ministry of Agriculture, while the elusive one belonged to the Ministry of Commerce.
This is not a spectacular finding, but helped the Dutch side understand the local competitive environment better.
Moreover, while we were studying the documentation provided by the Chinese side, we also discovered a hidden stakeholder. We noticed that the tax matters of the joint venture were not handled on the county level, but in a higher level city. On the basis of that finding we could advise the Dutch side to make sure that their project got known by the relevant authorities in that city as well. This could strengthen their position in the local political-economy.