http://www.powershow.

com/view/3be1a-MWU5Z/GOOGLE_INC_2005_powerpoint_ppt_presentation

umaira Arif Please address all correspondence to: Humaira Arif, Research Associate, Lahore University of Management Sciences, Sector U, DHA, Lahore, Pakistan. Research Associate, Lahore University of Management Sciences, Sector U, DHA, Lahore, Pakistan Arif Nazir Butt Research Associate, Lahore University of Management Sciences, Sector U, DHA, Lahore, Pakistan This case covers the negotiations between Packages Limited, Pakistan (Packages) and Mitsubishi Corporation, Japan (Mitsubishi) for the formation of a joint venture to produce Biaxially Oriented Polypropylene (BOPP) film in Pakistan. Packages was established in Pakistan in 1957 as a joint venture between the Wazir Ali Group and AB Auckerland and Rausing of Sweden. Packages manufactured paper and board and converted them to packaging products. Mitsubishi was one of the biggest conglomerates in Japan, operating internationally. In 1992, Syed Babar Ali, founder and advisor to Packages proposed establishing a joint venture with Mitsubishi, during his visit to Japan. Upon returning to Pakistan, he asked Packages' senior management to negotiate a joint venture agreement with Mitsubishi. Both Packages and Mitsubishi agreed in principle to establish a joint venture to manufacture BOPP film in Pakistan.

In this case, the negotiation process was divided into three phases. The case describes the issue discussed and tactics employed by the two sides during the three phases. The major issues discussed included the price and capacity of the plant, the reimbursement of Mitsubishi's investment if the company suffered repeated losses, raw material supply from Mitsubishi, equity participation, and the control of the management and the board of the new company. In April, 1993, Mr. Javed Aslam, the Deputy General Manager of Packages, received a quotation of US $6.4 million for a 6000-ton plant from Mitsubishi Heavy Industries (MHI). He had to decide if it was feasible for Packages to go ahead with the joint venture with Mitsubishi and what counter offer to make to Mitsubishi Heavy Industries.

Summary of Packages and Mitsubishi joint venture negotiations

This case study basically tells about different phases in the buying deal of plant by packages from Mitsubishi started in year 1992.There was a high demand in our country of Biaxial Polypropylene film by different industries e.g. biscuit industry, food products industry, pharmaceuticals industry and etc. BOPP is used in packaging of products to improve the shelf life of products.

Packages was established in 1957 in Lahore and are specialized in manufacturing of paper, board and packaging. Whereas Mitsubishi is the manufacturer of heavy machinery based in Japan.

In1992 the demand for BOPP film was 5,035 tonnes in Pakistan.80% BOPP film had been imported from Far East. Mostly the companies were using imported Bopp film so the was a need to produce Bopp film locally. Keeping that in consideration the packages and Mitsubishi entered into a deal of installing production plant of Bopp film. Until 1993 that deal was not yet fanialised.As there were many ambiguities during negotiation between packages and Mitsubishi. There are some similarities and differences in business cultures of two countries Pakistan and Japan. That is discussed below:

Maintaining Harmony: Japanese are well known for maintaining harmony in social relationships. A highly regarded Japanese social value called wa refers to the quality of human relationships. Pakistani also value collectivistic norms including harmony and sharing of warmth.

Personal Relationships: Both the Pakistanis and the Japanese values stress the importance of friendly and close relationship between business partners. Personal relationships are considered to be as important as the economic outcome of the project. Close personal relationships between business partners lead to higher trust and better communication.

Long term time perspective: A major difference between Pakistani and Japanese negotiators is based on the time perspective in business negotiations.

Role of the third parties: In Japan, business relationships are initially established through proper connections and associated introductions. The third party is called shokaisha in Japan. Pakistani companies usually depend on their own resources for introductions.

Anyhow, the negotiations were on track between packages and Mitsubishi.IN April 1992, Syed Babar Ali visited Japan to propose a business relationship between the two companies. By early May 1992, preliminary talks between packages and Mitsubishi began. During the negotiations the management of packages had found the project unfeasible because of limited market demand and chose not to pursue the proposal. In the first week of September 1992, the Mitsubishi team arrived to open again formal dialogue between the two companies. As a part of joint venture agreement, Mitsubishi wanted to add a clause which would hold packages responsible for reimbursing Mitsubishi's investment if the company suffered repeated loses in operations. That condition was quite outrageous for packages management and the disagreement continued between the two sides. At that time the packages became little unsure about the technology offered by Mitsubishi and they also became interested in another technology introduced by Bruckner, European company as they were offering the same technology at a 20% lower price.

Alongside, the Mitsubishi kept on trying to convince packages to buy their technology. In April 1993, negotiations began and Mitsubishi became little flexible on their stance but still the Bruckner's offer was more feasible. The packages management really felt it non-professional approach towards deal. When it appeared as though they were at an impasse, Mitsubishi offered packages an alternative to purchase a 6,000 tonne capacity plant at Y 720 million. That offer was acceptable and was providing economies of scale. The demand for Bopp film was also increasing at the rate of 12% to 15% each year.

Syed Babar Ali decided to form a joint venture with Mitsubishi but the ultimate decision was left to Mr. Javed Aslam.

There were many ups and downs in finalizing the deal and it should have been done very quickly. There were different considerations on both sides which were almost settled. In these kinds of negotiations parties always look for best possible options to gain maximum benefit.

Read More: http://www.worldscientific.com/doi/abs/10.1142/S0218927506000739?journalCode=acrj