A Rare Success in China - the Celanese Joint Venture
Disclaimer: It is against the The Negotiation Experts' principles to offer its services to the tobacco industry. The Celanese case study has been reproduced for the purposes of study only, and is in no way a condonement of the damage the tobacco is causing.
Overview
One of the most closely studied Chinese joint ventures is that involving Celanese Corporation of the United States, a producer of value-added industrial chemicals, and China National Tobacco Corporation (CNTC). The venture produces tow, the fluffy synthetic fiber in cigarette filters.
In 1982, when CNTC decided to increase its production of filter cigarettes, it was on the lookout for international suppliers. Since all tow providers refused to sell their technology to China, CNTC approached Celanese, a highly regarded tow producer, with a view to setting up a joint venture. Celanese declined the offer after two years of arm’s-length, long-distance discussions through its Chinese agent, London Export Company (LEC), which was well regarded in China. Celanese believed that the joint venture would destabilize the international market and adversely affect its cash flow.
In early 1984, LEC reviewed the negotiations and found there might be greater mutual benefit than had at first appeared. A senior LEC executive asked Celanese for permission to continue mediating the joint-venture proposal and, by mid-year, he had persuaded both parties of the potential joint-venture benefits. As a result, CNTC promptly made Celanese the preferred supplier of tow, even before the joint-venture plant was finished; classified the output of the new plant as import substitution, so that foreign exchange would be conserved and CNTC would not need to buy tow abroad; and would share top management decisions fifty-fifty.
First Steps
Next came face-to-face negotiations, discussions, and communications between the parties. Differences in formal communication almost stalled these discussions before they had got off the
Overview
One of the most closely studied Chinese joint ventures is that involving Celanese Corporation of the United States, a producer of value-added industrial chemicals, and China National Tobacco Corporation (CNTC). The venture produces tow, the fluffy synthetic fiber in cigarette filters.
In 1982, when CNTC decided to increase its production of filter cigarettes, it was on the lookout for international suppliers. Since all tow providers refused to sell their technology to China, CNTC approached Celanese, a highly regarded tow producer, with a view to setting up a joint venture. Celanese declined the offer after two years of arm’s-length, long-distance discussions through its Chinese agent, London Export Company (LEC), which was well regarded in China. Celanese believed that the joint venture would destabilize the international market and adversely affect its cash flow.
In early 1984, LEC reviewed the negotiations and found there might be greater mutual benefit than had at first appeared. A senior LEC executive asked Celanese for permission to continue mediating the joint-venture proposal and, by mid-year, he had persuaded both parties of the potential joint-venture benefits. As a result, CNTC promptly made Celanese the preferred supplier of tow, even before the joint-venture plant was finished; classified the output of the new plant as import substitution, so that foreign exchange would be conserved and CNTC would not need to buy tow abroad; and would share top management decisions fifty-fifty.
First Steps
Next came face-to-face negotiations, discussions, and communications between the parties. Differences in formal communication almost stalled these discussions before they had got off the