How important is the political environment in china for the Darby Company? Explain. Looking at the case, I think the political environment is really important for the Darby Company. As the phone doesn’t contain the state of art technology and it can produce it at cheaper price, the Chinese government has higher chances to walk away with the agreement done with Darby Company and start producing the phone by themselves. This is because the Chinese government has a different political environment compared to other countries.
Their economy differs from the economies of most countries belonging to the organization for economic cooperation and development in respects such as structure, government involvement, level of development, growth rate, capital reinvestment, rate of inflation etc. Darby Company should look into the pros and cons before entering into an agreement with the Chinese government. This mainly implies that they need to concentrate more on the political aspect in china. This is because of the stories being told about the Chinese government and not keeping up their word on the agreement.
There is so much on stake here and the Darby Company need to consider every minor aspect that comes into account to get into an agreement with the Chinese government. If the contract is been broken by the Chinese government, the Darby company would be in a big mess. They would probably be in losses if the Chinese government tries to break the agreement and do the business by themselves. There is so much to be considered here. Thought the Chinese government has agreed to sign a contract with the Darby Company, there is a chance that it can be broken and it would yield both the parties to the court.
This would cost a lot to both the companies as the fees would be considered individually. This is an unnecessary loss to the Darby Company and moreover once the technology is known to the Chinese government there is every way that they can start their own production of phones. In conclusion I would say, the Darby Company shouldn’t get into an agreement with the Chinese government as it involves more risk and the future with them is not safe as it involves lot of capital and mutual understanding. 2. If a disagreement arises between the two joint venture partners, how well protected is Darby’s position?
Explain. If a disagreement arises between the two joint venture partners, I would say there’s no much loss to the Darby Company. As it’s the Chinese government that has expressed its interest in manufacturing and producing. Saying this, I would also think there’s a substantial loss to the Darby Company as well. China is one of the best growing economy’s in the world and doing a joint venture with them will provide more importance to the product and also the growth of the company. Getting into an agreement would make the product available in one of the best growing countries in Asia.
It would also be a stepping stone for capturing the Asian market. Having said the advantages, if a disagreement arises between the two partners I think the Darby Company is quite well protected. It can look up to another partner who is much reliable and safe. Playing safe is any day better compared to playing unsafe? Darby has the capital to invest and has got the technology which would eventually attract more partners. Keeping in mind the above elements they would surely get a better deal and with lot more security. 3. Are the economic and technological environments in china favorable for Darby? Why or why not? No.
I think the economic and technological environments in china are not favorable for Darby Company compared to other countries. This is because though China is the second largest economy in the world, it may not be the best in terms of economic and technological environments. This is mainly due to the tough policies of the Chinese government. Limited price reforms have been undertaken with the result that prices for certain commodities are principally determined by market forces. Many of the reforms are unprecedented or experimental and may be subject to revision, change or abolition based on the outcome of such experiments.
The Chinese government may cease pursuing a policy of economic reform. The level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions, all of which could have a material adverse effect on our business, financial condition and results of operations. There I think it’s not a safe bet for Darby considering the economic and technological environments in china.