I am very confused and I need negotiate as MedLee

MedLee: In Pursuit of a Healthy Joint Venture Confidential Instructions for T. S. Lee, Vice President, Lee Medical Supply You are T. S. Lee, Vice President of Lee Medical Supply. You have been working at Lee Medical Supply for six years, since you completed your MBA in the United States Before that, you had spent some time at the office but had not worked there full time until finishing business school. As the eldest son of An Lee (founder, owner, and President of Lee Medical Supply), you had always expected and were expected by others to assume your place in the family business after completing your education. In keeping with your father's philosophy that one must perform all tasks in a company to fully understand the business, you have worked in various positions at Lee Medical, including sales representative, office manager, bookkeeper, and director of business development. In this last position, you were responsible for exploring new products and product lines from which Lee Medical Supply could benefit. Your strategic analysis showed that Lee Medical Supply could profit and grow by refocusing its energies on larger, higher margin, high-tech medical equipment and expending fewer resources on smaller ticket, disposable items like bandages and syringes. You see getting into high- tech medical equipment as the wave of the future as incomes, and therefore demand grow in Thailand. You lobbied your father and convinced him of the astuteness of your analysis You discussed your ideas at length with your father, adding that statistics show that 60% of all joint ventures fail before their four-year anniversaries. Because of this, you emphasized that the negotiation phase of joint ventures, in which the principles for the new company are established, is of critical importance to their success. He treated your comments like he treats all of your business school education: as interesting ideas that he pays little attention to until he sees them played out in real-life. He seemed however, to be genuinely interested in and surprised by the appalling failure rate of most joint ventures You were recently promoted to Vice President; this is the first time that Lee Medical Supply has ever had a Vice President. Your father jokingly claims that he was saving the spot for you. (You suspect, however, that he was reluctant to have anyone in a position who could question his authority) This case was written by Candace D. Lun under the supervision of Jeswald W. Salacuse at The Fletcher School of Law and and generously donated to the Program on Negotiation for distribution Copies are available from the Teaching Negot Center (TNRCL, onlne at www.pon ors, by email or by telephone at 800-258-4406. This case revised or translated in whole or in part by any means without the written permission of the TNRC, Program Law School, 501 Pound Hall, Cambridge, MA 02138 Please help to preserve the Copyright 2001, 2004, usefuln President and Felows of Harvard edlee: Confidential Instructions for T. S. Lee Your father returned from the annual family vacation on Phuket Island. (You did with him because you were looking after the business.) Your father showed you t Memorandum of Understanding he drafted with Mr. Thompson, and with more enthusiasm than you've seen in years, told you that he'd found the perfect joint venture partner. In an uncharacteristic show of optimism, he said, A l think we have a ne perfect situation here. MedDevice understands us. We have the potential to make a profitable alliance because both Mr. Thompson and I want the same things out of a joint venture. Mr. Thompson really seems to understand what a relationship between partners means. I don't think we'll have any problems working things out. In partnership with MedDevice, Lee Medical Supply has the potential to become the biggest importer of high-tech medical equipment in Thailand. You are stunned at your father's enthusiasm and are thrilled when he says that he would like you to be involved in the negotiations and launch of this joint venture. He tells you that he thinks it is time to test you on a big project, since you are now Vice President, and since you have so many ideas about joint ventures. He tells you that he and Mr. Thompson have sketched out the priority issues that need to be explored and suggests that you meet with your counterpart at MedDevice to discuss and develop a preliminary proposal Your father says, "Al don't expect you to draw up a formal agreement after the meeting but I want you to have a joint proposal that Mr. Thompson and I can review when we meet. My main goal for you is to ensure that the critical issues that may affect the future of MedLee are worked out in a way that is true to Lee Medical Supply's way of doing business and that capitalizes on MedDevice's strengths. We need to ensure that what we agree upon will build our relationship so that it makes it easy for us to work together in the future, especially since you told me that so many joint ventures fail. I want this to be a success. We stand to make a lot of money and enhance our reputation a big player in the market. I'm counting on you The pressure is on for you to make this joint venture successful from the beginning. You have the chance to prove to your father that his hard work and training, plus your education have made you a huge asset to the family business. This assignment is really cut out for you and you have a short time to produce results before your father goes to the States. The g are your notes from your d er regardi wi nts MedLee: Confidential Instructions for T.S. Lee Task: Conduct preliminary negotiations with MedDevice representative. Discussions will be based on Memorandum of Understanding Negotiating Instructions from Dad: 1) Decision-making/Control Decisions are to be made by consensus, with approval by Dad and Mr. Thompson. The head of the office (General Manager) will have authority to make day-to-day decisions; however, all important decisions will be referred to the individual companies to work together through Dad and Mr. Thompson to arrive at decisions. Both should have equal say in decisions. Note: the 60% / 40% difference in capital provided by MedDevice and Lee Medical Supply, respectively, should have no bearing on decision-making since this is a joint venture, a partnership that is reflected in the equal relationship between Dad and Thompson. Moreover, we are contributing invaluable knowledge of the market, without which this venture has no chance of survival. Our unique expertise makes our total monetary and non-monetary contribution to the joint venture worth at least as much as the 60% that MedDevice is supplying. For that reason, we should have equal decision-making power. Both Dad and Thompson will be actively engaged in running MedLee and will have frequent conversations and meetings about progress and plans. 2) Staffing . Dad envisions a Lee Team comprised of me as General Manager, my cousin lan as my assistant and financial analyst, my friend Adji as sales representative, and a secretary Dad's main objective in staffing this office is to make sure he can trust the employees. There is no one Dad trusts more than his own relatives. MedDevice will probably want to send an executive to the office; this person could work under my direction as well as provide some expertise about the medical equipment The office should be primarily staffed with Lee Medical Supply people since they have connections with the customers, familiarity with the appropriate languages, and knowledge of the way business is done in Thailand and in other parts of Southeast Asia. For these reasons, it is also very important that the head of the office be from Lee. Otherwise, the relationships with customers (doctors and hospitals) will not be as strong. And without these relationships, the venture will go nowhere e If more people are needed, then they wi ill be added as necessary. A possible ext candidate for a later position is my sister, who will be graduating from college n ear, and looking to join the family business. 3) Profit Distribution We would like to maintain maximum flexibility on this. For example, if there were a shortfall or a bad season at Lee Medical (unlikely, but possible, with increasing competition in disposable medical supplies), Dad would like to be able to withdraw profits. Dad prefers to hold consultations with Mr. Thompson on profit-sharing as needs arise, rather than set a specific rule right now. 4) Conflict Resolution Mechanism Dad does not think this is really necessary, but assumes that he and Mr. Thompson would settle all disputes through consultations. Courts and other mechanisms that U.S. companies often seek should not be necessary; the relationship between him an Thompson should preclude that. . Timing: It is important to get the items on the list into a joint proposal that Dad and Mr. Thompson can review when Dad visits. Beyond that, there is no real hurry. Mor important is cultivating a good working relationship with the folks at MedDevice so that they are committed to working with us. The idea is to work efficiently, but not t rush. We want to get it right and take it step by step to build trust. . Distributorship arrangements: Lee Medical purchases supplies and equipment from manufacturers and then sells them in Thailand. Lee Medical profits from the margin derived from the difference between the wholesale cost it pays the manufacturers and the prices it charges its customers. Over the years, Lee Medical Supply has experienced steady growth and strong financial results. However, as the demandf high-tech medical technologies has increased in Thailand, Lee Medical has bee seeking opportunities to partner with a major U.S. manufacturer. Such a partnershi would allow Lee to share in the greater profit margins associated with high-ticket items (as opposed to low-cost items like bandages) and to have some equity in the company's profits (as opposed to acting just as a middleman) In class, you will negotiate as either Pat Armstrong (MedDevice Inc.) or T.S. Lee (Lee Medical Supply). In addition to providing an introduction to some of the key issues involved with cross cultural negotiations, this exercise provides a good springboard for testing your understanding of important legal and business issues discussed in class thus far Mr. Lee and Mr. Thompson agreed to a brief Memorandum of Understanding, which is included in your materials. Lee and Thompson also agree that the following four areas remain to be negotiated: 1. Decision-making 2. Staffing 3. Profit Distribution 4. Conflict Resolution Mechanism It will be up to you to identify and negotiate your position on each of these items in person in class on February 25. Prior to that negotiation, and using only the materials we have covered to date in class (book, discussion, materials posted on Canvas, etc.), write a memorandum (1) identifying legal risks and (2) recommending a solution as described below: 75 points. This is about spotting issues: What are the legal risks to each party in establishing a joint venture (whether as a partnership or as a corporation)? Given the business goals of your party (Lee or MedDevice), how do (or should) the legal risks drive your decision? 1. Hint: It might be helpful to think about your response to this question from the standpoint of trade (distribution), access to technology (intellectual propertyl, and how these two items relate to the foreign direct investment strategy your boss proposed 2. 75 points. How disputes will be resolved is important to each of the parties. Think about what your boss wants in terms of dispute resolutiot and explain why that is or is not an appropriate approach. Make a recommendation about what the best approach (from a legal standpoint) would be You should not conduct outside research to answer these questions Papers will be evaluated on the completeness of your answer in identifying/spotting the legal risks, the soundness of your reasoning supporting your position, and the quality of your writing Please include your name and role (Lee or MedDevice) on the first page of your answer. Your answer may be no more than 4 pages, double spaced, with standard margins. Use 12 point type. Upload your paper into Canvas before class on Feb 27 MedLee: In Pursuit of a Healthy Joint Venture Confidential Instructions for T. S. Lee, Vice President, Lee Medical Supply You are T. S. Lee, Vice President of Lee Medical Supply. You have been working at Lee Medical Supply for six years, since you completed your MBA in the United States Before that, you had spent some time at the office but had not worked there full time until finishing business school. As the eldest son of An Lee (founder, owner, and President of Lee Medical Supply), you had always expected and were expected by others to assume your place in the family business after completing your education. In keeping with your father's philosophy that one must perform all tasks in a company to fully understand the business, you have worked in various positions at Lee Medical, including sales representative, office manager, bookkeeper, and director of business development. In this last position, you were responsible for exploring new products and product lines from which Lee Medical Supply could benefit. Your strategic analysis showed that Lee Medical Supply could profit and grow by refocusing its energies on larger, higher margin, high-tech medical equipment and expending fewer resources on smaller ticket, disposable items like bandages and syringes. You see getting into high- tech medical equipment as the wave of the future as incomes, and therefore demand grow in Thailand. You lobbied your father and convinced him of the astuteness of your analysis You discussed your ideas at length with your father, adding that statistics show that 60% of all joint ventures fail before their four-year anniversaries. Because of this, you emphasized that the negotiation phase of joint ventures, in which the principles for the new company are established, is of critical importance to their success. He treated your comments like he treats all of your business school education: as interesting ideas that he pays little attention to until he sees them played out in real-life. He seemed however, to be genuinely interested in and surprised by the appalling failure rate of most joint ventures You were recently promoted to Vice President; this is the first time that Lee Medical Supply has ever had a Vice President. Your father jokingly claims that he was saving the spot for you. (You suspect, however, that he was reluctant to have anyone in a position who could question his authority) This case was written by Candace D. Lun under the supervision of Jeswald W. Salacuse at The Fletcher School of Law and and generously donated to the Program on Negotiation for distribution Copies are available from the Teaching Negot Center (TNRCL, onlne at www.pon ors, by email or by telephone at 800-258-4406. This case revised or translated in whole or in part by any means without the written permission of the TNRC, Program Law School, 501 Pound Hall, Cambridge, MA 02138 Please help to preserve the Copyright 2001, 2004, usefuln President and Felows of Harvard edlee: Confidential Instructions for T. S. Lee Your father returned from the annual family vacation on Phuket Island. (You did with him because you were looking after the business.) Your father showed you t Memorandum of Understanding he drafted with Mr. Thompson, and with more enthusiasm than you've seen in years, told you that he'd found the perfect joint venture partner. In an uncharacteristic show of optimism, he said, A l think we have a ne perfect situation here. MedDevice understands us. We have the potential to make a profitable alliance because both Mr. Thompson and I want the same things out of a joint venture. Mr. Thompson really seems to understand what a relationship between partners means. I don't think we'll have any problems working things out. In partnership with MedDevice, Lee Medical Supply has the potential to become the biggest importer of high-tech medical equipment in Thailand. You are stunned at your father's enthusiasm and are thrilled when he says that he would like you to be involved in the negotiations and launch of this joint venture. He tells you that he thinks it is time to test you on a big project, since you are now Vice President, and since you have so many ideas about joint ventures. He tells you that he and Mr. Thompson have sketched out the priority issues that need to be explored and suggests that you meet with your counterpart at MedDevice to discuss and develop a preliminary proposal Your father says, "Al don't expect you to draw up a formal agreement after the meeting but I want you to have a joint proposal that Mr. Thompson and I can review when we meet. My main goal for you is to ensure that the critical issues that may affect the future of MedLee are worked out in a way that is true to Lee Medical Supply's way of doing business and that capitalizes on MedDevice's strengths. We need to ensure that what we agree upon will build our relationship so that it makes it easy for us to work together in the future, especially since you told me that so many joint ventures fail. I want this to be a success. We stand to make a lot of money and enhance our reputation a big player in the market. I'm counting on you The pressure is on for you to make this joint venture successful from the beginning. You have the chance to prove to your father that his hard work and training, plus your education have made you a huge asset to the family business. This assignment is really cut out for you and you have a short time to produce results before your father goes to the States. The g are your notes from your d er regardi wi nts MedLee: Confidential Instructions for T.S. Lee Task: Conduct preliminary negotiations with MedDevice representative. Discussions will be based on Memorandum of Understanding Negotiating Instructions from Dad: 1) Decision-making/Control Decisions are to be made by consensus, with approval by Dad and Mr. Thompson. The head of the office (General Manager) will have authority to make day-to-day decisions; however, all important decisions will be referred to the individual companies to work together through Dad and Mr. Thompson to arrive at decisions. Both should have equal say in decisions. Note: the 60% / 40% difference in capital provided by MedDevice and Lee Medical Supply, respectively, should have no bearing on decision-making since this is a joint venture, a partnership that is reflected in the equal relationship between Dad and Thompson. Moreover, we are contributing invaluable knowledge of the market, without which this venture has no chance of survival. Our unique expertise makes our total monetary and non-monetary contribution to the joint venture worth at least as much as the 60% that MedDevice is supplying. For that reason, we should have equal decision-making power. Both Dad and Thompson will be actively engaged in running MedLee and will have frequent conversations and meetings about progress and plans. 2) Staffing . Dad envisions a Lee Team comprised of me as General Manager, my cousin lan as my assistant and financial analyst, my friend Adji as sales representative, and a secretary Dad's main objective in staffing this office is to make sure he can trust the employees. There is no one Dad trusts more than his own relatives. MedDevice will probably want to send an executive to the office; this person could work under my direction as well as provide some expertise about the medical equipment The office should be primarily staffed with Lee Medical Supply people since they have connections with the customers, familiarity with the appropriate languages, and knowledge of the way business is done in Thailand and in other parts of Southeast Asia. For these reasons, it is also very important that the head of the office be from Lee. Otherwise, the relationships with customers (doctors and hospitals) will not be as strong. And without these relationships, the venture will go nowhere e If more people are needed, then they wi ill be added as necessary. A possible ext candidate for a later position is my sister, who will be graduating from college n ear, and looking to join the family business. 3) Profit Distribution We would like to maintain maximum flexibility on this. For example, if there were a shortfall or a bad season at Lee Medical (unlikely, but possible, with increasing competition in disposable medical supplies), Dad would like to be able to withdraw profits. Dad prefers to hold consultations with Mr. Thompson on profit-sharing as needs arise, rather than set a specific rule right now. 4) Conflict Resolution Mechanism Dad does not think this is really necessary, but assumes that he and Mr. Thompson would settle all disputes through consultations. Courts and other mechanisms that U.S. companies often seek should not be necessary; the relationship between him an Thompson should preclude that. . Timing: It is important to get the items on the list into a joint proposal that Dad and Mr. Thompson can review when Dad visits. Beyond that, there is no real hurry. Mor important is cultivating a good working relationship with the folks at MedDevice so that they are committed to working with us. The idea is to work efficiently, but not t rush. We want to get it right and take it step by step to build trust. . Distributorship arrangements: Lee Medical purchases supplies and equipment from manufacturers and then sells them in Thailand. Lee Medical profits from the margin derived from the difference between the wholesale cost it pays the manufacturers and the prices it charges its customers. Over the years, Lee Medical Supply has experienced steady growth and strong financial results. However, as the demandf high-tech medical technologies has increased in Thailand, Lee Medical has bee seeking opportunities to partner with a major U.S. manufacturer. Such a partnershi would allow Lee to share in the greater profit margins associated with high-ticket items (as opposed to low-cost items like bandages) and to have some equity in the company's profits (as opposed to acting just as a middleman) In class, you will negotiate as either Pat Armstrong (MedDevice Inc.) or T.S. Lee (Lee Medical Supply). In addition to providing an introduction to some of the key issues involved with cross cultural negotiations, this exercise provides a good springboard for testing your understanding of important legal and business issues discussed in class thus far Mr. Lee and Mr. Thompson agreed to a brief Memorandum of Understanding, which is included in your materials. Lee and Thompson also agree that the following four areas remain to be negotiated: 1. Decision-making 2. Staffing 3. Profit Distribution 4. Conflict Resolution Mechanism It will be up to you to identify and negotiate your position on each of these items in person in class on February 25. Prior to that negotiation, and using only the materials we have covered to date in class (book, discussion, materials posted on Canvas, etc.), write a memorandum (1) identifying legal risks and (2) recommending a solution as described below: 75 points. This is about spotting issues: What are the legal risks to each party in establishing a joint venture (whether as a partnership or as a corporation)? Given the business goals of your party (Lee or MedDevice), how do (or should) the legal risks drive your decision? 1. Hint: It might be helpful to think about your response to this question from the standpoint of trade (distribution), access to technology (intellectual propertyl, and how these two items relate to the foreign direct investment strategy your boss proposed 2. 75 points. How disputes will be resolved is important to each of the parties. Think about what your boss wants in terms of dispute resolutiot and explain why that is or is not an appropriate approach. Make a recommendation about what the best approach (from a legal standpoint) would be You should not conduct outside research to answer these questions Papers will be evaluated on the completeness of your answer in identifying/spotting the legal risks, the soundness of your reasoning supporting your position, and the quality of your writing Please include your name and role (Lee or MedDevice) on the first page of your answer. Your answer may be no more than 4 pages, double spaced, with standard margins. Use 12 point type. Upload your paper into Canvas before class on Feb 27