You have decided to investigate the possibility of working with X on a limited project in the battery field. You think a joint venture would work best with X, and you are willing to contribute management and technical oversight from Business Unit 2 only. You want to begin working together on a battery that is already mature, and keep the exotic battery off-limits (for reasons of simplicity, assume it is a lithium-ion battery used for watches and cell phones). In your initial negotiations with X, you propose that they

contribute funds to the joint venture that would house a jointly-owned plant in the U.S. so that you don't have to wait for the battery to be produced and shipped from X's far-away Asian factory. You have decided to staff the venture with people who are willing to rotate through the venture as part of their career advancement, possibly in two-year cycles, up to the life of the alliance (assume ten years). You also would like to choose the members of the BOD (Board of Directors) since the plant ideally would be U.S.-based, among other things.

The negotiating team from X looks at you in a funny way, but in turn, proposes its own counter-offer. X does not want to build a battery factory in the U.S., but in turn has proposed to work with you on a more advanced line of batteries - some of which use exotic, rare earth materials in the core. According to X's management, they prefer an alliance vehicle "that is not so elaborate and formal like a joint venture." In fact, you have heard from your own sources that X is probably not that concerned about owning a majority stake with its previous alliance partners, since X tends to relent on this point when a previous partner insists on majority ownership. However, in sacrificing majority ownership, X often receives exchange a broad technology-sharing arrangement with its partner that allows X to use any jointly developed product or process in its own operations outside of the alliance. X would definitely prefer something along the line of a co- development pact with the plant in Asia. As a gesture of friendship, they also offer to develop a full line of extended supplier capabilities for the plant in Asia so that the innovations in your exotic battery technology can benefit from accelerated quality improvement and cost unit reduction skills from X's long experience with continuous improvement. They have insisted that they want to staff their part of the venture with the same personnel for the entire length of the venture (assume ten years). In addition, you learn that X likes to shape the composition of the BOD with their people in charge of key operational activities (e.g., R&D, engineering, production, distribution) for the duration of the venture. These people have the right to review and to veto any requests for information and knowledge from you. One issue that makes you nervous is that X's personnel communicate among themselves not in English, but in their own local language - a language that is very difficult to learn. On the other hand, X's people have spent a lot of time in the U.S. and elsewhere and can speak English easily.

c) Keeping your answer concise and cogent, what are some key issues that you need to consider when planning to work with X? What are some key issues that X is probably considering? How will these issues show up in X's proposals? How should you respond? (Provide your answer and supporting rationale in a table for both companies using short bullet points. Justify/explain your rationale as well. Lack of rationale will be penalized heavily.) (60 points)