Packages and Mitsubishi — International Joint Venture Negotiations

Abstract

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.