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MedLee: In Pursuit of a Healthy Joint Venture
Confidential Instructions for Pat Armstrong,
MedDevice, Inc.'s Director of International Strategic Market Research
You are Pat Armstrong, Director of International Strategic Market Research. You have
been working at MedDevice, Inc. since you earned your MBA two years ago and landed
this much-coveted position. You were hired to survey and analyze potential overseas
market opportunities and have just completed your analysis of the Southeast Asian
region. Your research indicates that while most of the Southeast Asian countries
possess markets ripe for MedDevice's products, the best way to enter the market is via
joint venture partnerships with local companies who have the distribution networks and
local know-how necessary for success in this business. Your research report has been
very well received and the company has begun exploring potential joint venture
partners in Singapore, Taiwan, Thailand, Hong Kong, and Malaysia.
Trying to Make the Move From Research to International Management
While you have enjoyed and excelled at strategic market research, you are anxious to
expand your job profile to include establishing and operating overseas offices. You
would like to be involved directly in the business aspects and implementation of your
research results. You have approached your boss, the General Manager of International
Development, and made the case that since you created the plans, and you have
academic experience in international affairs and international negotiation (you took
several courses on these subjects while in business school), you should be included in
any negotiations regarding international offices. You also argued for your direct
involvement in the oversight and operation of these new offices. Your boss is thinking
about your suggestions and plans to bring up staffing issues on these new projects at a
meeting with the Vice Presidents next month. Because MedDevice is a large
organization with standardized procedures, it is necessary to get management and
human resources approval before changing your job responsibilities. Your boss is
currently on a three-week safari in Kenya. You are anxiously awaiting her return and her
decision on your future role in overseas expansion.
You have also shared some of your ideas with MedDevice's CEO. Several weeks ago, at
the company picnic, you met and chatted at length with CEO Ralph Thompson. You and
he really hit it off and had an interesting conversation about the appalling failure rates
This case was written by Candace D. Lun under the supervision of Jeswald W. Salacuse at The Fletcher School of Law and Diplomacy
and generously donated to the Program on Negotiation for distribution. Copies are available from the Teaching Negotiation
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keeping it confidential. Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev.
08/18.)
This document is authorized for use only by Arjun Dewan in ORGS 6560 M - Summer 2024 Medlee Pat Armstrong taught by TAMMY IRWIN, York University from Jun 2024 to Jun 2024.
For the exclusive use of A. Dewan, 2024.
MedLee: Confidential Instructions for Pat Armstrong
of international joint ventures. You noted that 60% of these ventures fail and suggested
that the problems might stem from a failure during the negotiation process to explore
and to agree upon how the two component companies would work together. Mr.
Thompson seemed genuinely interested in your ideas. You wished your boss were as
receptive as he was to your thoughts.
A Chance Opportunity
Upon his return from Thailand, Mr. Thompson intended to give the MedLee Joint
Venture exploration/negotiation project to the General Manager of International
Development (your boss). He discovers, however, that she is unreachable in Kenya for
the next few weeks. Not wanting to wait for her return, he looks for someone else and
calls you into his office.
Mr. Thompson describes his discussions with Mr. Lee and says to you, “I think we have a
near-perfect situation here. Lee Medical Supply understands where we are coming
from. We really have the potential to forge a profitable alliance because both Mr. Lee
and I (as well as our respective companies) want the same things out of a joint venture.
I don't think we'll have any problems working things out. In partnership with Lee
Medical Supply, MedDevice has the potential to become a significant player in the Asian
market.”
Then, to your elation, Mr. Thompson says that he has chosen you, in your boss's
absence, to work on solidifying the MedLee joint venture. He tells you that he and Mr.
Lee have sketched out the priority issues that need to be explored and suggests that you
meet with your counterpart at Lee Medical Supply ASAP to discuss and develop a
preliminary proposal resolving some of the questions associated with these issues.
Mr. Thompson says, “I don't expect you to have a formal agreement written up after the
meeting, but I want you to have a joint proposal that Mr. Lee and I can review when we
meet. Then with the general agreements out of the way, we can involve the lawyers
and accountants to formalize everything at the next stage of the process. I'll give you
the notes that I made on the airplane that lay out the issues and my thoughts on them.
They should be fairly self-explanatory. My main goal is for you to ensure that the critical
issues that may affect the future of MedLee are worked out in a way that is both true to
MedDevice's corporate character and capitalizes on the strengths of Lee Medical Supply.
We need to ensure that what we agree upon makes it easy for us to work together in
the future, especially since you told me how many joint ventures fail. I want this to be a
success.”
Mr. Thompson continued: “By the way, time is of the utmost importance. In addition to
my wanting to meet the pseudo-deadline set by Mr. Lee's upcoming visit, I want to get
this deal put together in time so that I can ask the Board of Directors for the capital
appropriation before the end of this fiscal year, which ends in eight weeks. We'll be on a
Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 2
This document is authorized for use only by Arjun Dewan in ORGS 6560 M - Summer 2024 Medlee Pat Armstrong taught by TAMMY IRWIN, York University from Jun 2024 to Jun 2024.
For the exclusive use of A. Dewan, 2024.
MedLee: Confidential Instructions for Pat Armstrong
very tight timeline to get this done, but it will save us a lot of scrutiny and headache
from the Board if we meet the fiscal year deadline. Get to it! Let's see what we can do to
beat the odds against success of international joint ventures.”
You are thrilled to have this assignment. You realize how much is riding on this: your
ability to become more intimately involved in international operations, the future of this
joint venture, and the CEO's (not to mention your boss's) opinion of you. This is a great
opportunity to perform well and to broaden your international business experience
beyond strategic research.
Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 3
This document is authorized for use only by Arjun Dewan in ORGS 6560 M - Summer 2024 Medlee Pat Armstrong taught by TAMMY IRWIN, York University from Jun 2024 to Jun 2024.
For the exclusive use of A. Dewan, 2024.
MedLee: Confidential Instructions for Pat Armstrong
Mr. Thompson's Notes
Turning to Mr. Thompson's notes, you are amused to find that the notes he wrote on
the airplane are written in perfect MedDevice Memo format. He really is a company
man. MedDevice and its quest for uniformity and standards!
TO: MedDevice Representative (PAT ARMSTRONG)
FROM: Ralph Thompson, CEO, MedDevice
RE: Preliminary Negotiations re: MedLee, Ltd. Joint Venture
Objective:
To set up an international joint venture with Lee Medical Supply, Thailand. The new
entity will be called MedLee, Ltd. and will be an international sales office located in
Bangkok, Thailand, that will sell and distribute MedDevice brand CAT Scanners, MRIs
and pacemakers in Thailand and Southeast Asia. MedDevice will provide 60% of the
capital and Lee Medical will provide the remaining 40%. See Memorandum of
Understanding.
Task for MedDevice Representative:
Meet with counterpart at Lee Medical Supply Company to discuss and create a
preliminary proposal for MedLee joint venture on the key issues below. What follows
are the main issues and my thoughts on each.
Issues and Instructions for Preliminary Negotiation
1) Decision making/Control
• Major decisions to be taken by the General Manager with majority approval by a
Board of Directors to be appointed by Mr. Lee and myself.
• I envision the Board of Directors as consisting of five members: three appointed
by MedDevice, and two by Lee Medical (in approximate proportion to the
percentage of capital contribution by each company).
• Voting within the Board should be one-man one-vote, majority rules.
2) Staffing
I expect the following structure should be sufficient for MedLee, Ltd. for the time being:
• One General Manager (appointed by MedDevice, since we contribute 60% of
capital. It is important to have a MedDevice person head the office for quality
control reasons and for knowledge of the medical devices. The GM will oversee
the entire operation and be ultimately responsible for business results of the
venture).
• One Manager (appointed by Lee Medical, to advise and assist the GM on issues
of local importance, as well as to cultivate local relationships with customers.
The manager will be responsible for client interaction and management of the
office staff).
Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 4
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For the exclusive use of A. Dewan, 2024.
MedLee: Confidential Instructions for Pat Armstrong
• Four Sales Representatives (three appointed by Lee Medical, and one by
MedDevice to execute sales and create distribution channels. These individuals
should have extensive local knowledge of the markets and customers as well as
speak the appropriate language. I would envision these sales representatives to
be geographically specialized; i.e., one will take care of Thai business, another,
Hong Kong, Taiwan and Singapore, and another, Malaysia and Indonesia.)
• Two Secretaries/Office Assistants (appointed by Lee Medical, who knows local
conditions and markets better than we do. These Secretaries will assist the
Manager and Sales Representatives. The GM will bring his/her own assistant as is
customary at MedDevice.)
• Anti-Nepotism Rule: We should enforce this at MedLee, but perhaps we can
make an exception to our rule for Mr. Lee's son. I got the impression that Mr.
Lee wanted him to be involved in this venture. But we need to avoid a situation
in which all of Mr. Lee's relatives end up working at MedLee. This could have the
negative effect of creating precedent for our other joint ventures around the
world and conflict with MedLee's appearance of fair treatment for all and
promotion based on merit, as opposed to connection. The bottom line is that
we need to ensure that we have the best quality workers who are fairly
evaluated – there should be no favoritism at MedLee.
3) Profit Distribution
Because we want to invest in the Asian market for the long term, we would agree to
have no profits withdrawn from operations for the first five years of the joint venture.
Thereafter, we can assess the future direction of the venture and then agree upon what
to do. MedDevice is stable financially, and since this is only one project of many that we
undertake each year, there should be no problems for us back home with this policy.
4) Conflict Resolution Mechanism
I prefer to have any disputes that arise referred back to Mr. Lee and me for discussion; if
there is no resolution, then the dispute should be resolved through the California Court
System or through international arbitration.
5) Timing
ASAP. I need to discuss results of preliminary negotiations with Mr. Lee in three weeks.
I also hope to request the capital appropriation from the MedDevice Board of Directors
before the end of the fiscal year in eight weeks.
Copyright © 2001, 2004, 2018 by the President and Fellows of Harvard College. All rights reserved. (Rev. 08/18.) 5
This document is authorized for use only by Arjun Dewan in ORGS 6560 M - Summer 2024 Medlee Pat Armstrong taught by TAMMY IRWIN, York University from Jun 2024 to Jun 2024.