Please read the following case study thoroughly and answer the questions below. Your discussions should apply the relevant business and communication theories and management principles

Morgan Stanley Forming a Joint Venture in China On 11 August 1995, Morgan Stanley Group Inc. and a Chinese partner created China's first foreign investment banking business. Morgan Stanley argued that the joint venture will give them an inside track to expand with China's developing financial markets. Being the sole big international investment firm in China-based investment banking, Morgan Stanley will have an edge over its rivals in winning transactions including project funding, capital investment, and stock and bond offers as China wants to fund large development projects. The latest joint company, the China Foreign Capital Corporation (CICC), has a capitalisation of $100 million and is in Beijing. Ten Morgan executives are headquartered there, making Morgan the biggest operation of any American investment firm in Beijing. Morgan Stanley controls 35% of CICC and the People's Construction Bank of China (PCBC), a commercial entity, holds 42.5%. The remaining shareholders, each with 7.5%, are China National Investment & Guarantee Company, Mingly Company (Hong Kong holding firm with important ties to Chinese leaders) and the Government of Singapore Investment Corporation (GSIC). As the Chinese official said, "CICC would have a significant effect on the growth and globalization of China's capital markets, and the new company would serve as a blueprint for expanding China's investment banking sector and educating China's foreign business managers." The long-standing discussions and agreements that followed this partnership demonstrate the numerous aspects of multinational and cross-cultural corporate relations and the difficulties posed by the participants and the methods they employed to address the problems. Initial Steps from Outside China Morgan Stanley has been considering a joint venture investment bank in China for years. In June 1992, John S. Wadsworth Jr, chairman of Morgan Stanley Asia Ltd, introduced the proposal to Wang Qishan, vice-president of the People's Construction Bank of China (PCBC). With $122 billion in reserves, PCBC has long been the biggest local participant in funding Chinese infrastructure projects. Wadsworth spent one-year nurturing Wang for a prospective company. In June 1993, Wang was unexpectedly named Deputy Chief of the Central Bank of China. The move was catastrophic to Morgan. Wadsworth regretted that their main support had relocated to another city. When Morgan Stanley was focusing on this new proposal, related steps were taken by others. And one was Payson Cha, Managing Director of Mingly Corp, a multi-billion-dollar Hong Kong investment firm. Payson Cha is the son of Hong Kong tycoon Cha Chiming, who has a powerful friendship with top Chinese officials. The other was Edwin R. Lim, an offshore Chinese businessman from the Philippines who served with the World Bank. Throughout the years, Lim climbed to the World Bank and launched the bank's China office in 1985. These two people have met each other since their first business encounter in Nigeria in 1974. In the fall of 1993, the two men faced each other again in Beijing, China. Cha suggested that it was time to set up an investment bank to enable China obtain exposure to foreign capital markets. Lim had discussed the same concept with Chinese Vice-Premier Zhu Rongji, whom he first encountered in 1980. Cha and Lim started working together to see how they could make the project work. Partnership through Network Lim, due to the knowledge of the World Bank, had ready exposure to top officials and bankers. In their meeting with Chinese government officials on the establishment of a joint venture investment fund, officials explained that they would only consider a proposal including players from several countries. So Lim brought in Government of Singapore Investment Corporation (GSIC), led by former Prime Minister Lee Kuan-Yew, who had strong relations with China's top executives. GSIC oversees a large portion of Singapore's foreign assets. Shortly after that, Cha and Lim agreed to discuss which international investment bank to bring in. While Salomon Brothers Inc. and Goldman, Sachs & Co. had established reputations in China as America's leading investment banks, Cha focused on Morgan Stanley. He had previously partnered with the company that had effectively sold a $100 million convertible bond to Cha's HKR International Ltd, a $840 million Hong Kong property developer, in 1993. Meanwhile, the recent talks with PCBC on the contract were finished. Wadsworth strove to revive the contract. Wadsworth's former colleague turned out to be a relative of Lim's and indicated that Wadsworth should stay in contact with Lim. Wadsworth called Lim at his World Bank office in Washington, DC in October 1993. A month later, Wadsworth and Lim met at Maison Blanche, outside the White House, for a soft-shell crab lunch. They showed each other the plans that they had submitted to the Chinese government. Wadsworth claimed that both of their letters could have originated from the same typewriter. As Cha was still leaning towards Morgan Stanley, the team was established. Political, Cultural, and Management Obstacles With foreign partners lined up, Lim quit the World Bank in early 1994 to make a full-time attempt. Shuttling from Hong Kong to Beijing, Lim received agreements with the PCBC and the Chinese Ministry of Finance, but it became more complicated to secure permissions from the State Council, the Chinese Cabinet. So, the team asked Cha's dad to help. Cha's father, Cha Chi-Ming, contributed $20 million to China's latest science and technology foundation in 1994. And on Chinese chief Deng Xiao-Ping's birthday in 1993, Elder Cha also gave out 10 prizes of $116,000 each to Chinese scientists. These contributions prompted Premier Li Peng of the State Council to show his "thankfulness." Then, in order to pave the way for a bank contract, Elder Cha made the rounds in Beijing, gaining the consent of the officials of the State Council. On 20 September 1994, PCBC told its stakeholders that the arrangement had been completed. Soon, all met in Hong Kong to hammer out the specifics. Cultural differences existed between the Americans and the Chinese. Payson Cha said that confrontation was a natural occurrence for the Americans but would take time for such a concept to be accepted in China. Morgan Stanley, for example, advocated for an idea that a single vote would address management problems. However, the Chinese decided to address disagreements by dialogue. At the end of the day, both parties decided to resolve problems by negotiation but set a timetable on how long such negotiations would continue. After almost a week of meetings in Hong Kong, Cha helped achieve the final deal. Yet problems and risks have persisted. The most challenging problems confronting the joint venture is how to integrate very different management approaches and how to work with somewhat diverse company cultures. The bank's pay for American and Chinese workers was distinct, with a separate wages and separate incentive programs. The bank's business was weaker than anticipated. The legal framework was also a barrier to foreign investment in China, where personal relations still overshadow legal requirements. When Beijing's authorities unexpectedly opened the economy to investors, Morgan Stanley could find itself saddled with a company over which it had less than 100% control.

1. What are the shared goals and specific priorities of the partners in the creation of this joint investment bank? Include definition, types, and nature of international business joint-ventures. 2. What communication strategies did each partner use at various times and what specific results did each partner achieve? 3. Which approach might create possible difficulties for Morgan Stanley and its partners in the future, and why? 4.a) What recommendations do you have for coping with the problems? b) How do you plan to implement your recommendations?