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PORTFOLIO PARTS TO BE GRADED 1

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PORTFOLIO PARTS TO BE GRADED

1. Competence: Reading comprehension: students can understand
background information, company profiles and a
memo as well as comprehend the cultural cues
within them
Writing: students can write a succinct, cohesive
briefing note, giving advice and making
suggestions

2. Input: MedLee: In Pursuit of a Healthy Joint Venture
adapted from Harvard University’s Program on
Negotiation role play of the same name, by
Candace D. Lun under the supervision of Jeswald
W. Salacuse

3. What to do: A. Read the task, background information and
company profiles
B. Make notes on the most important information,
and think about which of the negotiation
strategies discussed in this course could be
applied in this case.
C. Write the briefing note as outlined in the task
(approx. 800 words).
D. Upload your briefing note as a Word document
using your name as the file name (e.g.
Marta_Schmidt.doc) to the Übung.

THE TASK:

You work as personal assistant to Pat Armstrong, the head of International Development at
MedDevice, an American medical equipment manufacturer and distributor. Ms Armstrong
has asked for your help as she prepares to negotiate a joint venture with Lee Medical, a
medical devise distributor based in Thailand. Her first meeting with a representative from
Lee Medical is next week, the goal of which is to reach agreement on how decision-making
and staffing will be handled at the new company.
Read the background information on the following pages and write a briefing note (approx.
800 words) for Pat Armstrong in which you advise her on how she should approach this
negotiation as well as warn of potential risks. Your note should include:
• cultural differences that may create opposing positions on each of the negotiating
points
• suggestions for countering those potential issues
• suggestions of how she should negotiate each point including appropriate
strategies
Background
Mr. An Lee (owner and President of Lee Medical Supply) and Mr. Ralph Thompson (CEO of
MedDevice) met while both men were vacationing with their families at a luxury resort on
Phuket Island, an exclusive vacation spot in Thailand. They met over drinks at the pool one
evening, and finding that they had much in common in terms of business interests, had
several meals together over the next few days. They became fast friends with great respect
for each other's intellect, business acumen, and sense of humor.
Mr. Lee and Mr. Thompson were intrigued by each other's respective businesses in general
and by the complementary nature of their core competencies and needs specifically.
MedDevice had cutting-edge technology and products, but no access to distribution
channels and the medical customer base in Thailand. Lee Medical Supply possessed a strong
distribution network, a well-trained sales force, relationships with most of the major
hospitals and doctors in the country, and an intimate knowledge of the protocol, legal issues,
and eccentricities of the Thai market. Lee Medical lacked access to some of the newer, more
sophisticated technologies like CAT Scanners, MRIs and pacemakers, the demand for which
had been increasing exponentially in the increasingly affluent Thai market. Lee and
Thompson spent many hours chatting about the potential synergy between their two
companies.
The vacation ended, but at Mr. Lee's invitation, Mr. Thompson visited Lee Medical Supply in
Bangkok before returning to the States. The two solidified their friendship and respect for
each other by signing a Memorandum of Understanding to pursue a joint venture between
Lee Medical Supply and MedDevice (attached in Exhibit A), the purpose of which was to
establish a sales office in Bangkok under the name of MedLee, Ltd. and to develop the
market for MedDevice equipment in Thailand and throughout Southeast Asia. Initial capital
would be U.S. $2 million. MedDevice would provide 60% of the capital, and Lee Medical
Supply, 40%.
Mr. Lee and Mr. Thompson are delighted by their new venture. In particular, Mr. Lee was
impressed by Mr. Thompson's ability to forge a relationship, while Mr. Thompson was
impressed by Mr. Lee's thorough approach to business. Both fully expect to be in business
together very soon. They parted, agreeing that they would have their subordinates work out
the details of the arrangement in preliminary negotiations. Specifically, they agreed their
subordinates should discuss the following issues for the joint venture:
• Decision-making
• Staffing
Mr. Lee and Mr. Thompson would meet at MedDevice headquarters in three weeks (when
Mr. Lee would be in the States on other business) to review the results of the preliminary
negotiations.

EXHIBIT A:

Memorandum of Understanding
Following our cordial conversations over the last few days, it is in our mutual interest to
establish a joint venture to be called MedLee, Ltd. in Thailand to undertake the sale and
distribution, in Thailand and Southeast Asia, of high-technology medical equipment
manufactured by MedDevice. The initial capitalization of the joint venture will be U.S.
$2,000,000, and the initial period of the venture will be five years.
MedDevice, Inc. will contribute 60% of the capital and Lee Medical Supply will contribute 40%.
We agree that representatives of our two companies will meet within 30 days to negotiate the
details of this arrangement.

An Lee Ralph Thompson
President CEO

Lee Medical Supply

MedDevice, Inc.

EXHIBIT B:

MedDevice, Inc. Company Profile
MedDevice, Inc. is a U.S.-based Fortune 500 company that manufactures high-tech medical
equipment and devices like CAT Scanners, MRIs and pacemakers. Currently, MedDevice
earns more than 80% of its annual revenue from U.S. sales. Strategic studies indicate that
MedDevice's greatest growth potential in the next decade is in developing its Asian and
Southeast Asian markets. MedDevice has investigated the possibility of opening a whollyowned
branch office in Southeast Asia. However, logistical problems, the complexity of local
laws, and the difficulty of breaking into a foreign market that relies heavily on relationships
and connections suggests that forming a joint venture may be necessary to gain access to
key distribution channels in the region.
With over 30,000 employees, MedDevice is known for its organization, precision, and
efficiency. A rules-oriented company whose culture has been shaped by the highly regulated
nature of the medical equipment industry, MedDevice prides itself on its structured systems,
data-driven approach to making decisions and merit-based evaluation of employees. All
rules apply to all, and the best ideas and results win out. These are the qualities that have
made the company successful.
Company strategy is to be the first to market with the most advanced and safest medical
technologies. The specific means and timelines for implementing this strategy are codified
into a set of company principles. These principles must be followed exactly so that each
project that is undertaken is uniform, in terms of the processes that are carried out as well
as in the way that its success is evaluated. All projects are given specific goals and objectives,
including strict deadlines that must be adhered to. Without constant focus on deadlines,
MedDevice would be unable to maintain its ability to be the quickest to market with
superior technology.
There is a “MedDevice Way” of doing things, and that is considered to be the right way. A
common language is spoken and written across divisions of the company.
Standardized processes also help the bureaucracy work efficiently and help with the
measurement and evaluation of performance.
The organization is large, so some bureaucracy and some hierarchy are necessary. The
company, however, is moving away from this and is trying to flatten out layers of the
organization to simplify processes. The CEO is concerned that the organization has become
so large that upper management is out of touch with the employees. There has been a
significant attempt to make the company more egalitarian; there is little differentiation until
you reach the highest management levels in terms of offices.

EXHIBIT C:

Lee Medical Supply Company Profile
Lee Medical Supply is a family-owned company employing about 30 people, located in
Bangkok, Thailand. Lee Medical specializes in the distribution and sales of medical products
including operating tables, hospital beds, X-ray machines, ultrasounds, and a variety of
disposable medical supplies like bandages and syringes.
To date, Lee Medical Supply has focused its business on distributing equipment and supplies
for overseas (mostly American and European) companies. Under such distributorship
arrangements, Lee Medical purchases supplies and equipment from manufacturers and then
sells them in Thailand. Lee Medical profits from the difference between the prices it charges
its customers and the wholesale cost it pays its suppliers. Over the years, Lee Medical Supply
has experienced steady growth and strong financial results. However, as the demand for
high-tech medical technologies has increased in Thailand, Lee Medical has been seeking
opportunities to partner with a major U.S. manufacturer. Such a partnership would allow Lee
to share in the greater profit margins associated with high-ticket items (as opposed to lowcost
items like bandages) and to have some equity in the company's profits (as opposed to
acting just as a middleman).
Lee Medical Supply is fairly typical of the small, family-run and owned businesses in Thailand
and other parts of Southeast Asia. The company was started 30 years ago by An Lee, who
remains owner and president. His seniority and experience is well respected—after all, he
built the company from the ground up and has nurtured its development and growth into a
profitable venture. What Mr. Lee says generally goes; employees respond, for the most part
to both the letter and spirit of his directives. Decisions are made from above and executed
with little discussion or dissension by the subordinates.
The structure of the office seems loose because there are few official titles; however,
employees know where they stand with respect to everyone else at any given point in time.
Many of Mr. Lee’s relatives and close family friends work at Lee Medical Supply. The choice
positions are generally reserved for Lee's sons and close male relatives.
Indeed, 50% of employees at Lee Medical are either related to Lee or have a long-term
association with the Lee family. For example, Mr. Lee's eldest son is Vice President, his
nephew is Chief Financial Officer, his cousin is head of Sales, and his daughter is Office
Manager. Such is the nature of a family-run business and Mr. Lee feels that the
interconnectedness of everyone employed at Lee Medical helps the business because all are
working towards the same goal. In addition, Mr. Lee trusts his relatives' motives and loyalty
more than he would anyone else. Since there are few people working in similar positions,
there is little competition among employees.
Standard procedures have evolved over time, but there is no need to formalize them in such
a small organization. Suggested changes in procedures may come from employees, but they
are implemented only with the approval of Mr. Lee.

EXHIBIT D:

Mr. Thompson's Notes to Pat Armstrong
TO: Pat Armstrong, General Manager of International Development
FROM: Ralph Thompson, CEO, MedDevice
RE: Preliminary Negotiations: 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
Decision making/Control:
• Major decisions should be taken by the General Manager with majority approval by a Board
of Directors to be appointed by Mr. Lee and myself.
• A Board of Directors 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).
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.
• One Manager - appointed by Lee Medical, to advise and assist the General Manager 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.
• Four Sales Representatives - three appointed by Lee Medical, and one by MedDevice to
execute sales and create distribution channels.
Note: Anti-Nepotism Rule:
We should enforce our anti-nepotism rule 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.