Northern Telecom in China, 1972 to 1994

Nortel, a large Canadian telecommunications company, has been doing business in China since 1972. By mid-1994, Nortel had successfully developed two joint ventures in China but two others were bogged down in negotiations. The two that had been finalized would not make any money for Nortel, while the one in Guangdong that would make a profit was hopelessly bogged down. The chairman of Nortel China was contemplating alternative ways of expediting the negotiations. One alternative was to help the Chinese achieve their telecommunication-related industrial policy, by investing in an agreement whereby Nortel would help train R&D technical experts in China; this demonstration of goodwill might expedite the Guangdong project. Other options included selecting a new set of more cooperative partners; standing tough in the current negotiations; using the unsigned Advanced Semiconductor joint venture as a bargaining chip, as it would contribute to the Chinese government's goal of industrial self-sufficiency; or investing more heavily in back door and guanxi relationships. If Nortel could not find a way in which to expedite negotiations with the Chinese, one of Nortel's major competitors could easily pick up where Nortel left off.

This case was designed as a comparative management or an international business relationships-building case specifically related to the difficulties of doing business in China. The case details the history of Nortel's involvement in China from before the beginnings of the Open Door Policy to the negotiating of three joint ventures and a cooperative agreement in 1994. The case is helpful in demonstrating the importance of Chinese development goals, particularly related to local investment issues, the development of relationships, and the process of negotiating with the Chinese.

• China
• Investments
• Joint Ventures
• Negotiation
• Technology