Motives of Hong Kong-Japanese international joint ventures in retailing. (assessment of international joint ventures)

Introduction

After the yen appreciation in 1985, there was a sudden surge of Japanese investment in Hong Kong. Japanese retailers were one of the most aggressive investors in the latter half of the 1980s and by the early 1990s, there were 11 Japanese department stores (Table I), taking more than 50 per cent of the total market share in Hong Kong (the Association of Japanese Commerce and Industry, 1995). At the same time, locally-owned department stores had come under increasing pressure from Japanese competition. Under this situation, in order to compete with the Japanese competition, some local retailers entered into international joint ventures with the Japanese retailers.

The purpose of this paper is to find out first, the motivation behind the two retailers, Wing On (locally-owned) and Seiyu Ltd (Japanese-owned) for entering into international joint ventures (IJVs). Unlike most studies of IJVs that focus on the study of the foreign partners, this study concentrates on the study of the local partner-Wing On. This paper discusses the process of Wing On-Seiyu joint ventures and the motivations behind the joint venture activities. Furthermore, the paper evaluates what Wing On has achieved from the IJVs, and whether the IJVs have induced Wing On to change its corporate strategy.

Methodology

This research used a case study approach to study the international joint ventures between Wing On and Seiyu. The study was based on both primary and secondary data. The primary data were obtained through intensive interviews with the executives involved in the IJVs. The access to interviews with these executives was gained by the author who had worked for Seiyu immediately before and during the formation of the joint ventures. The secondary data included annual reports, company reports, in-company staff magazines and newspaper clippings of both companies.

Background of Wing On

The formation of the international joint ventures between Wing On and Seiyu can partly be traced from the unique background of Wing On in the local retail market. Wing On was one of the earliest department stores in Hong Kong. In 1907, Wing On Company Ltd (WOC) was incorporated to operate department store and warehouse businesses. After losing its property to the People's Republic of China (PRC) in 1949, Wing On concentrated on operating department stores, finance and insurance businesses in Hong Kong (Chai and Kwok, 1981, p. 145) before the 1990s. Nevertheless Wing On, like many Hong Kong companies, had always regarded the PRC as a natural market and had been waiting to return to the market. The joint ventures with Seiyu might have provided Wing On with the resources to bring forward its investment in the PRC.

 
Table I 
 
Japanese department stores in Hong Kong 
 
Company         No.     Location         Established year 
 
Daimaru         1       Causeway Bay     1960 
                2       Causeway Bay     1983 
Isetan          1       Tsimshatsui      1973 (closed in 1996) 
                2       Aberdeen         1987 (closed in 1996) 
Matsuzakaya     1       Causeway Bay     1974 
                2       Admiralty        1981 
Tokyo           1       Tsimshatsui      1981 
Mitsukoshi      1       Causeway Bay     1981 
                2       Tsimshatsui      1988 (closed in 1995) 
Sogo            1       Causeway Bay     1985 (expanded in 1994) 
Yaohan(a)       1       Shatin           1984 
                2       Tuen Mun         1987 
                3       Hunghom          1988 
                4       Tsuen Wan        1990 
                5       Tin Sui Wai      1991 
                6       Yuen Long        1992 
                7       Lam Tin          1992 
                8       Junk Bay         1994 
                9       Ma On Shan       1995 
Uny             1       Taikooshing      1987 
Jusco           1       Taikooshing      1987 
                2       Tsuen Wan        1990 
                3       Lok Fu           1991 
                4       Tai Po           1995 
                5       Junk Bay         1997 
Seibu           1       Admiralty        1990 
Seiyu           1       Shatin           1991 
 
Note: 
 
a The Macao and Sha Tao Kok stores (at the border of Mainland China) 
are excluded in this research although they belong to the Hong Kong 
operation. It is because they are located outside Hong Kong. 
 
Source: 
 
Compiled by the author based on the company reports and the author's 
survey of 11 Japanese department stores in Hong Kong. 

The following sections present first, a review of the process of IJVs between Wing On and Seiyu in Hong Kong, Asia and China. Second, the motivations of Wing On and Seiyu in the IJVs are analysed. Finally, the implications of the IJVs, especially to the local partner, Wing On, are examined in terms of whether Wing On has achieved any of its objectives from the IJVs.

International joint ventures between Wing On and Seiyu

The international joint ventures between Wing On and Seiyu was "unveiled in August 1989 when Seiyu took a 40% stake in Wing On Department Stores ..." (Hong Kong Inc., 1990, p. 95). This was the first step for a series of joint venture activities in Hong Kong, Asia and China between Wing On and Seiyu.

In Hong Kong

Joint ventures can …