Doctor of Leadership in Global Perspectives: Crafting Ministry in an Interconnected World

Cross Culture Joint Venture Contract Explanation and Cash Flow Diagram

Written by: on May 24, 2013


Last week I returned home from China. The purpose of the visit was to review a potential Retirement Community management contract project in the heart of Tianjin and to continue to negotiate a Joint Venture contract merging two organizations together to do business in China. The Chinese Organization brings to the JV, the connections and know how on how to do business in China. My company brings the Retirement Community management model and systems about how to develop, open and manage a Retirement Community.

Working in a different culture that has unique values and a different language is challenging. How ideas are conveyed sometimes is best communicated through pictures. Dan Roam in The Back of the Napkin: Solving Problems and Selling Ideas with Pictures has helped me to communicate how our joint venture works and how cash flows back to our organization.

In setting up a joint venture in China, the JV has a board of Directors and shares profits 50/50. China has very specific laws that governor how foreign organizations can set up a JV. The above diagram illustrates how the JV works. In order to start, each company puts into the JV an equal share of capital for seed expenses. Next, Cornerstone receives a lump payment for the systems and knowledge we bring to the JV to manage Retirement Communities. Our company also receives a licensing fee of 2% of gross revenues annually for the ongoing use of our systems. Periodically, the JV may need extra help outside its core business where by Cornerstone can be paid by the JV for consulting services.

Once the JV has started, the JV can establish service agreements with Chinese entities to help them develop, open and manage Retirement Communities.

The Back of the Napkin (Roam, 2008) has been a great help in understanding how to draw illustrations to communicate to another culture complex ideas.

Roam, Dan (2009-12-31). The Back of the Napkin (Expanded Edition): Solving Problems and Selling Ideas with Pictures. Penguin Group US. Kindle Edition. 

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