An American company and a Japanese company formed a joint-venture to manufacture gauges and measurement equipment for sale in Asia.

The American firm was supposed to supply the technology; the Japanese partner would manufacture and market the products.

Once per quarter on average, a Hong Kong-based American executive would visit the venture’s operations in Japan to review strategies and major decisions with the other side.

Between visits, the two sides communicated through occasional phone calls.

Over time, the American company’s strategy changed from developing a broad array of technology to focusing on a relatively small number of products, but the Americans never communicated the change to their Japanese partner.

As a result, the Japanese firm became convinced that the Americans were acting in bad faith – denying the joint-venture the new technology that it needed to stay competitive.

Eventually, the situation evolved into a bitter dispute that led to the liquidation of the joint-venture. Had the two sides discussed and agreed on a communication strategy for their partnership during initial contract negotiations, they might have avoided the conflict.

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