Beijing International Club Corporation (BICC)
In April of 1996 George Tossan reviewed the due diligence reports for the Beijing International Club Corporation (BICC) joint venture in Beijing, China. The BICC project was a joint venture with the Chinese Ministry of Foreign Affairs (MFA) to build a hotel recreation complex in the center of Beijing. George Tossan worked for Sheraton Asia Pacific Corporation (SAPC) which was currently negotiating with Sun Corporation (Hong Kong) to buy out Sun's interest in the JV. In two days George Tossan was due to attend a meeting of SAPC's senior management at which time he would present his assessment of Sheraton's investment in BICC. SAPC's negotiations with Sun Corporation had reached what George Tossan believed to be a reasonable figure for Sun's 31% interest in the venture. The key question facing George Tossan was whether the BICC investment represented a sound and prudent entry into actual asset ownership in China. But this question lay in the midst oa a host of questions, such as the risks and opportunities of investing in China, whether SAPC's growth strategy would work in China, whether the prospective economics of the JF were truly profitable, and whether Sheraton, in the end, would have any exit strategy in the event of impending failure. The JV had already gained a high profile in the head office, and George Tossan was worried that the decision would roll forward without careful consideration. George Tossan needed to detail the many issues relevant to a proper assessment of the proposed investment.
BICC is a foundations case for the analysis of international joint ventures, the complexities of entering into a Chinese joint venture, and the questions which arise from the financial analysis of an international joint venture investment. The case focuses first on the due diligence process performed by Sheraton prior to entering into investment, as well as a brief overview discussion of the individual risks posed by the project. The third and final section of the case details the issues related to the multi-staged development of the project and the capital outlays and operating cash flows associated with each stage. In addition to the case itself, the Beijing International Club Corporation Addendum, a six page supplement, provides a detailed discussion of the events following the case, including a brief interview with the main character of the case and how he saw a number of the issues and risks confronting Sheraton.