Joint Ventures Abroad Final


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Joint Ventures Abroad Final

  1. 1. What is the most Similar thing to a Joint Venture?
  2. 2. <ul><li>It’s Marriage </li></ul>
  3. 3. Joint Ventures Abroad Presented by: Jigar Mehta, Rahul Sharma, Omkar Borle and Pavan Singh.
  4. 4. Contents Joint Venture Definition & Overview 1 Reasons to form Joint Ventures 2 Types of Joint Ventures 3 Joint Venture Agreement 4 5 6 7 8 9 10 Government Policies Problems in a Joint Venture Benefits & Risks in a Joint Venture Secrets of a successful Joint Venture Ending a Joint Venture Examples of JV
  5. 5. Definition & Overview <ul><li>A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together. </li></ul><ul><li>The venture can be for one specific project only, or a continuing business relationship. </li></ul><ul><li>It belongs to the family of alliances – strategic and non strategic. Strategic alliances being characterized by the fact that they gather competitor companies. </li></ul>
  6. 6. Overview <ul><li>A typical International Joint Venture is between: </li></ul><ul><li>Two international parties, (individuals or companies), incorporate a company. </li></ul><ul><li>The above two parties subscribe to the shares of the joint venture company in agreed proportion, in cash, and start a new business. </li></ul>
  7. 7. <ul><li>Promoter shareholder of an existing company and a third party, who/which may be individual/company, one of them non-resident or both residents, collaborate to jointly carry on the business of that company and its shares are taken by the said third party through payment in cash. </li></ul>
  8. 8. When is joint venture used. <ul><li>Joint ventures are common in the oil and gas industry. </li></ul><ul><li>To Enter a new or existing market. </li></ul><ul><li>Technology transfer. </li></ul><ul><li>Government regulations. </li></ul>
  9. 9. Reasons to form JV <ul><li>Internal reasons </li></ul><ul><li>Build on company's strengths </li></ul><ul><li>Spreading costs and risks </li></ul><ul><li>Improving access to financial resources </li></ul><ul><li>Economies of scale and advantages of size </li></ul><ul><li>Access to new technologies and customers </li></ul><ul><li>Access to innovative managerial practices </li></ul>
  10. 10. Reasons to form JV <ul><li>Competitive goals </li></ul><ul><li>Influencing structural </li></ul><ul><li>evolution of the industry </li></ul><ul><li>Defensive response to </li></ul><ul><li>blurring industry boundaries </li></ul><ul><li>Creation of stronger </li></ul><ul><li>competitive units </li></ul><ul><li>Speed to market </li></ul><ul><li>Improved agility </li></ul>
  11. 11. Reasons to form JV <ul><li>Strategic goals </li></ul><ul><li>Synergies </li></ul><ul><li>Transfer of technology/skills </li></ul><ul><li>Diversification </li></ul>
  12. 12. Types of JV <ul><li>Co-operate with another business in a limited and specific way </li></ul><ul><li>Separate joint venture business </li></ul><ul><li>Business partnership or a limited liability partnership </li></ul>
  13. 13. JV Agreement <ul><li>A written agreement should cover: </li></ul><ul><li>the structure of the joint venture, e.g. whether it will be a separate business in its own right </li></ul><ul><li>the objectives of the joint venture </li></ul><ul><li>the financial contributions you will each make </li></ul><ul><li>whether you will transfer any assets or employees to the joint venture </li></ul><ul><li>ownership of intellectual property created by the joint venture </li></ul><ul><li>management and control, e.g. respective responsibilities and processes to be followed </li></ul>
  14. 14. JV Agreement <ul><li>how liabilities, profits and </li></ul><ul><li>losses are shared </li></ul><ul><li>how any disputes between the </li></ul><ul><li>partners will be resolved </li></ul><ul><li>an exit strategy </li></ul>
  15. 15. Government Polices and Opportunities <ul><li>The following requirements will have to be complied with for setting up joint ventures abroad </li></ul><ul><li>Companies Act </li></ul><ul><li>FERA.- Section 27 of Foreign Exchange Regulation Act, 1973. </li></ul><ul><li>Approval of Reserve bank.- </li></ul><ul><li>For sending representatives </li></ul><ul><li>Remittance of cash </li></ul>
  16. 16. Government Polices and Opportunities <ul><li>Holding shares and securities abroad </li></ul><ul><li>Tax concessions under Income-tax Act </li></ul><ul><li>Deduction of 50% of royalties, commission, etc., received from foreign enterprises </li></ul>
  17. 17. Problems in a JV <ul><li>Valuation problems. </li></ul><ul><li>Transparency </li></ul><ul><li>Conflict resolution </li></ul><ul><li>Ownership and management </li></ul><ul><li>Control problems </li></ul><ul><li>Changes in ownership shares </li></ul><ul><li>Marketing and staffing issues </li></ul><ul><li>Problems related to multinationality. </li></ul>
  18. 18. Problems in a JV <ul><li>Export rights </li></ul><ul><li>Tax issues. </li></ul><ul><li>Dividend and investment policies. </li></ul><ul><li>Differences in partner size. </li></ul><ul><li>There may be other control problems: </li></ul><ul><li>Product line disputes </li></ul><ul><li>Material and component sourcing </li></ul><ul><li>Technology utilization </li></ul><ul><li>Cultural problems. </li></ul>
  19. 19. Joint Venture Benefits <ul><li>A successful joint venture can offer: </li></ul><ul><li>Access to new markets and distribution </li></ul><ul><li>networks </li></ul><ul><li>Increased capacity </li></ul><ul><li>Sharing of risks with a partner </li></ul><ul><li>Access to greater resources, </li></ul><ul><li>including specialized staff and </li></ul><ul><li>Technology </li></ul><ul><li>A joint venture can also be very flexible </li></ul><ul><li>Popular with transport and travel industries that operate in different countries. </li></ul>
  20. 20. Joint Venture risks <ul><li>Problems are likely to arise if: </li></ul><ul><li>the objectives of the venture are not 100 per cent clear and </li></ul><ul><li>communicated to everyone involved </li></ul><ul><li>the partners have different objectives for the joint venture </li></ul>
  21. 21. <ul><li>there is an imbalance in levels of </li></ul><ul><li>expertise, investment or assets brought </li></ul><ul><li>into the venture by the different partners </li></ul><ul><li>different cultures and management styles result in poor integration and co-operation </li></ul><ul><li>the partners don't provide sufficient leadership and support in the early stages </li></ul>
  22. 22. Ending a Joint Venture
  23. 23. Ending a JV <ul><li>A contractual joint venture, such as a distribution agreement, can include termination conditions. </li></ul><ul><li>The company can give a time periods notice to terminate the JV </li></ul><ul><li>One company can buy out the other. </li></ul>
  24. 24. Ending a JV <ul><li>The original agreement should also set out what will happen when the joint venture comes to an end. </li></ul><ul><li>how shared intellectual property will be unbundled </li></ul><ul><li>how confidential information will continue to be protected </li></ul><ul><li>who will be entitled to any future income arising from the joint venture's activities </li></ul><ul><li>who will be responsible for any continuing liabilities, e.g. debts and guarantees given to customers </li></ul>
  25. 25. <ul><li>Understanding cultural backgrounds of all the countries involved </li></ul><ul><li>Negotiating win-win contract </li></ul><ul><li>Having Comprehensive </li></ul><ul><li>Joint Venture Agreements which </li></ul><ul><li>lays down a road map of duties </li></ul><ul><li>and obligations of all the </li></ul><ul><li>parties involved </li></ul><ul><li>Having a workable and </li></ul><ul><li>efficient Dispute </li></ul><ul><li>Resolution Mechanism </li></ul>Secrets of a Successful Joint Venture
  26. 26. <ul><li>Involving lawyers from all the jurisdictions early on </li></ul><ul><li>Giving leeway for international contingencies and environment. </li></ul><ul><li>Understanding legal and regulatory regime of all the jurisdictions involved </li></ul><ul><li>Termination </li></ul><ul><li>Terms and Conditions </li></ul>Secrets of a Successful Joint Venture
  27. 27. Examples of JV <ul><li>The Bharti - Wal-Mart Retail Joint Venture. </li></ul><ul><li>Lee Cooper Joint Ventures With Pantaloon Retail (India) to market Lee Cooper's denim apparel in India. </li></ul><ul><li>Fossil in 50:50 joint venture with Rajesh Exports </li></ul>
  28. 28. Thank You