Joint Venture- Success & Failure
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Joint Venture- Success & Failure

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Factors responsible for success and failure of Joint ventures.

Factors responsible for success and failure of Joint ventures.

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Joint Venture- Success & Failure Joint Venture- Success & Failure Presentation Transcript

  • Joint Venture:- Success &International Business Presentation by Onkar Satam, MMS Sem. III Page 1
  • “ Joint Ventures and Alliances can deliver more shareholder value than Mergers and Acquisitions can, but getting them off the ground can trip you up in unpredictable ways” --- Harvard Business Page 2
  • JV - What?A contractual agreement joining together two or more parties for the purpose ofexecuting a particular business undertaking. All parties agree to share inthe profits and losses of the enterprise.• Shared contribution of equity• Shared authority, control and responsibilities• Shared Revenues & Losses• Shared Assets Page 3 View slide
  • Advantages of a JVParticipating in joint ventures has the following advantages:1. Helps an organization to enter in to new markets or new product lines2. Access to increased resources and improved expertise & technology3. Helps to build credibility with a particular target market by choosing a well established and credible partner in that market4. Reduces risk involved in business due to sharing of losses and expenses.5. Exiting from the business in case of failure is easier as compared to solely owned businesses.6. Partners in Joint Ventures get preference in buying out the shares of other partners and take over the company. Page 4 View slide
  • Disadvantages of a JVEntering into Joint Venture agreements may pose certain threats or disadvantages tothe participating organizations:1. It is time consuming and difficult to set up a Joint Venture and poses many challenges.2. The objectives of the JV may not be clear and understood by all if the partnering organizations do not state and communicate them clearly.3. Differences in the cultures and management styles of the organizations may lead to a lack of cooperation and coordination.4. Lack of thorough research and feasibility studies in the beginning of the JV may lead to failure of the JV.5. The individual partners may not treat the JV as an integral part of their business and may lead to lack of attention being given to the JV6. There can be an imbalance in levels of expertise, investment or assets brought into the venture by the partners Page 5
  • Steps in formation of Joint Venture Partner Feasibility Incorpor Planning Search Study -ation Page 6
  • Planninga JVThe Planning Stage involves decision making on the following issues:1. Specify the Goals and Objectives2. Determination of the product and market3. Market Analysis4. Technology Decisions5. Financial Requirements6. Foreign Exchange analysis7. Human resource and skill requirements8. Revenue Predictions9. Cost benefit Analysis10. Personal SWOT Analysis Page 7
  • PartnerSearch The following considerations have to be made while selection partners for JV 1. Financial resources of the prospective partners 2. Technological know how and capabilities 3. Presence in the target market 4. Organizational culture and management style 5. Type of organizational structure adopted 6. Credibility study 7. Ranking of the prospective partners based on above mentioned criteria 8. Selection of partners for the feasibility study Page 8
  • FeasibilityStudy  Predication of the culture and structure of the Joint Venture  Analysis of partners comfort with and adaptability to the new technology and culture of the JV  Analysis of the authority, responsibility and financial gains and loss sharing among the prtners  Market analysis and viability of the JV  Analysis of the sustainability of the JV in times of uncertainty Cost Benefit Analysis  Environmental Analysis of the JV in the market  Growth Predictions Page 9
  • Incorporation A JV can be brought about in the following major ways: •Foreign investor buying an interest in a local company •Local firm acquiring an interest in an existing foreign firm •Both the foreign and local entrepreneurs jointly forming a new enterprise Page 10
  • Critical Success Factors ina Joint Venture1. Good communication, cooperation and coordination among partners2. Common goals and shared vision among partners3. Dedication towards the success and long term sustainability of the JV4. Proper sharing of profits and benefits among partners5. JV should work towards the benefit of all the partners6. Proper planning and research prior to the incorporation of the JV Page 11
  • Factors hindering thesuccess of a JV1. Lack of understanding between the partners2. Lack of patience and motivation among partners3. Entry of a wholly owned subsidiary of a partner in the same business and market (E.g.. Hero Honda)4. Benefits lower than the expectations5. Operational Difficulties due to geographical location of the partners6. Differences and conflicts between partners on various issues. Page 127. Incompatibility of the culture and management styles of the partner
  • Successful Joint VenturesVOLVO – EICHER JVTATA – DOCOMOFailed Joint VenturesChrysler – Diamler AGYamaha – EscortsJVs Leading to Takeover by one partnerHero Honda (Takeover by Hero Group)Virgin – TATA ( Takeover by TATA) Page 13
  •  Launching and running a world class JV is a complex and demanding task. Ifdone right JV promises a better ROI than mergers and acquisitions. It is necessary for all executives involved to understand the unique demands ofJV and invest in early planning Right investments during launch phase will reap big rewards “If you get the launch right, the rest will take care of itself” Page 14
  • Sources http://www.investorwords.com/2671/joint_venture.html http://www.businesslink.gov.uk http://sbinfocanada.about.com/od/management/a/jointventure.htm http://en.wikipedia.org/wiki/Joint_venture http://www.bharatentrepreneurs.com/2008/09/26/successful-joint- ventures-in-india-in-2008 Page 15
  • Thank You Page 16