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Paul Beamish is a Professor of International Business at Ivey.Author or co-author of over 50 books, and 100 refereed articles. His books are in the areas of International Management, Strategic Management, and especially Joint Ventures and AlliancesEXPERIENCE Full Professor, since 1996; Tenured, 1990; Associate Professor, effective July 1989; Assistant Professor, July 1987-June 1989; Visiting Assistant Professor, September-December 1986.Assistant Professor, School of Business and Economics, Wilfrid Laurier University, Dec. 1984-June 1987; Lecturer, July 1982-Dec. 1984.Proprietor - Nomad Trading Company, 1977-90.Manager, Comptroller’s Division - The Procter and Gamble Company of Canada Ltd., 1976-1979.EXPERTISEJoint Ventures and Alliances, Business Strategy, Emerging Markets, China/Japan/Asia, Exporting, International Management
I would like to explain the different issues that we are going to discuss in this presentation. It is important that we have in mind the different case study we have analyze in order to tray to meet theory of this presentation with the practical case studies we have analyzed. In particular I would like to compare the different concepts presented with the Cameron Auto Part Case and also with the TCL Case.
International Operations have become an important part of overall business strategy in recent years, and the commencement of activities in foreign markets has become a natural milestone for any growing business regardless of its size in terms of employees, products, and revenues. Each foreign market offers unique opportunities and risks and many firms naturally look to strategic partnerships with one or more partners for assistance in entering new markets. In an environment where capital is scarce, I urge small business owners to consider collaborating with other businesses to reach new customers or broaden their offerings without the cost of developing additional expertise or hiring more employees. Unlike a merger, a joint venture lets two companies maintain separate identities. They can enter into the partnership understanding that it may be short-lived and predicate the steps to unwind it. To give you a sense of how such arrangements work, I spoke recently with two entrepreneurs who described the nuances and offered their advice.
Joint Ventures is one of the most popular form of strategic relationship. The JV utilizes separate business entity (e.g. corporation, limited liability company, or partnership)Joint Ventures could be Domestic (among companies in the same country or nationality or International)An International Joint Venture is a company that is owned by two or more firms of different nationality. International JV may be formed from a starting or Greenfield basis or may be the result of several established companies deciding to merge existing divisions. The main purpose is to allow partners to pool resources and coordinate their efforts to achieve results that neither could obtain
According to Peng (2009) it could be signed in three specific forms: Minority JV (less than 50%), 50/50 JV, and Majority JV (further than 50%). This equity mode is advantageous because its share the risks and parties have the opportunity of practice knowledge-sharing and R&D activities.I would now, take a chance and give you this piece of paper and try to remember from our Cases Studies, WHAT TYPE OF SPECIFIC FORMS HAVE BEEN USED.
Joint VenturesForms Form Denomination%Cameron Auto PartsMinority60/40TCL Multimedia Majority 67/33(e.g. Nestle  USA and the Pillsbury Company has signed and Joint Venture agreement to combine the well-know brand of Haagen-Dazs with the Nestle’s outstanding worldwide frozen dessert technology, this is a great example of how parties can share brand and technology to develop more innovative products)50/5050/50%
An example mention in the book about a Japanese and a French Joint Venture is that the French partner was bringing complex technology that must be modify by the Japanese partner to be introduce in his market. It was clear that the French firm required a significant say in the management of the venture. On the other hand, the French did not have knowledge of the Japanese market and, thus, the Japanese also needed a significant ole in the venture. The logical solution would have been a shared management venture and equal influence in decisions made at the board level. Unfortunately, both companies wanted to play a dominant role, and the venture collapsed in a decision making stalemate.Is here, in the divisions of the venture, how much of the JV must owned by each party where the majority of JV presents difficulties. Some firms preferred to equate ownership with control, assuming more is always better. Such an assumption would be incorrect. Research has shown that once a foreign firm has about a 40 percent equity stake, there is little difference in the survivability of that subsidiary than if they had , for example an 80 percent stake.
There are two mainly forms of form strategic alliances:Non-Equity Modes: In this mode there is not necessary to engage the company equity. This classification is considered a small scale entry according to Peng (2009). The mainly forms of entry to new markets is through exports or contractual contracts.Equity (FDI) Modes: This mode of entry requires commitment to set up independent organization abroad with the engage of equity.In this presentation we are going to focus on in the EQUITY (FDI) MODES , this is the form usually requiring the greatest level of interaction cooperation and investment.The examples we are mainly going to discuss are two party joint ventures, but it is also possible to have three or more partners. JV have moved from being a way to enter FOREING MARKETS to become a part of the mainstream of corporate activity. Virtually all MNEs are using international JV as a key element of their corporate strategies.Trough the 1990s the popularity of Joint Ventures has increase. The range of JV does not change much from year to year , In general, JV are the mode of choice 25-35 percent of the time by U.S. multinationals and in about 40 percent of foreign subsidiaries formed by Japanese multinationals
The popularity of Joint Ventures continue despite of this reputation for being difficult to manage. The majority of this failure is because they did not well manage the different organizational cultures and also because of the lack of strategies to manage the JV. As an example what lessons do we learned from TCL JV: Different Cultures. Different Strategies Orientation. Different approachesFrom Smuckers Presentations we learned:That it is important to study the product opportunities of acceptability in the new market, by realizing a deep cultural study of custom and habits of the new culture.
As we can see regardless the failure of the different JV, companies continue using this strategic alliance type in order to enter to new markets and form effective partnership and corporations. This continue activity has brought the formation of ASAP. This association was created to support the professional development of alliance managers and executives to advance the state-of-the-art of alliance formation and management and to provide a forum for sharing alliance best practices, resources and opportunities to help companies improve their alliance management capabilities.
International Joint Ventures can be used to achieve one of four basic purposes. As shown in this frame work. These are: (mention all of them)Companies using JV for each of these purposes will have different concerns and will be looking for partners with different characteristics. Firms wanting to strength their existing business, for example, will most likely be looking for partners among their current competitors, while those wanting to enter new geographic markets will be looking for overseas firms in related business with good local market knowledge (eg. Thomson , TLC), Although often treated as a single category of business activity, international JV are remarkably diverse, that we will discuss in the followings slides. Now I would like to evaluate which of the different JV motivations has we seen in the different case study!!! Disucuss the different strategies use by TCL, and Cameron Auto Parts!!! Eplain the different between strategies use in DEVELOPED and DEVELOPMENT COUNTRIES!!! ( USE EXAMPLE AS WALL MART, TRACE INTERNATIONAL, ETC) COMMUNICATIONS COMPANIES! CLARO VERIZON, ORANGE!
International Joint Ventures are used in a variety of ways by firms wishing to strengthen or protect their existing businesses. Among the most important are Joint Ventures formed to achieve economies of scale , and mention the others.This type of Joint Venture allow firms to acquire particular technology and Know How, reducing financial risks of major projects. Also this benefit of eliminating a potential competitor from a particular product or market area. EXAMPLE:Nestle USA and the Pillsbury Company Form Joint Venture Combining U.S. Frozen Dessert Businesses; Joint Venture Provides Opportunity for Significant Incremental GrowthCASE STUDIES:TCL: CHANGCHENG AND THE DIFFERENT CHINESSE MANUFATURES!!!
Small enterprises are more likely to participate in JV in order to strengthen their business through economies of scale. This network can reduce COST and increase the POTENTIAL of foreign markets entries, OR to meet some other focused objective. This require a limited structure and investment.
This type of international Joint Venture are unusual because those firms overcome some combination of liability size , newness, foreignness and relational orientation. EXAMPLE ! AUTO MAKERS! TO SUPPLY certain low engines to each companies. Received engines at lower cost that it could obtain if it were to produce them itself. Disadvantages:Tend to be slow ! Because all parts disagree on the design. Could not agree on the features.Because all of the venture’s output was sold to the parents, the JV personnel had no direct contact with end customers and could not resolve the dispute. It is a MANY-HIGHER-VOLUME – TAKING process , whichever parents but the most quantity of products obtain the more benefits. As the share holdings to the venture and not the volumes is what is taken out every year, this means that the different parents will do well under this arrangement. But Certainly that they are potential transfer price disputes
It is very common in the International Joint Ventures that companies share their research and development efforts. This is not only save both time and money for the participating firms but also increasing the possibilities for firms to come up with results that would otherwise have been impossible. Issues for disadvantages:*Shared the Cost. *Increase Collaboration*Coordination of efforts.TWO WAYS! Assign rout for each of the companies participating and told to pursue it . They are regular meetings and perhaps quarterly. The other form is JOINTLY OWNED COMPANY. Provided it with budget, and a physical location.One way to carry out collaborative research is to establish a jointly owned company and provide it with staff, budget, and a physical location. However, there are some issues for this method. The participating companies may not sending their best people to the new company which makes the company will need to hire people from outside. Moreover, sometimes they don’t want to go too far with the collaboration because the partners are usually competitors. Firms are afraid that the partner will steal their core technology or use the new technology that they developed together to against them in the future.EXAMPLE: DOZEN U.S. Computer Firms discovered that the participating companies were not sending their best people to the new company. He ended up hiring more than 200 of the firm’s 300 scientists from outside.ISSUE TO EVALUATE: HOW FAR TO GO IN COLLABORATION. Because usually they are competitiors “ PRECOMPETITIVE” focus. Ex. On product development work. Difficult line to draw.
Is not a Some firms create IJV to share their marketing and distribution channels for wider market coverage at a lower cost. Example: NUMMI Joint Venture : General Motors and Toyota in California. Clearly branded and are sold competitively through each parent’ distribution network. Antirust: Plays a role to keep marketing activity separate. , but so does the partners' intrinsic desire to maintain separate brand identities and increase their own market share. They do not forget they are competitors. Others form, of JV are form with the purpose of achieving economies in Marketing and Distribution. Hoping for wider market coverage at a lower cost. Trade off is a loss of direct control over the sales force, potentially slower decision maintain and a possible loss of direct contact with customers.-Cooperative Marketing Agreements: not JV but agreements by two firms with related product lines to sell one another's products: EX. PRACTIVE – VITACELAR! SYSTEMCompanies pursue a more complete line to sell a product or a system. *example telephone services, internet, brings modem equipment! Without the managerial complications of a JV. This can entail a JOINT BRANDING!!!
Multinational Companies with subsidiaries that they have concluded are too small to be economic have sometimes chosen to create a Joint Venture by combining their too small operation with those of a competitor. Examples: Fiat and Peugeot, merged their operations in Argentina, where both companies were doing poorly. The new JV started with a market share of 35% and a chance for greatly improved economies in design, production and marketing. Allow graceful exit of the market. Business which is not longer interesting.Example:
Traditionally achieved by LICENSE AGREEMENTS or by DEVELOPING THE TECHNOLOY THEMSELVES. JV are increasingly use for this purpose. The power is that a firm may be able to have its employees working shoulder to shoulder with those of its partners. Trying to solve the same problems. EXAMPLE: GM AND TOYOTA! Provided an opportunity for GM to obtain a source of low-cost small cars and to watch firsthand how TOYOTA managers, who were in operational control of the venture, were able to produce high-quality automobiles at low cost. Opportunity to learn new production techniques was more significant than the supply of cars coming from the venture.
Some projects are to risk for firms to tackle alone. This is why Oil companies use Joint Ventures to split the cost of searching for new oil fields. And why aircraft industry is increasingly using this type of JV. Do this make sense? YES! In this cases one partner take the lead role and manages the venture on a day-to-day basis. Management complexity, a major potential drawback of JV, is kept to a minimum with this strategy. If the venture Finds oil, transfer prices are not a problem- the rewards of the venture are easy to divide between the parners. In situations like this, forming a JV is an efficient and sensible way of sharing the risk. Why to get together with the competitors? Is better to have a portion of a smaller future pie than none at all. EXAMPLE! MUSIC:::
EXAMPLE CEMEX/ TCL:Firms with domestic products that they believe will be successful in foreign markets face a choice. They can produce it at home and export it, license the technology to local firms around the world, establish wholly owned subsidiaries in foreign countries or form Joint Ventures. With Local Partners. EXPORTING: is unlikely lead to significant market penetration efforts. SUBSIDARIES: Is too slow and requires too much time , many resources. LICENSING: Does not offer adequate financial terms, and have many risk. JOINT VENTURE: Is often the most attractive compromise. This movement to a new market cover certain amount of risks, so forming JV with Local Firms that already know the markets is what most of the organizations prefer. In order to reduce the risk associated with their new market entry. Very often looking for a partner that deal with a related product line and thus has a good feel of the local market. JV make being the negotiation as simple as Marketing and Sales operation until the product begins to sell well and volumes rise. “SCREWDRIVER” eventually the venture could be redesign or modified. To better suit local markets and establish complete local manufacturing, sourcing raw materials and components locally. The objective is to with hold major investment until the market uncertainty is reduced.
A way to reduce risk. Following firms that are already customers at home. Many Japanese automobile suppliers have followed Honda, Toyota and Nissan, as they set up plans in North America and Europe. These suppliers uncertain of their ability to operate in foreign markets decide to form JV with a local partner. There are for example, a great many automobile supplier JV in the United States originally formed between Japanese and American auto suppliers to supply the Japanese “Transplant” automobile manufacturer. For the Americans such JV was an opportunity to learn new manufacturing techniques, and for the Japanese to tap into a growing market.
This is related to taking an early position in what they see as EMERGING MARKETS. Example HSBC : Investing in countries with economic conditions. CEMEX: Investing in Emerging Markets. Seeks for low-cost raw materials, as well as a possible source of low-labor wage. PROBLEMS: unfamiliarity with local culture, establishing western attitudes toward quality , and in some areas, repatriating earnings in hard currency. Solutions can be manage by local governments “ know the ropes” and can deal with the local bureaucracy.
The complementarily of interest that makes the JV possible. For every firm that uses an international JV to take its product to a foreign market, a local company sees the JV as a n attractive way to bring a foreign product to existing market. Why Local Partners accept the JV: to better utilization of existing plants (MC TAGGART) or distribution channels (TCL) to protect themselves against threatening new technology, or simply as an impetus for new GROWTH. The Rewards: Shipping finished products and components to their JV and making profits because they are hard currency. Foreign partners received technology fee, and also management fee.Forign partners typically pay withholding tax on dividend remitted to them from the venture. Local firms do not. The Local partner is often far more concerned with the venture’s bottom line earning and dividend payout than the foreign partner. This means that foreign partner is likely to be happier to keep the venture as simply as marketing or assembly operational as previously described, than to develop it to the point where it buys less imported materials. Example XEROX: FUIJI (JAPANESE) XEROX AMERICAN Adopting a Japanese JV allow the American XEROX to learn manufacturing techniques and quality programs, the prent company fought its way back to heath in the mid 1980 they form Fuji Xerox Corporations .
As Xerox example shows one parent takes products that knows well into a market that he other parents know well. (TCL, CAMERON AUTO PARTS EXAMPLE)However sometimes they move forward to a products and markets that are new to them also. This arrangement to acquire the skills necessary to compete in an new business is a long term proposition, but one that some firms are willing to undertake.Given the fact that most of acquisition do not succeed, and that running to enter a new business without help is extremely difficult, choosing partners who will help you learn the business may not be a bad strategy if you already familiar with the partner, however enter a new product , with a new partner and a new market leaves one with an overall probability of success of (08x.8x.8) 50%/JV: Vehicles for learning , going beyond Knowledge Transferring, to include transformation and harvesting. In practice most of JV include transfer of existing knowledge but stop short of knowledge transformation and harvesting.
The decision to enter a JV should not be taken lightly. As mentioned earlier, JV require a great deal management attention, and in spite of the care and attention they receive, many prove unsatisfactory to their parents. JV LABELED “PERMANENT SOLUTIONS TO TEMPORARY PROBLEMS” by firms that entered a venture to get help on some aspect of their business, then , when they no longer need help they were still stuck with the Joint Venture. This is the reason what firms considering entering a JV should satisfy themselves that there is not a simpler way to get what they need. They should also carefully consider the time period for which they are likely to need help.
A major issue of discussion in the strategic logic is to determine whether congruent measure of performance exist. As shown the figure, in many joint ventures, incongruity exist. In this example the Foreign partner was looking for a joint venture that would generate 20% return on sales in a 1-2 years period and require a limited amount of senior management time. The local partner in turn was seeking a JV that would be quickly profitable and be able to justify some high-paying salaried positions. While performance objectives seen defensible, this venture would need to resolve several major problem areas in order to succeed.
When assessing issues around partnership and fit, it is useful to consider whether the partner not only share the same objectives fot he venture but also has a similar appetite for risk. It is difficult for parents from different organizational size to establish effective JV. Because of varying resources sets, payback period requirements, and corporate cultures. Corporate culture similarity or compatibility can be a make-or-break issue, in many joint ventures. It is nor enough to find a partner with the necessary skills, you need to be able to get access to them and to be compatible. Mangers are constantly told that they should choose a JV partner they trust. Can just be developed over time, for that reason, it is recommend to establish certain negotiations first , before getting a JV.
Question of Strategic Freedom. Questions as is the market competitive? How strong is the Competition? How will the company compete? How much freedom related to the selection of suppliers, product line, and customers?WIN-WIN SITUATION!!! To each parent. Keeping both parents working for the success of the venture. Management Roles: that each parent company plays. It is going to be easy if one parent company plays a major role and has a lot of influence over both the strategic and the day to day operation of the venture. Or if one parent plays a lead role in the day to day operation of the JV. More difficult to manage are share ventures. In which both parents have significant input into both strategic decisions and the everyday operations of the venture. The most common form, is the middle ground is split management decisions, where each partner has primary influences over those functional areas where it is most qualified. The objective is superior performance!!!!! Domincant-parent venture are easier to manage than shared management ventures.
Key importance is the relationship between the managers. Not the legal agreement. . Principal elements most of the time are straightforward. One item that often goes un-discussed is the termination of the venture. It is important to work out a method of terminating the venture in the event of a serious disagreement, and to do this at a time when heads are cool and goodwill abounds.The usual way is to use a shotgun clause, which allows either party to name a price at which it will but the other’s share in the venture. However, once this provision is activated and the firs company has named a price, the second firm has the option of selling at this price or buying the firs company’s shares at the same price. This ensures that only fair offers are made, at least as long as both parents are large enough to be capable of buying each other out.
In the early months they need particularly attention. Establish healthy working relationships between the parents and the venture general manager. Managers should be on the lookout for the impact that cultural differences may be having on the venture and for the emergences of unforeseen inequities. Selection of capable people in key roles. Example of cultural differences:Western are frustrated by the slow consensus-oriented decision making style of Japanese. Equally the Japanese find American individualistic decision making to be surprising, as the decisions are made so quickly but the implementation is often slow. Firms that are sophisticated in the use of international JV are aware and have taken action to minimize this cultural effects. EX. FORD has put more than 1,500 managers through courses to improve their ability to work with Japanese and Korean managers.
This just not arrive form different nationality. Small Firms vs. Large Firms: Projects take too long, get approval is a long process. Even though they have the same nationalityFirms working with two partners from the same country (e.g. Rural Japan from Tokyo dun business): How different they are in cultural habits, for example ,.A Japanese automobile from headquarters in rural Japan from an one run from TOKYO. Cultural Differences between managers within in different functional areas: Cultural difference may be bigger than managers from the same functions activity. European engineers discovered when discussing a potential join venture with an American partner that they had more in common with American engineers than with the marketing people their own company
The Design And Management Of International
The Design and Management of International Joint Ventures (JV) Author: Paul W. Beamish
• Paul Beamish is a Professor of International Business at Ivey.• Author or co-author of over 50 books, and 100 refereed articles.EXPERIENCE• Full Professor, since 1996; Tenured, 1990.• Associate Professor• Proprietor : Nomad Trading Company Manager : Comptroller’s Division The Procter and Gamble Company of CanadaEXPERTISE• Joint Ventures and Alliances• Business Strategy,• Emerging Markets: China/Japan/Asia• Exporting, International Management
Table of Content• Introduction• Joint Venture Definition• Equity Joint Venture• Why Companies create International Joint Ventures?• Requirements for International Joint Ventures• Joint Ventures Checklist• Summary• Discussion
Introduction• Competitive Advantage• Introduce products or services to new Markets• Scarce Capital• Organizations Collaborating
What is a JV?• A formal agreement sign by two or more organizations with the objective of do certain business together and share between all the parties the profits and the losses of the agreement. Types • International • Domestic
JV Specific Forms Joint Ventures Forms % Minority Less than 50% 50/50 JV 50% Majority More than 50%
Can you Remember ? Joint Ventures Form Forms Denomination % Minority 40/60 Cameron Auto Parts Majority 67/33 TCL Multimedia 50/50 % 50/50 Another JV of your knowledge?
Effect of Foreign Equity Holding on Subsidiary Mortality Risk.
Lessons Learned from Joint Ventures• 50% of Companies with Joint Ventures were dissatisfied with their venture performance.• Reputation of Being difficult to manage.• Failure exist and are publicizedExamples:-As an example what lessons do we learned from TCL JV:- Different Cultures.- Different Strategies Orientation.- Different approaches
Association of Strategic Alliance Professionals (ASAP)• Established in 1998, ASAP is the only professional membership associationdedicated to alliance formation
Motivations for InternationalNew Markets Joint Ventures Formation Cameron TCL To Take Existing Products to to Take Existing Products For ForeignMarkets eign Markets To Diversify into a New Business Auto PartsExisting Markets TCL To Strengthen the Existing Business Codetel-Verizon To Bring Foreign Products to Local Markets Existing Products New Products
Strengthening the Existing New Markets BusinessThis type of To Take Existingfirms to acquire to Joint Venture allow Products to particular technology Take Existing Products For To Diversify into a Newand Know How, reducing financial risks of major projects. ForeignMarkets eign Markets Business Existing Markets To Strengthen the To Bring Foreign Existing Business Products to Local Markets Existing Products New Products
Achieving Economies of Scales• In Raw Materials• Component Supply• Research and Development• Marketing and Distribution• Achieve Divisional Merge
Raw Materials• Obtain Raw Materials• Jointly Manufacture Components (e.g. Auto Makers)
Research and Development • Save Time and Money • Collaborating and Combining Efforts of HR • Incredible OutcomesTwo possible Forms toaccomplish R&D JV:• Simply Coordinate Efforts and Share Cost• Set up a jointly owned company.
Marketing and Distribution• Not a Common Form of JV.• Anti-Trust feelings emerge.• Achieving Economies in Marketing and Distribution• Cover Market at Lower Cost• Loss Direct Control of Sales Force• Slower Decision Making Process
Divisional Mergers• Combining “Too Small” companies• Practice when both organizations are performing poorly• Allow firms graceful exit from a business in which is not longer interesting
Acquiring Technology in the Core Business• Through License Agreements• Through developing the technology themselves• Giving access to Patent Rights• Having employees of both organizations working shoulder to shoulder
Reducing Financial Risks• Split the cost for searching new field• Reduce Complexity of find resources (oil companies)• One partner take the lead role.• Manage day-to-day basis.• The rewards of the venture are easy to divide between partners.
Taking Products to New Markets Foreign Markets To Take Existing Products to To Diversify into a New Foreign Markets BusinessFirms with Domestic developed products have the opportunity to success in foreignmarkets.Options: Existing Markets• Produce the product at home or export it.• License Technology• Establish Subsidiaries in Foreign Markets To Strengthen the To Bring Foreign• From Joint Ventures Existing Business Products to Local Markets Existing Products New Products
Following Customers to Foreign Markets• Reduce Risk• Follow firms that are already customers at home• Learn from knowledge transfer• Tap into growing markets.
Investing in “Markets of the Future”• Taking early position in Emerging Markets• Possible source of Low-Cost• “Know the Ropes” JV• Government regulations• Currency Exchange• Unfamiliarity with the local culture
Bringing Foreign Products to Local Markets This is the complementary effect that makes JV possible, for every firm that uses aninternational JV to takeExisting Products to market, a local company sees the JV as an To Take its product to foreign To Diversify into a Newattractive way to bringForeign Markets its existing market. a foreign product to Business Existing Markets To Strengthen the To Bring Foreign Existing Business Products to Local Markets Existing Products New Products
Using JV for Diversification In the previous example we have illustrate, many JV where one parent knows well the product and the other parent knows well the market, but when we talk of diversification New MarketsJV we are referring to a new ground and move one or both parents into products andmarkets that Take Existing Products to To are new to them. To Diversify into a New Foreign Markets BusinessEnter New Product, New Market with a New Partner = (.8 x .8 x.8 ) about 50% ! Existing Markets To Strengthen the To Bring Foreign Existing Business Products to Local Markets Existing Products New Products
Requirements for International JV Success “Permanent solutions to temporary Problems”
Measuring JV Performance: The Search for Congruity Foreign Partner Local Partner1. Profitability – 20% ROS (within 12-24 1. Profitability (within 9-12 months) months)2. Require limited senior management 2. High paying salaried positions time 3. Opportunity to export3. Maximize local sales4. Exploit peripheral or mature 4. Obtain newest technology technology
1. Partnership and FitDoes the partner share your objectives for the venture?Does the partner have the necessary skills and resources? Will you get access to them?Will you be compatible?Can you arrange an "engagement period"?Is there a comfort versus competence trade-off ?
Shape and DesignDefine the Venture´s Scope of activity and its strategic freedom vis-a-vis its parents.Lay out each parent´s duties and payoffs to create a win-win situation.Ensure that there are comparable contributions over time.Establish the managerial role of each partner.
Doing the DealHow much paperwork is enough? Trust versus legalconsiderations?Agree on an endgame.
Making the Venture WorkGive the venture continuing top managementattentionManage cultural differencesWatch out for inequitiesBe Flexible
What others Cultural Differences?•Small Firms vs. Large Firms•Firms working with two partners from the same country (e.g. Rural Japan fromTokyo dun business)•Cultural Differences between managers within in different functional areas.
The True Joint Venture versus the Pseudo Joint Venture The True Alliance The Pseudo Alliance Planned level of parent input development and involvement Continuing One-time Distribution of Risks/Rewards Roughly even Uneven A unique organization Parent attitude toward the JV with unique needs One more subsidiary Frequently referenced The Formal JV Agreement Flexible guidelines rulebook Clearly Specified and Partially overlapping/ Performance Objectives Congruent ambiguous