Joint Venturing, Contracting& Business Law BMCP 905Mar 30, April 1, 2, 2006Calgary                           Chris Hylton ...
Friday   Part I: Where does law come from         Part II: Contracts         Part III: Joint VenturesSaturday         Part...
Your agenda – what do you want? ________________________ ________________________ ________________________ ___________...
Evaluation  Final exam                               100%  Sunday 1 pmExam is open book. You may bring in your textbook,...
A little about me:First of all, call me Chris  BA & MA from Queens and Laval University  Worked for the feds, consulting...
Why study Joint Venturesand Law?   (beside this being a required course   for most of you)
What is Law?   Anyone have any idea?
What is Law? Law as Rules Law as Morals Characteristics of “good” law:   –   Generality   –   Lack of retroactivity   –...
The Role of Law   The law fulfils several functions in   society, including: Protect persons and property Provide govern...
The Law in Perspective Law provides rules of conduct that are  enforceable by government, individuals,  and companies La...
The Law and Economic FreedomFramework for freedom of choice  – Businesses rely on law to enforce the    business arrangeme...
Business and the LawLaw is pervasive in the business environment.    - Employment contracts    - Liability of Directors an...
Case: Dudley & Stephens 3 men and a boy are shipwrecked Men are all married with young families Food & water ran out, s...
The Civil & Common Law SystemsThe legal systems of the Western world can be    divided into two groups: countries with a  ...
I.   Where Does Law Come from?     P3
I Where Does Law Come from? P 3Four Sources of law: Statutes Subordinate legislation Law made by Judges – Case law  – C...
Legislation or Statutes pg 3 Legislation is a general term referring to statutes (or  statute law), regulations, by-laws...
Subordinate Law pg 3 Statute creates administrative body Administrative body may create procedural  rules Administrativ...
Case Laws - The Doctrine ofPrecedent pg 4  One of the most important differences  between the civil and common law systems...
The ConstitutionThe Constitution is the highest source of  law in Canada.  – Any law inconsistent with Constitution: no  ...
Division of Powers pg 5Canada is a federal country with 2 constitutionally  entrenched levels of government: federal gove...
Division of Powers pg 5The Constitution creates division of powers     between the levels of government  – topics divided...
Constitution Act 1867s. 91 – Federal Powers     s. 92 – Provincial Powers Interprovincial/          Hospitals   internat...
5-1II Contracts pg 31
Contract LawA contract is a voluntary exchange of promises, creating obligations which, if defaulted on, can be enforced ...
Ingredients of a Contract pg 31 To be enforceable in court an agreement must meet the following qualifications.  1. Conse...
Consensus p 32A meeting of the minds of contracting parties  –   share an understanding of the bargain struck  –   be wil...
Offer p 32  Offer must contain:   – terms of the contract   – a communication of willingness     to be bound   – terms of...
Invitation to Treat p 32An invitation to the general public to engage  in the bargaining process  –   advertisements or s...
Communication of an OfferAn offer must be communicatedDisclaimers of responsibility must be posted in plain sight or pri...
End of an OfferOffer ends at a specified time orafter a reasonable time if not specifiedAt the death or insanity of off...
Acceptance p 33Must be unconditional  –   must not specify any new terms  –   court will interpret any ambiguities in the...
Communication of Acceptance 33Usually by communication to the offeror  –   effective at time acceptance is communicatedS...
Post Box Rule pg 33When acceptance is mailed, it is effective when and where it is postedRule applies only when response...
Consideration p 34Each party must give considerationDoes not have to be fairMust be legalNot gratuitousPast considera...
Capacity pg 34                 36
Illegal Contracts pg 35                          37
Restrictive Covenant p 35, 36Non compete clause against sellor of business  – Must be reasonable in time and geographyEm...
Some contracts not enforceable by thecourts unless in writing p 36Land deals  – Sale, easements, and right of waysLeases...
Factors affecting contracts pg 37 - 40                                         40
Ending contract pg 40                        41
Remedies pg 42, 43                     42
Case Study – Leander and JasonLeander (L) owns greenhousesJason (J) is a retail floristJ contracts with L for 3000 plan...
Jason’s PositionContract  – Offer  – Acceptance  – ConsiderationBreachRemedy                    44
Leander’s PositionNo contract as performance not until Dec. 10- 20No breachJ can still go elsewhere and get plants     ...
The ResultJ has a much better caseThere was a contractRemedy  – Mitigation  – Assessment of damages  – Costs           ...
III JOINT VENTURES:GROWING THE FUTURE  The growth in aboriginal Ec Dev  strategies is a key driver for joint  ventures
Planning for success Phase I - Ideas   Phase II - Options                                        48
Next Steps,Planning      Signing   Announcing                                     49
Steering                 CommitteeResources   Markets               Community                       Business              ...
Ownership Options                                                     Merger Acquisition    100%Community Ownership       ...
Commitment OptionsType of relationship Example         Scale of Commitmentno relationship                      No commitme...
Motivation for developing a      joint venture pg 3•Business expansion•New products•New markets•Need for more resources•Te...
The following areas need to be considered when forming a joint venture:CapitalBrandingExpertiseResourcesCulturalLega...
Types of JV’s pg 4Start smallNew companyLegal advice needed (Vancouver FN and casino)                                  ...
Why JV? Pg 5Greater successComplementary practices                           56
Important FactorsSuccess in a joint venture depends on the choice  of JV partner. Successful choice depends on: The partn...
If there is a fit with your organization and   prospective partner: Financial Joint development of business plan Legall...
BenefitsThere must be real benefits for both partners. If the  partnership issuccessfully established, it will provide: S...
Question for DiscussionYour leadership wants you to come up with three possible partners for a JV in your communityWith ...
HUMAN RESOURCESTRATEGY pg 5, 6, 7The HRM functions of a JV are more complex because managers (and sometimes workers) come...
HR ISSUESHR planning, skills neededParent involvementStaffing the alliance management and technical personnelStaffing ...
HR issues, continuedPerformance assessmentLoyaltyCareer developmentCultural differences, need to create hybrid culture...
What can go wrong? Pg 9Most common reasons for JV failure:Cultural Differences – 49%Poor or unclear leadership – 49%Po...
Why? Pg 9Objectives are not clearCommunity buy in not thereImbalance in levels of expertise, investments or assets of p...
Assess your readiness for JV pg 11    SWOT analysis    Gap analysis    Look at existing successful      businesses    ...
Choosing the right JV Partner pg 12Existing customers and suppliersOther success stories from other  communities        ...
SELECTING A PARTNER:THE MOST IMPORTANTCHOICE?Seek  – strategic complementarity  – skill complementarity  – compatible man...
ISSUES TO CONSIDER IN CHOOSING A PARTNERThe level of mutual dependencyThe "anchor" partnerThe "elephant and the ant" co...
Plan your JV relationship pg 14What do you want out of relationship?Access to larger resources                          ...
Decide Link in                             Value Chain                              Select a          Begin Over          ...
Creating a JV, pg 15Written agreementShopping listtrust                       72
NEGOTIATING THEAGREEMENTJoint venture contracts: legal documents that bind partners togetherThe formal agreement is not ...
ISSUES IN ALLIANCEAGREEMENTSunder which law does the agreement operatehow will profits be divideddo you need a prenupti...
DECISION MAKING CONTROLMajority ownership does not necessarily = controlOperational decisionsStrategic decisions       ...
DOMINANT PARENTOne parent controls strategic and operational decision making  – dominant parent often has majority    own...
SHARED MANAGEMENTBoth parents contribute approximately the same number of managers to the board of directors, the top man...
SPLIT CONTROLPartners usually share strategic decision  making and split functional decision making                      ...
INDEPENDENTMANAGEMENTJV managers act like managers from a separate company  – JVs often recruit managers from outside the...
ROTATING MANAGEMENTKey positions rotate among partners  – popular in developing countries     • trains management talent ...
CHOOSING AN ALLIANCEMANAGEMENT STRUCTUREIf one parent has dominant equity position  – dominant management structure more ...
Choosing an alliancemanagement structure,continuedEqual ownership  – shared, split, or rotating management    structure p...
COMMITMENT AND  TRUSTWithout trust and commitment the alliance will fail entirely or never reach its potential           ...
COMMITMENTTaking care of each other and putting forth  extra effort to make the venture work  – attitudinal commitment  –...
WHY ARE TRUST ANDCOMMITMENT IMPORTANT?Required for JV participants to contribute knowledge and quality inputsWeakness of...
KEY FACTORS TO BUILD &SUSTAIN TRUST &COMMITMENTPick your partner carefullyKnow each side’s strategic goalsSeek win-win ...
Key factors to build and sustain trustand commitment, continuedInvest in cross-cultural trainingInvest in direct communi...
TRUST & COMMITMENT   HighCommitment         Vulnerabilities  Trust                                             Benefits   ...
Making it work. Pg 16, 17Look for quick success firstCommunicationsShare info openlyLook for win wins                 ...
Critical Success FactorsAssuming that financial, legal, and regulatory  elements are stable, the two critical factors  are...
Communication and         shared visionHigh levels of internal commitment  communicated clearly and consistently,  includi...
Ending a JV pg 17, 18Not designed to last foreverContract wordingBuy out                                92
IF THE ALLIANCE DOESNOT WORKNegotiate an end or improve implementationKnow when to quit/invest moreAvoid “escalation of...
One example pg 18, 19, 20Discuss and comment on what you would do differently                                            94
Joint Ventures – ConflictingValues “Developing businesses for our community will  create jobs and bring wealth to our peo...
Building on economic   opportunities       Forestry                                                         (e.g., BC Econ...
INAC’s Key Investments in Economic Development• Capacity Development• Regional Economic Opportunities• Business/Market Dev...
Regional Economic OpportunitiesRegional Partnerships Fund Assists First Nation and Inuit  communities to participate in th...
Business / Market DevelopmentOpportunity Fund/Resource Acquisition Initiative  • Helps First Nation and Inuit Community Ec...
Innovative Access to CapitalAboriginal Contract Guarantee  • Assists Aboriginal businesses overcome lack    of access to b...
Federal Support for Ab Forestry Natural Resources Canada (NRCan)  – First Nation Forestry Program (joint with INAC)  – Su...
NR Canada Initiatives First Nation Forestry Program  – To improve economic conditions in status Indian    communities wit...
Forestry Mess ups inClayoquot Sound
Clayoquot Sound: A Mythic BattleConflict began in mid 1980’sKey stakeholders  – Coalition of environmental groups  – Mac...
What happened?Conflict (1985-1995)  – protests, blockades and market campaignExploration (1994-1998)  – community-based ...
Barriers to Building Social Capitalhostility/years of conflictgender/ethnicity/life experience differenceslack of commo...
Lessons LearnedRelationships evolved between individuals and organizationsRelationships fostered greater interdependence...
StrategiesStart small           Keep the door openManage                Embrace diversity expectations          Focus...
MISSISSIPPI BAND OFCHOCTAW INDIANSEconomic Overview                      110
Economic Conditions 1950s•86% below $2,000 per year•Only 7% finished High School•BIA “in charge”                          ...
History•1969 Choctaw Development Enterprise(construction co)•1969 American Greeting Visit•1971 1st Industrial Park•1975 - ...
History•1986 Choctaw Manufacturing Enterprise•1989 Choctaw Shopping Center Enterprise•1991 First American Printing & Direc...
Industrial Development Results•Diversified Economy into 5 counties•Customers: McDonald’s, Ford, Chrysler, Xerox, AT&T,Navi...
Tourism & Gaming•1988 Indian Gaming Regulatory Act passed by Congress•1993 Signed the Tribal/State Compact•1994 Opened the...
Economic Impact Study 2001Impact from Recurring Operations      Jobs Created               14,817      Payroll Created    ...
Emerging Trends•400 Tribal Members in College•50% of the Tribe’s population is <21 years old•Emerging Middle Class        ...
What the Tribe is Seeking1. Add new customers to existing companies   •Electronic assembly, printing, plastic molding, etc...
What the Tribe is Not Seeking•Vertical Integration Opportunities•Angel Investment Opportunities•Purchase of Existing Compa...
Most Alliances FailResearchers              Year   Failure RateMcKinsey & Company       1993      33%The Darden School    ...
30 – 70% of alliances do not succeed for a number of reasons Unclear strategies                                  Changin...
Our offer to youPlease call if you have any HR, or workplace issue that you are overwhelmed withWe can help youWe also ...
CG Hylton - Services HR Consulting                  Benefits, Pensions, Job Descriptions               EAP Salary Grid...
Business Law 1
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Business Law 1

  1. 1. Joint Venturing, Contracting& Business Law BMCP 905Mar 30, April 1, 2, 2006Calgary Chris Hylton chris@hylton.ca Tel 403 264-5288 1
  2. 2. Friday Part I: Where does law come from Part II: Contracts Part III: Joint VenturesSaturday Part III: Joint Ventures - continued Part IV: Employment Law Part V: Courts and Civil Procedures Part VI: Sole Proprietorships, Corporations, PartnershipsSunday Part VII: The Tort of Negligence am Part VIII: Privacy Law Part VIII: The Charter & Human Rights Legislation in Canada pm Exam 2
  3. 3. Your agenda – what do you want? ________________________ ________________________ ________________________ ________________________ ________________________ 3
  4. 4. Evaluation  Final exam 100%  Sunday 1 pmExam is open book. You may bring in your textbook, classnotes, and lecture notes. 4
  5. 5. A little about me:First of all, call me Chris  BA & MA from Queens and Laval University  Worked for the feds, consulting firms  Has own firm since 1991  Specialize in employee benefits and Human resources consulting  Certified Trainer with NAIT  Sports: skiing, swimming, squash  Have worked with aboriginal groups for 5 years 5
  6. 6. Why study Joint Venturesand Law? (beside this being a required course for most of you)
  7. 7. What is Law? Anyone have any idea?
  8. 8. What is Law? Law as Rules Law as Morals Characteristics of “good” law: – Generality – Lack of retroactivity – Clarity – Non-contradictory – Constancy and consistency between official actions and existing law 8
  9. 9. The Role of Law The law fulfils several functions in society, including: Protect persons and property Provide government with powers to act in the interest of the public; and Provide a framework that gives us broader freedom of choice 9
  10. 10. The Law in Perspective Law provides rules of conduct that are enforceable by government, individuals, and companies Law binds everyone: you can’t opt out of the legal system The law protects people and their property The law allows government to act on behalf of society From a commercial perspective, the law provides a framework for economic freedom 10
  11. 11. The Law and Economic FreedomFramework for freedom of choice – Businesses rely on law to enforce the business arrangement – Law provides predictability and reliability – Regulating commerce is a balancing act – Under-regulated jurisdictions create uncertainty – Others believe that excessive regulation leads to restriction on economic freedom 11
  12. 12. Business and the LawLaw is pervasive in the business environment. - Employment contracts - Liability of Directors and Officers - Slip and fall of customers on business property - Leasing of buildings and equipment - Misrepresentation by sales people - Transferring shares and shareholder rights - Contracts between suppliers, distributors and customers 12
  13. 13. Case: Dudley & Stephens 3 men and a boy are shipwrecked Men are all married with young families Food & water ran out, several days passed 2 of the men killed the boy, and all three fed until they were rescued The 2 men charged with murderWhat would you argue? … if you were the prosecutor … if you were the accused? 13
  14. 14. The Civil & Common Law SystemsThe legal systems of the Western world can be divided into two groups: countries with a civil law system and countries with a common law system. The civil law system originated in continental Europe, and has its roots in Roman law, and the common law system operated in feudal England. Other parts of the world inherited these systems of law during the process of colonization. 14
  15. 15. I. Where Does Law Come from? P3
  16. 16. I Where Does Law Come from? P 3Four Sources of law: Statutes Subordinate legislation Law made by Judges – Case law – Common law 16
  17. 17. Legislation or Statutes pg 3 Legislation is a general term referring to statutes (or statute law), regulations, by-laws Statute laws are created by Parliament or legislature (also called “Acts”) – introduced as “bill” – majority support through series of “readings” – Potential for public consultation – Additional step of Senate for federal legislation – finalized by “royal assent” subordinate legislation: regulations, bylaws – created under Parliament’s or legislature’s authority – example of municipality: province creates municipality, province gives municipality power to pass by-laws 17
  18. 18. Subordinate Law pg 3 Statute creates administrative body Administrative body may create procedural rules Administrative body makes decisions, sometimes even giving reasons Examples: Workers Compensation tribunals, Labour Relations boards, Employment Stds Regulations, OH&S 18
  19. 19. Case Laws - The Doctrine ofPrecedent pg 4 One of the most important differences between the civil and common law systems is the emphasis that is placed on precedent. In the common law system, judges have an obligation to treat similar or like cases alike. This practice is referred to as the doctrine of precedent, or stare decisis In civil law systems, however, little emphasis is placed on precedent 19
  20. 20. The ConstitutionThe Constitution is the highest source of law in Canada. – Any law inconsistent with Constitution: no force or effect, see also s. 52 “supremacy clause”EXCEPT: see Limitations on Charter rights, discussed below. 20
  21. 21. Division of Powers pg 5Canada is a federal country with 2 constitutionally entrenched levels of government: federal government – represents entire country – Parliament, or House of Commons (elected) – Senate (appointed) provincial (territorial) government – Legislature represents province (or territory) 21
  22. 22. Division of Powers pg 5The Constitution creates division of powers between the levels of government – topics divided into federal or provincial authority • federal: crime, bankruptcy, copyright, etc (s. 91) • provincial: property, civil rights, etc (s. 92) – federal government holds residual power • topics not otherwise allocated (eg telecommunication)ultra vires legislation – created outside scope of government’s authority • no force or effect (s. 52) 22
  23. 23. Constitution Act 1867s. 91 – Federal Powers s. 92 – Provincial Powers Interprovincial/  Hospitals international trade &  Property and civil rights commerce  Administration of justice Postal service  Local matters (e.g. Aboriginal affairs highways) Currency  Incorporation of National defense provincial companies Criminal law Residual powers Navigation & shipping 23
  24. 24. 5-1II Contracts pg 31
  25. 25. Contract LawA contract is a voluntary exchange of promises, creating obligations which, if defaulted on, can be enforced and remedied by the courts.Primary concern of the courts is to enforce the reasonable expectations of the partiesCourts reluctant to interfere, not concerned about fairness of the deal 25
  26. 26. Ingredients of a Contract pg 31 To be enforceable in court an agreement must meet the following qualifications.  1. Consensus  4. Legality  2. Consideration  5. Intention  3. Capacity  6. In writing (sometimes) 26
  27. 27. Consensus p 32A meeting of the minds of contracting parties – share an understanding of the bargain struck – be willing to commit themselves to terms – terms must be unambiguous – failure to read a contract is no excuseComprised of Offer and Acceptance 27
  28. 28. Offer p 32  Offer must contain: – terms of the contract – a communication of willingness to be bound – terms of offer must be clear – terms can be implied 28
  29. 29. Invitation to Treat p 32An invitation to the general public to engage in the bargaining process – advertisements or sales promotions are not binding offers – articles displayed for sale are not offers but merely invitations for customers to offer to pay the price of the item 29
  30. 30. Communication of an OfferAn offer must be communicatedDisclaimers of responsibility must be posted in plain sight or printed on back of ticketsOnly the person or group to whom offer is made can accept it 30
  31. 31. End of an OfferOffer ends at a specified time orafter a reasonable time if not specifiedAt the death or insanity of offerorWhen it is revoked before acceptance and the revocation is communicated to offereeWhen offer is rejected or counteroffer is put forward 31
  32. 32. Acceptance p 33Must be unconditional – must not specify any new terms – court will interpret any ambiguities in the offer to give effect to the intentions of the parties – will not overcome the defect of an incomplete or defective offer 32
  33. 33. Communication of Acceptance 33Usually by communication to the offeror – effective at time acceptance is communicatedSometimes by conductBy performance of the act stipulated in offerSilence is not acceptance unless part of on- going business relationshipNote negative-option schemes, cable cos 33
  34. 34. Post Box Rule pg 33When acceptance is mailed, it is effective when and where it is postedRule applies only when response by mail is appropriateNew methods of communication makes the expansion of the post box rule unnecessary 34
  35. 35. Consideration p 34Each party must give considerationDoes not have to be fairMust be legalNot gratuitousPast consideration is no consideration 35
  36. 36. Capacity pg 34 36
  37. 37. Illegal Contracts pg 35 37
  38. 38. Restrictive Covenant p 35, 36Non compete clause against sellor of business – Must be reasonable in time and geographyEmployment contract – Same issues for new hires 38
  39. 39. Some contracts not enforceable by thecourts unless in writing p 36Land deals – Sale, easements, and right of waysLeases for more than 3 yearsContract that cannot be performed in one yearGuarantee’s against another’s debtMarriage promisesPromise of executor to pay debts of estate 39
  40. 40. Factors affecting contracts pg 37 - 40 40
  41. 41. Ending contract pg 40 41
  42. 42. Remedies pg 42, 43 42
  43. 43. Case Study – Leander and JasonLeander (L) owns greenhousesJason (J) is a retail floristJ contracts with L for 3000 plants @ $10Delivery to take place between Dec.10-20On Dec. 9, L informs J that she will not deliver the plantsWhat are J’s options? 43
  44. 44. Jason’s PositionContract – Offer – Acceptance – ConsiderationBreachRemedy 44
  45. 45. Leander’s PositionNo contract as performance not until Dec. 10- 20No breachJ can still go elsewhere and get plants 45
  46. 46. The ResultJ has a much better caseThere was a contractRemedy – Mitigation – Assessment of damages – Costs 46
  47. 47. III JOINT VENTURES:GROWING THE FUTURE The growth in aboriginal Ec Dev strategies is a key driver for joint ventures
  48. 48. Planning for success Phase I - Ideas Phase II - Options 48
  49. 49. Next Steps,Planning Signing Announcing 49
  50. 50. Steering CommitteeResources Markets Community Business Strategy 50
  51. 51. Ownership Options Merger Acquisition 100%Community Ownership Joint Ventures & Alliances Lease Partnerships & Franchises Equipment Management Contracts Service Contracts 0%Community 5 10 15 20 25 30+ Months Ownership 51
  52. 52. Commitment OptionsType of relationship Example Scale of Commitmentno relationship No commitmentOne-off deal delivery of one serviceAlliance buying consortia / national brandPartnership various partnerships / franchisesJV timber or O&G operationMerger / Acquisition High commitment 52
  53. 53. Motivation for developing a joint venture pg 3•Business expansion•New products•New markets•Need for more resources•Technical expertise•Greater distribution channels 53
  54. 54. The following areas need to be considered when forming a joint venture:CapitalBrandingExpertiseResourcesCulturalLegalNational/local government support 54
  55. 55. Types of JV’s pg 4Start smallNew companyLegal advice needed (Vancouver FN and casino) 55
  56. 56. Why JV? Pg 5Greater successComplementary practices 56
  57. 57. Important FactorsSuccess in a joint venture depends on the choice of JV partner. Successful choice depends on: The partners sharing similar objectives The partners’ commitment to making the JV work A reward from the relationship, and An equal share in the risks and rewards 57
  58. 58. If there is a fit with your organization and prospective partner: Financial Joint development of business plan Legally, and from a Governance / regulatory perspectiveIf you have researched potential partner track record in: Maintaining relationships Resources to commit to the venture, and History of long-term commitment…then the building blocks for an alliance are in place 58
  59. 59. BenefitsThere must be real benefits for both partners. If the partnership issuccessfully established, it will provide: Shared financial commitment Shared risk Growth Mutual learning & professional development Increased research capacity Widening markets / programs / opportunities 59
  60. 60. Question for DiscussionYour leadership wants you to come up with three possible partners for a JV in your communityWith a partner, come up with three possible JV partners and explain your choices 60
  61. 61. HUMAN RESOURCESTRATEGY pg 5, 6, 7The HRM functions of a JV are more complex because managers (and sometimes workers) come from two or more firms or from two or more cultures 61
  62. 62. HR ISSUESHR planning, skills neededParent involvementStaffing the alliance management and technical personnelStaffing the alliance workforceAssigning managers strategic or operations tasks 62
  63. 63. HR issues, continuedPerformance assessmentLoyaltyCareer developmentCultural differences, need to create hybrid culture, overcoming cross cultural issuesTrainingCompensation plan tied to success of JV 63
  64. 64. What can go wrong? Pg 9Most common reasons for JV failure:Cultural Differences – 49%Poor or unclear leadership – 49%Poor integration process – 46% 64
  65. 65. Why? Pg 9Objectives are not clearCommunity buy in not thereImbalance in levels of expertise, investments or assets of partnersDifferent cultures and management style results in poor integration and co-operation 65
  66. 66. Assess your readiness for JV pg 11 SWOT analysis Gap analysis Look at existing successful businesses Direction of growth Method of growth 66
  67. 67. Choosing the right JV Partner pg 12Existing customers and suppliersOther success stories from other communities 67
  68. 68. SELECTING A PARTNER:THE MOST IMPORTANTCHOICE?Seek – strategic complementarity – skill complementarity – compatible management styles 68
  69. 69. ISSUES TO CONSIDER IN CHOOSING A PARTNERThe level of mutual dependencyThe "anchor" partnerThe "elephant and the ant" complexOperating policy differencesDifficulties of cross-cultural communication 69
  70. 70. Plan your JV relationship pg 14What do you want out of relationship?Access to larger resources 70
  71. 71. Decide Link in Value Chain Select a Begin Over Potential Partner No Acceptable? Yes Build Trust Choose an Negotiate an Build the andAlliance Type Agreement Organization Commitment Assess Performance Terminate Meets Continue or or Revise No Strategic Yes Increase Objectives? Involvement Implementation 71
  72. 72. Creating a JV, pg 15Written agreementShopping listtrust 72
  73. 73. NEGOTIATING THEAGREEMENTJoint venture contracts: legal documents that bind partners togetherThe formal agreement is not as important as the ability of managers to get along 73
  74. 74. ISSUES IN ALLIANCEAGREEMENTSunder which law does the agreement operatehow will profits be divideddo you need a prenuptial agreementwhat are the equity contributions of each partner? 74
  75. 75. DECISION MAKING CONTROLMajority ownership does not necessarily = controlOperational decisionsStrategic decisions 75
  76. 76. DOMINANT PARENTOne parent controls strategic and operational decision making – dominant parent often has majority ownership – dominant parent treats the JV as wholly owned subsidiary 76
  77. 77. SHARED MANAGEMENTBoth parents contribute approximately the same number of managers to the board of directors, the top management team, and functional area management 77
  78. 78. SPLIT CONTROLPartners usually share strategic decision making and split functional decision making 78
  79. 79. INDEPENDENTMANAGEMENTJV managers act like managers from a separate company – JVs often recruit managers from outside the parent companies 79
  80. 80. ROTATING MANAGEMENTKey positions rotate among partners – popular in developing countries • trains management talent and transfers expertise 80
  81. 81. CHOOSING AN ALLIANCEMANAGEMENT STRUCTUREIf one parent has dominant equity position – dominant management structure more likely 81
  82. 82. Choosing an alliancemanagement structure,continuedEqual ownership – shared, split, or rotating management structure preferredSimilar technologies or know-how – shared management structure preferred 82
  83. 83. COMMITMENT AND TRUSTWithout trust and commitment the alliance will fail entirely or never reach its potential 83
  84. 84. COMMITMENTTaking care of each other and putting forth extra effort to make the venture work – attitudinal commitment – calculative commitment 84
  85. 85. WHY ARE TRUST ANDCOMMITMENT IMPORTANT?Required for JV participants to contribute knowledge and quality inputsWeakness of formal contracts – can never identify all the issues 85
  86. 86. KEY FACTORS TO BUILD &SUSTAIN TRUST &COMMITMENTPick your partner carefullyKnow each side’s strategic goalsSeek win-win situationsGo slowly 86
  87. 87. Key factors to build and sustain trustand commitment, continuedInvest in cross-cultural trainingInvest in direct communicationFind the “right” levels of communication 87
  88. 88. TRUST & COMMITMENT HighCommitment Vulnerabilities Trust Benefits & Trade Off Point Low Low Vulnerabilities & High Benefits 88
  89. 89. Making it work. Pg 16, 17Look for quick success firstCommunicationsShare info openlyLook for win wins 89
  90. 90. Critical Success FactorsAssuming that financial, legal, and regulatory elements are stable, the two critical factors are: Communication Shared goals and vision 90
  91. 91. Communication and shared visionHigh levels of internal commitment communicated clearly and consistently, including: Involvement of senior management Involvement of departments and staff Creation and propagation of protocols and responsibilities 91
  92. 92. Ending a JV pg 17, 18Not designed to last foreverContract wordingBuy out 92
  93. 93. IF THE ALLIANCE DOESNOT WORKNegotiate an end or improve implementationKnow when to quit/invest moreAvoid “escalation of commitment”“prenuptial agreements” assist with termination of agreementDeath not always failureWas not designed to last for ever anyway 5 – 10 years 93
  94. 94. One example pg 18, 19, 20Discuss and comment on what you would do differently 94
  95. 95. Joint Ventures – ConflictingValues “Developing businesses for our community will create jobs and bring wealth to our people” Economic Development Director “The real issue is the protection of our traditions and values, not jobs” Museum Director1. Do you agree or disagree with each of the statements above?2. Discuss with colleagues and come to a conclusion 95
  96. 96. Building on economic opportunities Forestry (e.g., BC Economic Mining Renewal, Sask Forestry Accord) (e.g., Diavik)Oil & Gas Tourism(e.g., Athabasca Oil (e.g., the North)Sands/Fort McKay) Fisheries Agriculture (e.g., Blood and Peigan irrigation) Hydro Commercial/ (e.g., Gull Gas Rapids) Industrial Parks (e.g., Sable Island) (e.g., Chippewas of 97 Sarnia, Kamloops)
  97. 97. INAC’s Key Investments in Economic Development• Capacity Development• Regional Economic Opportunities• Business/Market Development• Innovative Access to Capital 98
  98. 98. Regional Economic OpportunitiesRegional Partnerships Fund Assists First Nation and Inuit communities to participate in the planning and implementation of large-scale resource development projects involving the private sector, federal and provincial/territorial governments and other stakeholdersResource Access Negotiation Program Helps individual First Nation and Inuit communities negotiate bilateral benefit agreements with governments or the private sector relating to resource developmentResource Partnerships Program Assists First Nation and Inuit communities to participate in the planning and implementation of large scale resource development projects involving the private sector, federal and provincial/territorial governments and other stakeholders 99
  99. 99. Business / Market DevelopmentOpportunity Fund/Resource Acquisition Initiative • Helps First Nation and Inuit Community Economic Development Officers (CEDOs) attract joint venture partners or secure conventional debt financing, and helps communities to obtain natural resource permits and licencesMajor Business Projects Program • Provides financial assistance for start-up and expansion of major First Nation and Inuit businesses 100
  100. 100. Innovative Access to CapitalAboriginal Contract Guarantee • Assists Aboriginal businesses overcome lack of access to bid and performance bonds Note – some of these programs may have been discontinued or replaced, check with your local office. 101
  101. 101. Federal Support for Ab Forestry Natural Resources Canada (NRCan) – First Nation Forestry Program (joint with INAC) – Sustainable Communities Initiative – Model Forest Program Indian and Northern Affairs Canada (INAC) – Resource Access Negotiations Program – Resource Partnerships Program – Resource Acquisition Initiative – Regional Partnership Fund Human Resources Development Canada (HRDC) – Aboriginal Human Resources Development Strategy – Youth Employment Strategy Aboriginal Business Canada (ABC) – ABC business program 102
  102. 102. NR Canada Initiatives First Nation Forestry Program – To improve economic conditions in status Indian communities with full consideration of the principles of sustainable forest management – Capacity building and economic development projects – A partnership program between INAC, NRCan, and First Nations – 1148 projects; $83 million invested ( 96/97 – 01/02) – Over 65,000 person weeks of work – 4,800 First Nations with forestry job experience – 106 forest management plans – 90 feasibility studies and 114 business plans – http://fnfp.gc.ca 103
  103. 103. Forestry Mess ups inClayoquot Sound
  104. 104. Clayoquot Sound: A Mythic BattleConflict began in mid 1980’sKey stakeholders – Coalition of environmental groups – MacMillan Bloedel Forest Company – First Nations leaders (Nuu-Chah-Nulth)Government in passive role though responsible for Crown LandsNo one “in charge” 105
  105. 105. What happened?Conflict (1985-1995) – protests, blockades and market campaignExploration (1994-1998) – community-based dialogue and learning – development of new model of forestryCollaboration (1999- ?) – MOU re joint venture forest company – collaboration on the Central and North Coast 106
  106. 106. Barriers to Building Social Capitalhostility/years of conflictgender/ethnicity/life experience differenceslack of common vision/goalno language for sustainable forestry 107
  107. 107. Lessons LearnedRelationships evolved between individuals and organizationsRelationships fostered greater interdependence and trustSolutions emerged that weren’t anticipatedRelationship-building competence a key 108
  108. 108. StrategiesStart small Keep the door openManage Embrace diversity expectations Focus on sharedSeek quick visions successes and build Earn trust on themMake linkages 109
  109. 109. MISSISSIPPI BAND OFCHOCTAW INDIANSEconomic Overview 110
  110. 110. Economic Conditions 1950s•86% below $2,000 per year•Only 7% finished High School•BIA “in charge” 111
  111. 111. History•1969 Choctaw Development Enterprise(construction co)•1969 American Greeting Visit•1971 1st Industrial Park•1975 - 1977 Chief Martin wrote 500 letters•1977 Packard Electric•1981 American Greetings•1985 Choctaw Electronics Enterprise 112
  112. 112. History•1986 Choctaw Manufacturing Enterprise•1989 Choctaw Shopping Center Enterprise•1991 First American Printing & Direct Mail•1995 First American Plastic Molding Enterprise 113
  113. 113. Industrial Development Results•Diversified Economy into 5 counties•Customers: McDonald’s, Ford, Chrysler, Xerox, AT&T,Navistar, Boeing, Peavey, Caterpillar, etc.•Industries: Automotive Assembly, Commercial Printing,Plastic Molding, Retail, Service, Construction, Medical,etc.•Business Types: Wholly-owned Tribal Enterprise, JointVentures, Leasehold Interest•Overall: A positive reputation within business andpolitical realms 114
  114. 114. Tourism & Gaming•1988 Indian Gaming Regulatory Act passed by Congress•1993 Signed the Tribal/State Compact•1994 Opened the Silver Star Hotel & Casino•1997 Dancing Rabbit Golf Club -- The Azaleas•1999 Dancing Rabbit #2 -- The Oaks•2000 Pearl River Resort Master Plan•2002 Golden Moon Hotel & Casino•2002 Geyser Falls Water Park•2003 Hard Rock Beach Club and Clearwater Key 115
  115. 115. Economic Impact Study 2001Impact from Recurring Operations Jobs Created 14,817 Payroll Created $356.8 million MS Tax Revenues $18.7 millionConstruction Impacts Current Expenditures $485.9 million Jobs Created 8,686 Payroll Created $236.7 million Mississippi Tax Revenues $19.7 million 116
  116. 116. Emerging Trends•400 Tribal Members in College•50% of the Tribe’s population is <21 years old•Emerging Middle Class 117
  117. 117. What the Tribe is Seeking1. Add new customers to existing companies •Electronic assembly, printing, plastic molding, etc. •Exclusive Manufacturing Arrangements2. Leasehold Tenants •Manufacturing Facilities •Choctaw Town Center •Pearl River Resort3. Joint Ventures with Existing Companies4. Creation of New Tribal Enterprises or Joint Ventures 118
  118. 118. What the Tribe is Not Seeking•Vertical Integration Opportunities•Angel Investment Opportunities•Purchase of Existing Companies/Facilities outside“normal” boundaries•Tax-Oriented Projects•Environmentally-Sensitive Projects•Grant-Dependent ProjectsSource: “MISSISSIPPI BAND OF CHOCTAW INDIANSEconomic Overview” BREI ANNUAL CONFERENCE Proceedings, HALIFAX, NOVASCOTIA, MAY 20, 2004 119
  119. 119. Most Alliances FailResearchers Year Failure RateMcKinsey & Company 1993 33%The Darden School 1996 60%(Prof. Robert Spekman)KPMG 1996 70%PricewaterhouseCoopers 1998 50%Anderson Consulting 1999 61%The Lared Company 2000 60% 120
  120. 120. 30 – 70% of alliances do not succeed for a number of reasons Unclear strategies  Changing factors (internal and external) Strategy failure  Different partner goals  Uncertainty Dysfunctional governance  Valuation difficulty Culture clashes  Difficulty in unwinding Loss of proprietary assets  Asymmetric dependence Lack of relationship focus  Distrust Source: Jill Foote, CFA, Ph.D. Jones Graduate School of Management, Rice University 121
  121. 121. Our offer to youPlease call if you have any HR, or workplace issue that you are overwhelmed withWe can help youWe also are pleased to do Free Workshops for your organization (some limits apply) Let us know what your needs are and we will make it happen! 122
  122. 122. CG Hylton - Services HR Consulting  Benefits, Pensions, Job Descriptions EAP Salary Grids  Strategic Planning Wellness at Work  Drug and Alcohol programs Staff Morale  Dept re-orgs Training and Workshops  Leadership compensation Tel 403 264 5288 chris@hylton.ca 123

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