Joint Venture is a combined effort of two or more companies to form a new company. JVs are undertaken to bring the distinctive competence of two or more parties together. Each party brings its own resources- finance, managerial talent etc. When these resources are put together, these give birth to a new entity which is quite distinct from its parents.
A joint venture is formed between two or more partners to take the advantages of their complementary skills. In short, both parties must be committed to focusing on the future of the partnership, rather than just the immediate returns. Ultimately, short term and long term successes are both important. In order to achieve this success, honesty, integrity, and communication within the joint venture are necessary.
The license raj that existed prior to economic liberalization (1940s-1980s) in India did not allow foreign companies to enter the market. In the mid-’80s when the Indian government started permitting foreign companies to enter the Indian market through minority joint ventures.
Joint Venture between Government of India or a State Government and another company- Indian or Foreign, for Ex. Maruti Suzuki between Gov of India and Suzuki Motors of Japan. Joint Venture between two or more Indian private sector companies, for Ex. Excel Industry between Tata Group and Shroff Group.
Joint Venture between an Indian and a foreign company. In fact, this type of joint venture has attracted lot of attention. Some major joint venture formed during 1980s in this category are Kinetic Honda (between firodia Group and Honda Motors ), Hero Honda (between Hero Group and Honda Motors)
Hero Cycles manufactured Over 16000 Bicycles a day. They Sold about 86 million bicycles in aggregate as of 2002. They had nurtured an excellent network of dealers to serve India’s expansive markets.
HMC first chose Kinetic Engineering Ltd. And formed Kinetic Honda Motors Ltd. But this JV would work in field of Scooters Manufacturing. HMC came to Hero Group as the Last compromise choice for its motorcycle venture.
Its engineering capability Relevance and salience of HERO brand. Distribution network. Commitment to Quality. Know-how and experience in handling large volume production and distribution. Tight focus on financial and raw material processes. Cordial Industrial Relations.
The deep penetration network of hero largely benefited the sales. Absence of major competitors in initial years. Sound and proven technical capabilities of Honda and the reliability of Hero. Increased market for motorcycles: ◦ Better Fuel efficiency. ◦ Change in people’s perception. ◦ Decrease in price difference with scooters.
SonyEricsson between Sony Mobile Communication and Swedish telecommunication company Ericsson in October 2001. Britannia New Zealand Foods Pvt ltd. Between Britannia and Fonterra(Worlds second largest dairy Company ) in 2002.
Time wasted first in negotiating the joint venture and then aligning thinking of each partner. Decision – making takes longer. Less freedom and flexibility. Ex. Tata Unisys (between Tatas and Unisys); Proctor & Gamble Godrej India (between P&G and Godrej); and so on