The case of_thai_joint_venture_with_japanese_partn


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The case of_thai_joint_venture_with_japanese_partn

  1. 1. The case of Thai Joint Enterprise With Japanese Partner in BuildingBusinessLiterature ReviewCompany within the 21st century is increasingly carried out withshifting borders. International partnerships will become standardapply because the item life cycles shorten and immediate distributionturn out to be imperative. As company is increasing its globalization,alliances among multinational firms are becoming much more popular.Cooperation between international companies can take many formssuch as, cross-licensing of proprietary technologies, sharing ofmanufacturing amenities, co-funding of research tasks, and advertisingof each others products using current distribution networks (Griffinand Pustay, 2005). This kind of forms of cooperation are referred toas strategic alliances, company arrangements whereby two or even morecompanies choose to cooperate for his or her mutual advantage. A jointenterprise is a particular and much more formal kind of strategicalliance.two.1 Defining International Joint Venture (IJV)An worldwide joint venture (IJV) is a unique type of strategicalliance in which two or even more businesses from various nations bea part of together to create a new business entity that is legallyseparate and distinct from its mother and father. Joint ventures arenormally established as companies and therefore are owned from thefounding parents in whatever proportions they negotiate. Even thoughunequal ownership is common, many are owned equally from the foundingcompanies (Berger, 1999).Heres also a definition adapted from Shenkar and Zeira (1987):one its a separate legal organisational entity, and belongs entirelyto neither/none of its mother or father;2 its jointly controlled by its mother or father;three these parents are legally impartial of every other;four the headquarters of at least 1 mother or father is situatedoutdoors the nation in which the IJV operates.As mentioned some IJVs are shaped on an equity basis, much moreversatile preparations might rely on contract cooperation with outinvolving the legal commitments of equity. Some IJVs might have morethan two mother and father. Generally, the more mother and fatherthe higher the administrative complexities and also the higher theissue of controlling the undertaking. Occasionally, both (or all)mother and father are located outside the IJV country. For instance,Coca Cola (Vietnam) was began as an IJV between Coca Cola (USA) anda Singaporean bottler; originally it did not employ any Vietnamesemanagers, like a result the business required to deal with culturaldistinction (Beamish, 1985).In terms of the building industry, joint enterprise continues tobe noticed like a tool for enhancing the performance with theconstruction procedure and emphasizes the way in which it helps tocreate synergy and increase the usefulness of each participantsresources (Barlow et al., 1997).The Building Business Institute defines joint ventures as a long-term dedication in between two or even more organisations for that
  2. 2. purpose of attaining specific company objectives by maximizing theeffectiveness of every participants resources. This demands alteringtraditional relationships to a shared tradition without regard toorganisational boundaries. The relationship is based upon trust,dedication to typical goals, and an comprehending of every othersperson expectations and values (Barlow et al. 1997). To date, jointventure is understood like a set of collaborative processes, whichemphasizes the significance of typical objectives. The base ofjoint enterprise is a high degree of interorganisational trust andthe presence of mutually beneficial objectives. Joint enterpriseindicates a management process that helps the strategic preparingto improve the effectiveness with the enterprises, and forms a teamwith typical objectives (Barlow et al. 1997). Participants of theundertaking can improve performance in terms of price, time, quality,construct ability, fitness-to-purpose, and a entire of array ofother requirements, if they adopt much more collaborative ways ofoperating (Bresnen and Marshall 2000). Barlow et al. (1997) mentionssix effective elements of joint enterprise: building believe in,teambuilding, the need for leading level commitment, the significanceof individuals, the strategic motion of key personnel, and the requirefor open up and flexible communications. The same authors quote astypical advantages in a joint enterprise relation: reduced costs,shortened delivery time, enhancement in building high quality, muchbetter working atmosphere, and organisational studying. Joint ventureclassifications focus on the duration of cooperation in betweenpartners. This dissertation will be used as a case study to discoverthe extent and native of those benefits in practice.Two main kinds of joint venture are discovered in literature:project joint venture and strategic joint venture or long-termjoint enterprise. Undertaking joint enterprise is a cooperativepartnership between organisations for that duration of a specificproject (Barlow et al. 1997). In the finish of the undertaking, thepartnership is terminated and an additional joint enterprise mightcommence around the next project (Kumaraswamy and Matthews 2000).Welling and Kamann (2001) state that if these firms do not meet againin an additional undertaking, the learning impact reached around theparticular undertaking will probably be eradicated. Strategic jointenterprise is a relationship with a high degree of cooperation betweencompanions (Barlow et al. 1997), which takes location when two oreven more firms use joint venture on the long-term basis to undertakemore than 1 construction undertaking, or some continuing activity(Kumaraswamy and Matthews 2000). In this type of joint venture, thelearning accomplished in a specific undertaking is more prone to beused in long term projects. Within the context of the strategic jointenterprise, it becomes a management philosophy that is expected tofunction continuously for every and every undertaking and there aremore expectations from group members than to get a undertaking jointventure (Cheng and Li 2001). The type of TNC JV will be the strategicjoint venture where Thai and Japanese Companion are focusing aroundthe long term goal.2.two Seeing Joint Ventures as a Foreign Marketplace Entry andDevelopment Strategy
  3. 3. Joint ventures are sometimes viewed like a second (or perhaps 3rd)very best option for supplying a foreign market-bemng utilized onlywhen fedezal gover�ment regulations (�.g. owne�ship and exr�rtcontrols, l�mitations on royalty repayments, etc.) prevent theestablishment on wholly owned �ubsidiaries, exports, or lmcensing.Cestiinly, there are main issues uhat come ux within the �lanning,negotiation, ant adminis�ration o� worldwide joint ve�turms. Insxite of this kind of difficulties, its broedly rgcognysed �nthe�literature that you will find imporvant stretegic and aggressiveadvantages tha� mcy be derived from successful joint v�ntureagseements, qnd such!collaboratyon m�y bm cons�dered a initya�option in particular conditions 8Kenichi Ohmce, 1985). Connolly(1984), for example, a�gued that txe property of developed-countrymu�tinctyonal en|��prise� (ooney, forei�n$gychange, technology<management� and �arketi�g abinities, etc.) and developing-gountry!companie� (|ower costs, greqter familiarity with!nearby!markets,"andso on.)�are comple�entar{, cod(that vhe2�ixture �f thgs� assevs0ina joint ventur� resumts in0mutual!idvantages. This�can��e(noticedwithi~ the0case of TNC.$Equall{, C�n�ractor (�984) argued the lossof control and the s|aring!og xrofits inhmr�nt�in1equity joint!ve~tures0is�more than compen�ated for from ti� knowledgm andcapital�contrijution!wyth tle n�asby"companion; sonticts withg�vernment off�cia�s: fastev entry in�o(the�markev;`a~d fangerredu�tion. Harrkgin (1984, 198�) arguel that0koint ventures shouldnot be(sden |ike a hidino"place ov i signal �f weaknuss. I�stead, iforganyzee rroperl�joint*vm�tu�es would$ce asource(of0a�grewsive"edvao|awe��a indicate� of defendi�g existingstrategmc$xowitions in �rposition)to forcus t�o strong for 9 firm$towithstand by itself or like a indicates of(implem�ntingm�eifigations"in stzategic postures (e.g� diversification iccess uotechoolooy)/ Ko�nt venturmw permit every kompanyon to focus0their!resources in loketions of expertmse, w�i|st enabling diver�ificatyoninto �t|ractyve but unfamiliar�business creas.!Genesal, Jarrigan(1�84, 1985) concludes that joint vm~tures*are importint stretegicweapon in re{ponding towirds the cha|lenges of global competytion.two.thr�e Facto��for forming the IJVThe partners (Thai and Japanese) may have sha�ed interests�in!forming an IJV which giveboth opportunities tofive proluse greater market power by combining sources;(Bell,�1996)06 reduce r�sk by sharing costs (expens�s of expense and productionare shared);seven reap econommes of scale;8 cooperave"and steer slear of competition , which might`inc}r greater costs0than �hoseincurred by agreeing towmr�w the IJV (the IJV os defin�te|y an ill�a~cg that restry�ts!
  4. 4. your(personal catabmlmty for indepgndent action,"jut qdditionally�restricts th�t0of yowrcom��nion); (�ont�actor & Lovangel 1988).<�{pan>In general, though, most IJVs offer mother and father various opportunities which arise fromtheir different environments. A project might offer the foreign mother or father access to alocal market, and the local mother or father use of the international marketplace. According to(, in 1997 two securities companies, the Premier Group of Thailand andSBC Warburg, shaped a joint enterprise designed to provide Warburg with local knowledge andPremier with worldwide entry.Furthermore, the foreign mother or father needs to meet the hostgovernments requirements for doing business within the nation (inthis case the Thai Government). For instance, a foreign companyis only permitted to operate within the country if ownership isshared having a nearby company. The IJV offers the foreign parentopportunities to learn about local marketing conditions and to gainaccess to nearby resources, including manufacturing amenities, labour,and materials. For the local mother or father these are possibilitiesto generate upstream and downstream industries. For instance, theimprovement of an IJV pulp mill encourages nearby entrepreneurs toincrease logging facilities and to invest in paper manufacture. Thenearby government advantages by possibilities to encourage foreignexpense. Also, the foreign parent may be allowed to consider onlyminority ownership, and must fulfil conditions regarding localemployment, technology transfer, purchase of nearby materials, etc(Chowdhury, 1992).two.four Factors influencing IJV success and failureThe greater that the business depends upon the strategic alliancein order to achieve its strategic goal, the more it invests in thesuccess with the alliance. In the situation of TNCJV this indicatesinvesting to find the ideal partner. Finding the ideal companion takestime and effort, and the higher the significance the company gives tothis selection procedure, the greater the chances of success (Geringer1991).Hungs (1992) research of Canadian businesses operating in South-EastAsia discovered that "the most often mentioned difficulty is to getthe right companion company, 1 which has compatible objectives and istrustworthy". Therefore, trust is one with the most important parts offorming the IJV. Believe in factors then will be reviewed:2.4.1 Trust between the parentsThe project is much more likely to succeed when each parent truststhat the other is genuinely committed to the project and will do itsvery best to abide by all agreements between them (Demirbag & Mirza,2000).When more companions believe in each other, the easier they find it toreach agreement on internal preparations:1 applying the same strategic priorities to planning;2 management style, and systems;3 systems for communicating in between the parents, the IJV, andmother and father; within the IJV; and with the environmentfour factors associated with company passions, objectives, impact ofsize, timescale5 assessments of IJV success and failure: project evaluation, both
  5. 5. ongoing and on termination.(Demirbag & Mirza, 2000)2.four.2 Mistrust in between mother and father, and also theenvironmentMistrust arises from13 inadequate preparing;14 communication issues in between parents (Thai and Japanese withinthis situation)15 wide differences in the national and organisational cultures of theparents;16 1 parent altering its attitude towards the project in response to�ts personal internal changes � e.g., a brand new technique,$a newCEO;17 1 mother�or father amtering its attitude to the undertaking inresponse to changes in its company environment.To take the final point: b�th mother and father operate �n their personalvolatile �ompany e�~ivo�ment. Their n�qrb� masket� and(�ompetitorsdiffer>0T�ey are subject to divf�r�nt loc�� political, social, and eco�omicpressur�s. These environmental dif�evences make any alliance inherentlyun�tablm (Geringer, 198x).�span>These elements�of environmental uncertainty may be the reason for focusing onn} onshort-term alliances with highly particulir goals. The partners may use an initial limited alliance inorder to test the possibilities to gmt a greater commitment and to construct believe in (Harrigan,1985).(This also has implications for communicatmon. Each partner �eeds to communicateinformition about its own en~ironment and to dgvelop knowledge with th� others.2.four.three Believe in within the projectA project succeeds when undertaking staff trusts each other andwhen persons posted from the two mother and father develop asynergetic relationship. Before undertaking operations start, a sharedundertaking culture is fostered by mixing staff from the mother andfather in groups, where they work collectively on project planning.They exchange non-critical technological and company data (Harrigan,1985).A lack of believe in arises when18 staff join the project ignorant with the needs and passions oftheir colleagues from the other mother or father;19 local staff feel threatened by a stronger foreign mother or father;20 conflict come up from human resource and technology transferpolicies (1 mother or father cannot supply the skills to which it iscommitted);21 cultural differences are exploited.2.4.four Trust between the project staff and their parentA undertaking succeeds when staff posted to it feels confident withthe support of their headquarters. Mistrust arises when promisedsupport fails to materialize, or staff feel that their long-termcareer prospects with the company are in jeopardy. A project is alsoundermined when top administration fails to communicate its goaleffectively within the organisation. Subordinate levels perceive it
  6. 6. like a drain on their sources, and give it a minimum of attention(Kachara & Hebert, 1999).two.four.5 Similar business passionsThe potential partners are much more prone to function togethereffectively when they have related passions. The mother and fatherof effective IJVs have similar passions and belong to similar orcomplementary sectors. When both contribute and learn from theother, fruitful cooperation is possible. Businesses within the samebusiness form alliances when they hope to benefit from discrepanciesin technology, systems, and markets (Kogut, 1988). By 1993, jointventures parented by the Swiss food firm, Nestle, included allianceswith Coca Cola (canned coffee and tea drinks), General mills(cereals), and two companies in the peoples Republic of China (acoffee and creamer plant, an infant formula and milk powder plant).2.4.six Compatibility in sizeIncompatibility in the size with the parents is important when oneuses its greater sources to dominate the project in its own passionsalone. However, the improvement of company by Internet and otherelectronic media indicates the company can expand (and agreement)in a very short time, and also the size of staffing complements andphysical resources is no longer an accurate guide to some firmsfinancial and knowledge power (Kachra & Hebert, 1999).The research of the foreign direct expense in Japan discovered theattitude taken by the Japanese bureaucracy was influenced by this kindof elements because the investors care for its partnership with thefederal government, the profitability of the IJV, the foreign parentscommitment, timing and location, and technology transfer issues.However, "the size with the investor does not seem to matter much"(Thawley, 1996) Compatibility in timescaleThe mother and father require to share a timescale. Suppose thatMother and father A and B are both prepared to invest in five yearsdevelopment expenses. The project is set fair. But contradictions comeup when Mother or father A aims at reinvesting profits made duringthe initial period whereas Parent B wants a quick return from itsinvestments (Li, 1995).2.five Culture influencing IJV success and failure2.5.1 Cultural dimensions by HofstedeCultural distance between companions and its impact on IJV performancehas so far been the most commonly reviewed variable. The distancehas usually been expressed multi-dimensionally (based on Hofstedé(1980) four cultural dimensions and an index created by Kogut andSingh (1988)). Cultural similarity decreases issues caused bycultural issues (e.g. different norms of behaviour and productivity,measurement and goals related to efficiency) and should facilitatebelieve in and cooperation between partners. Barkema and Vermeulen(1997) tried to analyse in much more detail the impact of traditionon IJV performance. Utilizing the five different cultural dimensionsby Hofstede - power distance, uncertainty avoidance, individualism,masculinity, and long-term orientation - the authors anticipatedthat there would be differences in the impact of various dimensions.Differences in uncertainty avoidance are difficult to cope with
  7. 7. because they imply differences in how people perceive opportunitiesand threats in their environment and how they act on them (Schneider& Meyer, 1991). In substantial uncertainty avoidance countriesorganisations tend to respond to uncertainty by creating up a systemof high formalization and hierarchy. In low uncertainty avoidancenations people are much more attracted to versatile, ad hoc structuresthat leave much more room for improvisation and negotiation.Differences in uncertainty avoidance lead to differences in howpartners perceive and respond to events within the environment withthe IJV, which will likely breed disagreement and disputes betweenthe companions, and have a detrimental impact on the IJVs efficiency.Power distance and individualism directly bear on issues of internalintegration and influence relationships with personnel, such as thechoice of control types, reward systems. Administration of personnelis usually 1 of the initial activities to become left to the localpartner. There can also be evidence that MNCs do not transfer culturalvalues related to power distance and individualism to their foreignsubsidiaries (Soeters & Schreuder, 1988). Thus tensions betweenthe companions with differences along these dimensions might beavoided. Shenkar and Zeira (1992) suggest that having partners fromboth "feminine" and "masculine" cultures might even advantage the IJV.The aggressive attitude of one companion and also the partnershiporientation of the other may complement every other instead thancollide. The above discussion suggests that differences in uncertaintyavoidance would be more important than the other three dimensions.The empirical results by Barkema and Vermeulen (1997) supported theexpectations: uncertainty avoidance and long-term orientation hadhigher differential negative impact on IJV survival than masculinity,whilst the two other dimensions (individualism and energy distance)had no impact. What concerns the Asian context it may be said thatall potential Asian cultures have rather similar cultural profile.This profile includes rather few layers of decision-making, muchmore danger taking, greater group emphasis, and higher concern forrelationships (Swierczek & Hirsch, 1994). This can be applied to TNCwhere Thai and Japanese tradition share some similarities.One tradition can influence how willing 1 is to trust a possible jointenterprise companion. When it comes to tradition, the Japanese tendto become somewhat introverted in their ways. They generally are notreceptive to outsiders. When conducting business with Japanese, itsessential to note that relationships and loyalty towards the group iscritical for success.( to Hofsted Cultural Dimension Scores, the score of Japanis dramatically different from other Asian Countries. Masculinity inJapan will be the highest characteristic. The lowest ranking factor isIndividualism, which coincides with their high ranking in UncertaintyAvoidance. Japan is a much more collectivist tradition that avoidsrisks and shows little value for personal freedom.( contrast, Thailands lowest Dimension is Individualism (IDV). Alow score, as Thailand has, indicates the society is Collectivistas compared to Individualist which this score is even lower than
  8. 8. Japanese. It may be said that this is manifest in a close long-termdedication to the member group, is that a family, extended family,or extended relationships. Furthermore, the primary different categorycompared to Japanese Dimension is Masculinity which ranks the lowestamong the Asian Nations. This lower degree is indicative of a societywith less assertiveness and competitiveness, as compared to 1 wherethese values are considered more essential and significant. Thissituation also reinforces more traditional male and female roleswithin the population.two.five.2 Compatibility between national culturesOnes culture also influences ones perception of the environmentalelements discussed above; whether your company interests are similar(or in conflict), whether your objectives are complementary, whetherdifferences in size are essential, what timescale should apply. Intheory, partners are more prone to agree on these points when culturesare compatible. That is, joint ventures shaped by parents of similarcultures stands a greater chance of succeeding than these primarilybased on between dissimilar cultures (Wille, 1988).two.five.three Different organisational culturesIf the organisational cultures of the two mother and father varybroadly, a effective alliance may not be possible. However, this isnot always the case. Within the situation of TNC, the organisationaltradition of mother or father can be advantagous because theunderstanding of National Culture also affects the performance.When talks designed to lead to strategic alliance between Mitsubishiof Japan and Daimler-Benz of Germany broke down, the following reportwas made:"Analysts say the match has been strained from the beginning becausethe companies have fundamentally different structures. Daimler-Benz,a much smaller company than Mitsubishi, has traditionally had a closeknit management structure that has tended to set out clear strategicobjectives and forge ahead. Mitsubishi, an amorphous conglomerate ofseveral large businesses, has moved much much more cautiously withinternal factions often disagreeing over broader policy." (Yamawaki,1995).The companies were unable to overcome differences in their strategies,structures, and organisational cultures.Staff posted towards the undertaking from the two parents is muchmore prone to work well together when their organisational culturesare similar. This does not mean that they ought to be identical -an impossible condition. Instead, there must be considered a senseof comfort about how the other does the business, a willingness towork collectively and learn, and needs for shared solutions (Fedor &Werther, 1997).two.five.four How the IJV affects the parent organisational culturesParenting an IJV undertaking can influence the tradition withthe mother or father headquarters by creating new spiritof "internationalism." This is ADVANTAGOUS when headquarters staffadvantage from an influx of new ideas and technologies, and developnew knowledge with the possibilities offered I the environment.Its DISADVANTAGOUS when the outflow of staff towards the IJV (andinflow of replacements) impairs internal cohesion. A positive culture
  9. 9. is weakened when staff feels pressured by responsibilities for whichthey have no training and experience. Supporters with the project areisolated. Planning and operating the IJV influences the organisationalculture of the mother or father headquarters. In order to respondto issues and opportunities arising from parenting the undertaking,headquarters streamlines and reorganizes its structures (Siddall etal., 1992).two.six Motivational Perspectives in between Thai and JapaneseOnes motives are major determinants of ones behaviour. If thecompany can understand the employees motives, they can influencetheir employees behaviour. To motivate others is one with themost essential administration tasks. It comprises the abilitiesto understand what drives people, to communicate, to involve, tochallenge, to encourage, to set an instance, to develop and coach,to obtain feedback, and to provide a just reward. According to(Find Ref), "Motivation is about cultivating your human capital.The challenge lies not it the function by itself, but in you, theperson who creates and manages the function environment." However, tomotivate people in different culture might be difficult if the levelof motivation is not exactly the same. Ref describes how differenttradition may be perceived differently. Scandinavian cultures (Sweden,Norway, Finland, and Denmark) location a substantial value on qualityof lifestyle and social needs. European and Anglo-American cultureslocation a substantial value on productivity, efficiency, andindividual self-actualisation. Chinese tradition values collectivismand community activity higher than individualism (Exact same Ref).According to Maslows hierarchy of needs, he theorised that peoplehave successive layers of needs, and that as every lower layer issatisfied, then the person moves on towards the subsequent layer up.The following diagram will explain how the model works:(Maslows hierarchy of needs model from Maslow, 1943)The lowest layer is that of physiological needs. It is the requireto eat, sleep, stay warm, use the bathroom, etc. The second layer issafety (the need to have physical and psychological security, such aswanting the presence of law and keeping a job). The 3rd layer is thatof love and belonging (being the require to be part of the family,group, or gang). Some would say that this 3rd layer is very much aJapanese domain, where belonging to some group seems to take priorityover the achievement of higher layers. According to (Japanese Ref),he raises the question that "How many times have you noticed verycapable people like Japanese deny themselves a fuller career due totheir desire to stay with some smaller business on the foundation thatits their family?" The Japanese always put the top priority totheir business. The fourth layer is that of self esteem and status.This is exactly where high-achievers dwell, and therefore are ableto distinguish themselves commercially and professionally. The fifthlayer is "Actualization." According to, it gives thefollowing description (extract): "Self actualized people embrace thefacts and realities of the world rather than denying or avoiding them.They are spontaneous in their ideas and actions. They are creative.They are interested in solving problems, which often includes theproblems of others."
  10. 10. The interesting point to make heres whether Thai and Japanese haveexactly the same level in Maslows hierarchy of needs. At TNC,different level of needs might bring the conflict in interactivesituations, for instance, between Japanese employer and Thai employee,the model might require to be adopted in its applications amongstdiffering cultures. Even though the tradition of Thailand and Japanmight be similar, it does not mean that they would have the samedesire or expectation.Primarily based around the literature review, the definition ofIJV, and reasons for forming the JV have been illustrated. Factorsincluding cultural differences between Thai and Japanese, and variousmotivational perspectives were explained. However, its essential andvital to discover how these factors affect TNC employees primarilybased on their perception. In Chapter four, findings and analysis fromthe interview will probably be examined.manga city