http://www.investopedia.com/terms/j/jointventure.asp
http://www.investopedia.com/video/play/joint-venture/
Management of Joint Ventures
Joint Venture
- A business arrangement in which two or more parties agree to pool
their resources for the purpose of accomplishing a specific task
- This task can be a new project or any other business activity
- In a joint venture (JV), each of the participants is responsible for profits,
losses and costs associated with it
- However, the venture is its own entity, separate and apart from the
participants' other business interests
- JVs represent a great way to pool capital and expertise and reduce the
exposure of risk to all involved
- It is governed by a joint venture agreement
- The agreement delineates specifics – how much each party will
contribute and how the proceeds, if any, will be divided
- For example, in the oil industry, developers, drilling companies and
service providers could agree to form a joint venture to drill an oil
well. If the oil well is successful, those parties split the profit based on
the value of their respective contributions to the joint venture
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http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
Management of Joint Ventures
Advantages
Risks
A successful joint venture can offer:
- access to new markets and distribution networks
- increased capacity
- sharing of risks and costs with a partner
- access to greater resources, including specialized staff, technology and
finance
Partnering with another business can be complex. It takes time and
effort to build the right relationship. Problems are likely to arise if:
- the objectives of the venture are not 100 per cent clear and
communicated to everyone involved
- the partners have different objectives for the joint venture
there is an imbalance in levels of expertise, investment or assets
brought into the venture by the different partners
- different cultures and management styles result in poor integration and
cooperation
- the partners don't provide sufficient leadership and support in the
early stages
- Success in a joint venture depends on thorough research and analysis
of aims and objectives
2
http://entrepreneurs.about.com/od/beyondstartup/a/jointventures_2.htm
Management of Joint Ventures
Assess
Readiness for a
JV
1. What do I sell, and how do I reach my target market?
2. Who are my competitors? If they are better at generating revenues and
reaching the marketplace than me, what do they have that I don't?
3. Are there geographical areas that will remain beyond reach without
local partners, or acquisition costs that are simply too high?
4. Do I need to develop a know-how, which has already been developed by
a company or by an individual?
5. Is there a logical business partner that could help me develop a vertical
or horizontal market penetration?
6. Do I have all the human resources I need in marketing, R&D,
production, or operations? Is there a company I know which would
have resources complementary to mine?
7. How do I feel about combining resources? Do I like to lead by myself
and act as a solitary business hero, or am I fine with sharing the pie?
8. Do I have access to the right legal resources to structure the joint
venture and insure all aspects are duly covered?
9. Are there local legal regulations I can bypass by partnering with a local
business?
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http://www.investopedia.com/terms/j/jointventure.asp
http://www.investopedia.com/video/play/joint-venture/
Management of Joint Ventures
Assess
Readiness for a
JV
10. Do I have access to successful joint ventures who can share their
experience with me?
11. Do I understand that going through the decision process entails sitting
down and taking the time to write a full-fledged joint business plan?
12. Am I looking at partnering because I don't see another way out of my
current business problems? (Joint venturing should not be considered as
a last resort action, but rather as one course of action among several
others. This decision needs to be taken in a careful and methodical
manner.)
13. Do I already know of a person or a company that I see has a real
interest in partnering? Have I discussed this possibility with this person
or with the person in charge of the targeted company? If yes, what is
the general feeling? If no, then it is time to start a high-level discussion
to gauge the level of interest
14. Is my company in need of more credibility? Do I know of a potential
joint venture target, which has the level of credibility I am seeking?
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http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
Management of Joint Ventures
Assess
Readiness for a
JV
Plan JV
Relationship
16. What are my strengths and weaknesses? What are the threats and
opportunities in my target market?
17. Do I have all the support I need to go through this major change in my
business life? If I am going through personal turbulences, does it make
sense to start such a major project?
Before starting a joint venture, the parties involved need to understand
what they each want from the relationship;
1. Smaller businesses often want to access a larger partner's resources,
such as a strong distribution network, specialist employees and
financial resources
2. The larger business might benefit from working with a more flexible,
innovative partner, or simply from access to new products or
intellectual property
3. One might decide to build a stronger relationship with a supplier,
might benefit from their knowledge of new technologies and get a
better quality of service. The supplier's aim might be to strengthen
their business from a guaranteed volume of sales to you
Any deal should:
recognize what you each contribute
ensure that you both understand what the agreement is expected to achieve
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set realistic expectations and allow success to be measured
http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
Management of Joint Ventures
The ideal partner in a joint venture is one that has;
Choose the
1. Resources
Right JV Partner 2. Skills
3. Assets
4. A good fit between the cultures of the two organizations
that complement your own
A good starting place is to assess the suitability of existing customers
and suppliers with whom you already have a long-term relationship.
Broad consideration points would be;
 How well do they perform?
 What is their attitude to collaboration and do they share your level of
commitment?
 Do you share the same business objectives?
 Can you trust them?
 Do their brand values complement yours?
 What kind of reputation do they have?
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http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
Management of Joint Ventures
If you opt to assess a new potential partner, you need to carry out some
Choose the
basic checks:
Right JV Partner  Are they financially secure?
 Do they have any credit problems?
 Do they already have joint venture partnerships with other
businesses?
 What kind of management team do they have in place?
 How are they performing in terms of production, marketing and
personnel?
 What do their customers and suppliers say about their
trustworthiness and reputation?
Important
Checkpoints
It's important to;
 protect your own interests
 Draw up legal documents
 Find out whether your potential partner holds intellectual
property rights agreements
 Checking to see whether they have other agreements in place,
either with their employees or consultants
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http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
Management of Joint Ventures
JV Agreement
Content
the structure of the joint venture, e.g. whether it will
be a separate business in its own right
the objectives of the joint venture
__________
______________
_______________________
_______________________
_______________________
_______________________
__________
___________
____________
the financial contributions you will each make
whether you will transfer any assets or employees to
the joint venture
ownership of intellectual property created by the
joint venture
management and control, e.g. respective
responsibilities and processes to be followed
how liabilities, profits and losses are shared
how any disputes between the partners will be
resolved
an exit strategy – strategy on ending a joint venture
8
http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
Management of Joint Ventures
Ways to
Workout a JV
Relationship
Ending a JV
Get your relationship off to a good start
Communication
Establishing clear performance indicators
Aim for a flexible relationship. Regularly review how you could
improve the way things work and whether you should change your
objectives
Look for "win-win" solutions rather than trying to score points off each
other
Termination Condition:
For example, you might each be allowed to give three months' notice to
end the agreement. Alternatively, if you have set up a joint venture
company, one option can be for one partner to buy the other out
how shared intellectual property will be unbundled
how confidential information will continue to be protected
who will be entitled to any future income arising from the joint
venture's activities
who will be responsible for any continuing liabilities, e.g. debts and
guarantees given to customers
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http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
http://en.wikipedia.org/wiki/Kinetic_Engineering_Limited
Management of Joint Ventures
Company
Reason for Break up
Kinetic-Honda
Kinetic buys partner’s stake
Kinetic Engineering formed a joint venture with Honda Motor Company to introduce
Kinetic Honda scooters, which had electric start and gearless transmissions. Kinetic and
Honda parted ways in 1998 with the Firodias bought out the majority stake of the MNC
joint venture partner. In 2008, Kinetic entered into a joint venture with Mahindra
Automobiles, where Mahindra held an 80% stake. By this joint venture, Mahindra
acquired the two-wheeler manufacturing facilities as well as the then selling brands of
Kinetic.
After ceasing two-wheeler manufacturing, Kinetic Engineering produces and exports
automotive components. Kinetic Motors resumed operations in January 2011 and has
announced plans to produce electric vehicles.
In February 2014, Kinetic sold its stake in Mahindra Two-Wheelers to Samena capital
(investment group) for 182 Crores
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http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-partnering/
h http://en.wikipedia.org/wiki/Mahindra_Renault_Limited
Management of Joint Ventures
Company
Mahindra- Renault
Mahindra Renault Limited was a joint venture between India’s largest utility vehicle
manufacturer Mahindra & Mahindra Limited & Renault S.A. of France (51% & 49%
respectively). The joint venture was formed in 2007. On April 15, 2010 Mahindra &
Mahindra and Renault together announced restructuring plans by which Mahindra would
buy Renault's share in the joint venture and Renault would continue to provide the
support for M&M through license agreement and continue to be supplier of key
components
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http://timesofindia.indiatimes.com/business/india-business/Godrej-exits-joint-venture-with-Hersheys/articleshow/16305540.cms
Management of Joint Ventures
Company
Reason for Break up
Godrej – Hershey
Incompatibility in growth
The Godrej Group is entirely exiting the foods business - along with local brands such as
Jumpin', Nutrine, Mahalacto and Sofit - with its decision to divest its holding in joint
venture company, Godrej Hershey. Godrej Industries announced its decision to divest its
43% stake in the joint venture company to the US chocolate major for an undisclosed
consideration.
Adi Godrej, chairman, Godrej Group, said: "Over the last few years, we have been
following a disciplined approach to doubling down on our core businesses to drive
sustained and profitable growth. We have been making clear choices to focus on areas
where we have a competitive advantage and that provide the best growth opportunities
for us. Our decision to divest our stake in the Godrej Hershey joint venture is in line with
this focused portfolio strategy.
The Hershey Co. has agreed a deal to buy Godrej industries 49% stake. It has announced
plans to set up its own subsidiary ‘Hershey India’
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Cross Cultural Dimensions of International Management
A patterned way of thinking, feeling and reacting that exists in a
What is Culture? particular group, organization, profession, subgroup of a society,
nation or a group of nations
The core features of culture;
a. A past history which may be recorded
b. Regulated political, legal, social systems & communication networks
c. A dominant organized religion within which the salient beliefs and
activities (rites, rituals, taboos & ceremonies) are given meaning,
legitimacy, & a sense of continuity
d. A set of core values & traditions including norms of personal,
familial, and social conduct; patterns of socialization, kinship
patterns, gender roles
e. Artifacts unique to that society, such as literature, works of art,
architecture, paintings, music, dance, drama, religious texts,
philosophical texts
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Link Between History, Geography with Culture & Managerial Practices
USA
Japan
India
- In the 18th & 19th Century,
people fleeing from poverty,
persecution or prison in
Europe (Pioneers)
- Staked their land & got rid of
the original Native Americans
- Those were the days of land
grabbing (U got there first- U
got the land)
-It is an island nation with few
natural resources
- High population density with
little land availability
- Had to cooperate to work
hard at rice farming
- Rigid Indian caste system
- Long history of colonization
where Indians worked for the
British
-Working hard is the
guarantee of success
- Americans want to be first
- Believe in equality
- Have large resources & still
want to conquer the
environment
-Harmony & group work
continue to be core values
- Japan is considered a ‘web
society’
- Interdependence between
people, moral & social
obligations both vertically &
horizontally
- Caste may not matter in the
modern Indian workplace
- Indian workplace is
hierarchical
- Commitment to the org. &
its goals is low
- Family occupies prime place
- If an organization creates a
‘familial’ culture, then Indians
feel more comfortable 14
Cross Cultural Dimensions of International Management
Dimensions of
Culture
Relationships
Equality
Time
- Cultures are complex
- Common dimensions are relationship with people, equality, time,
space, language, priorities, attitude toward risk, emotions, rules &
regulations, & control over nature
1. How important is the role of individual Vs the role of the collective?
2. Do individuals make decisions taking their community into account
or based on their own self interest?
3. Are tasks considered more important than relationships?
4. How important is relationship building for business transactions?
1. How much inequality do people accept?
2. Is it expected that the boss be the most powerful person & tales all
the decisions?
3. How accessible are bosses to subordinates?
1. How do people treat time?
2. Is it something precious & not to be wasted?
3. How much emphasis do people place on clock time and on
schedules?
4. Do people mind spending time on meals or do they find it a waste of
time?
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5. Does time rule the person or does the person rule time?
Cross Cultural Dimensions of International Management
Space
1. How is space used?
2. Do people stand close to each other or keep a distance?
3. Do important people have different access to space?
1. What are the relative roles of verbal & non verbal communication?
Spoken
Language & Non 2. How much a message is conveyed in words & how much without
words?
verbal
Communication
Priorities in
Society
1. What is given most importance in society?
2. Is success defined by money, material goods & position?
3. Or is success defined by care, love and a balanced life?
Risk Taking
1. How wiling are people to take risks?
2. Are people happier to stick to known ways & resist to change?
Emotions
1. Do people feel free to express their emotions in business & personal
relationships?
2. Is it unacceptable to express anger/ displeasure/ enthusiasm in
business relationships?
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Cross Cultural Dimensions of International Management
Rules &
Regulations
1. Do people have a healthy respect for rules & regulations?
2. Are people flexible enough to follow rules & regulations as per the
context?
Fatalism &
control over
nature
1. Do people feel that they have control over their destinies & nature?
2. Do they feel it is God’s Will & there is nothing they can do about
their future?
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Cross Cultural Dimensions: Geert Hofstede’s Model
Geert Hofstede
-
Power Distance
A Dutch engineer & social scientist
His classic text Culture’s Consequences: Comparing Values, Behaviors,
Institutions & Organizations Across Nations (1981)
Hofstede is third most cited author in understanding cross- cultural
aspects of International Management
Prof. Hofstede conducted his study in the 1960s in the IBM
subsidiaries in 64 nations across the world
Dimensions of National Culture as identified by Hofstede are:
1. Power Distance
2. Individualism & Collectivism
3. Masculinity & Feminity
4. Uncertainty Avoidance
5. Long Term Orientation
It is the degree to which people in a society or an organization accept
inequality
High Power Distance Society: Where difference in power between
superiors & subordinates, older & younger people, rich & poor people is
accepted
Low Power Distance Society: Society equality is part of the social
structure. Everyone rich or poor, high or low in the organizational or
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societal hierarchy expects to be treated equally
Cross Cultural Dimensions: Geert Hofstede’s Model
High Power
Distance Society
-
Power Distance
in India
-
Philippines, India, China, Venezuela, Malaysia, Mexico are high
power distance socities
Supervisor takes all the decisions & dominates all meetings &
discussions
Subordinates cannot disagree with seniors openly
It is common to find ‘office assistants’ whose job is to meet the
needs of the superiors
Powerful people enjoy many privileges & try to project an image of
being very important in public
Better off houses have dometsic help at home who are low paid &
are from lower social class
Skills, Wealth, Power & Status go together
Example: Indian MNC; top positions have sons or close relatives of
the founder members. Apollo Tyres have three members of Kanwar
family on the board, Bharat Forge have three members of the Kalyani
family on its board
Term Homo Hierarchicus has been used to describe Indians by
French anthropologists Louis Dumont
Indians are perhaps world’s most undemocratic people living in the
world’s largest democracy
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Age, gender, caste, credentials, wealth determine the rank
Cross Cultural Dimensions: Geert Hofstede’s Model
Power Distance
in India
-
PDI Score & its
Factors
Family is the glue that keeps the Indian society together
Relationships in the family are hierarchical in structure
Same tendency manifests in the workplace
Superiors male or female can almost be maternal in behavior , while
subordinates display respect & compliance
An Indian leader can often be idealized & looked upon & a
repository of all virtues
Hofstede’s research shows that predictable factors that determine a
country's PDI score could be;
1. The country's geographical latitude: A higher latitude contributes to
lower PDI. Countries like Panama, India, Malaysia are all near to
equator & have high PDI score. Countries like Finland, Norway,
Sweden have higher latitude & contributes to lower PDI score
2. Population Size: The larger the population the larger is the PDI score.
Sparcely populated countries like Iceland have a low PDI score.
Countries like India, China have a high PDI score
3. Wealth: The richer the country the lower the PDI score. Countries
like USA, Japan, Germany, UK may have lower PDI scores. China is an
exception which is world’s fourth largest economy still having high
PDI score
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Cross Cultural Dimensions: Geert Hofstede’s Model
Criticism
-
-
Hofstede’s research shows that employees in low PDI score countries
prefers a boss who decides paternalistically or autocratocally
These results have been questioned by Indian scholars, Prof. Jai
P.Sinha & Prof. Sudhir kakar
Kakar shows that Indians preferred nurturing superiors
Sinha came up with the model of nurturant- task leadership style
Laungani points out how western academicians reinforce
stereotypes by claiming that western societies are individualistic,
horizontal, open, flexible, rational & secular. Eastern societies as
communalistic, vertical, hierarchical, rigid, religious and superstitious
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Cross Cultural Dimensions: Geert Hofstede’s Model
Individualism &
Collectivism
Hofstede measured the degree of individualism through the
‘Individualism Index’
Individualistic Cultures
Collectivist Cultures
-
-
Societies in which the ties between
individuals are loose
Everyone is expected to look after
themselves & their immediate families
Examples: USA, UK, Australia
Personal time & family time are important
Freedom to experiment in a job is
welcomed
Low Context Communication Style:
everything is spelt out clearly in words
Employee- Employer r/p: contract based
on mutual advantage
Hiring & promotion is based on skills &
output
Tasks prevail over r/p
-
-
-
Societies in which the identity of individual
is based on the identity of the group he/
she belongs to
Examples: Guatemala, Ecuador, Panama
Opportunities to improve skills, good
physical working environment,
opportunities to use skills & abilities on
the job are important work related goals
High Context Communication Style: lot of
communication remains unspoken
Employee- Employer r/p: more like a
family
Hiring & promotion is based on
employee’s ‘in- group’
R/p prevails over tasks
Harmony, shame & face are given
importance
*Face is an unwritten set of rules by means of which people 22
in
Cross Cultural Dimensions: Geert Hofstede’s Model
Masculinity &
Feminity
Masculinity
-
-
Hofstede computed a ‘Masculinity Index’
for the 50 countries & 3 regions in IBM database
Feminity
Societies in which social gender roles are
clearly distinct
Men are supposed to be assertive, tough,
focused on material success whereas
women are supposed to be modest,
tender & concerned with the quality of life
Example: Japan, Austria, Venezuela
Masculine cultures give importance to
high salaries & recognition
Prefer jobs that give them the opportunity
to advance & jobs that are challenging
Failing in school is a major disaster &
children commit suicide (social pressure)
Teachers are admired if they are brilliant
academically
Women teach at schools & men teach at
universities
People live in order to work
-
-
-
-
Societies in which social gender roles
overlap
Both men & women are supposed to be
modest, tender & concerned with the
quality of life
Sweden, Norway, Netherlands
Give importance to having a good working
r/p with one’s supervisor & working with
people who cooperate with one another
Give importance to job security & family
life
There is no pressure to be the best
Excelling in one’s studies & reaching the
top are not necessary to earn respect
Social skills & friendliness are values that a
teacher must possess
People work in order to live
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Cross Cultural Dimensions: Geert Hofstede’s Model
Uncertainty
Avoidance
-
-
-
Uncertainty Avoidance can be defined as the extent to which the
members of a culture feel threatened by uncertain or unknown
situations
The feeling is expressed through nervous stress & anxiety
The degree to which a culture avoids uncertainty is measured
through the ‘Uncertainty Avoidance Index (UAI)’
In weak uncertainty avoidance cultures anxiety levels are low
whereas in strong UAI countries anxiety levels are high
Uncertain avoidance leads to a reduction of ambiguity, people look
for a structured approach in organizations
Hofstede ranked highest – lowest uncertainty avoidance countries
High Uncertainty Avoidance countries have the credo ‘ What is
different is dangerous’
Low Uncertainty Avoidance countries feel ‘What is different is
curious’
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Cross Cultural Dimensions: Geert Hofstede’s Model
Long Term
Orientation
Hofstede added it wit Michael Bond (Canadian scholar)
It was measured in a study among students in 23 countries across the globe
Values associated with LTO are;
- Thrift (economy, saving)
- Perseverance (insistence)
- Respect for Tradition
- Fulfilling Social Obligations
- Protecting One’s Face
Long Term Orientation
-
Examples: China has the highest score at
LTO, other being Taiwan, Hong kong,
Vietnam, Korea & Japan
Short Term Orientation
-
-
Example: USA, UK , Germany, Norway, New
Zealand & Sweden
US corporate’s stress on quarterly results,
putting tremendous pressure on top
managers to show sort- term profits
US corporate lay off its employees just to
show better quarterly results
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