Q.1 What are the unique advantages and disadvantages of International Joint Ventures?

Try to relate to the case when you answer this question. The case illustrates the possibility of a Joint Venture between Nora, a leader in telecomequipments in Malaysia and Sakari, a Finnish Conglomerate that deals in the manufacturing of cellular phone sets and switching systems.Joint Ventures between local players in developing countries and foreign companies have become an apt means for both managements for satisfying their business needs and objectives.Local partners bring local expertise of the target market, familiarity with local governance andgovernment regulations, understanding of the regional work ethics and culture, while, the foreign players get the latest technological know-how, advanced operational frameworks and access toexport markets to the table. It can be seen as a symbiotic tryst between two mutually codependant parties.In the light of the aforementioned case, some of the unique advantages and disadvantages of anInternational Joint Venture are as follows: Advantages of an International Joint Venture: y A ccess to new markets and a wider distribution capacity: A s shown in the case, Sakariwas interested in enhancing its global market share by means of a Joint Venture. A JointVenture allowed it to foray into lesser known foreign markets with the help of anestablished local player. This allowed the Finnish company to gain the much neededexpertise and foothold in a relatively alien market. y Cap the high growth potential of virgin markets (usually the developing countries) : A JVallows a company to enter a market and tap the high growth opportunities almostinstantly. The case illustrates that the mobile telecommunication network is anticipated to be about 40% a year in A sia in the next 5 years. A lso the low telephone penetration ratein Malaysia as opposed to its developed counterparts allowed for lucrative gains in thenear future. They provide higher returns compared to trade related and contractualexpansion modes. y Incorporation of New and A dvanced Technology: The entities in a joint venture benefitfrom each other by pooling in resources and technology to attain sustainable competitiveadvantage over the other players. One of the examples of the same would be Sakaris product SK33, a digital switching system, which worked on an open architecture. This product would definitely leverage Noras chances of winning the TMB bid on a five year project worth RM2 billion for installing digital switching exchanges across the country. y Sharing of risks and costs with a partner: A joint venture allows the participatingcompanies to mitigate the risks and distribute the fixed and variable costs. y A ccess to a greater resource base including specialized staff, technology and financialresources. y P rovide access to countries where complete ownership is restricted : For example, theMalaysian government had strict norms related to participation of foreign equity. The setstandard was in the ratio 30:70, wherein the foreign player could invest not more than30% in the equity of the joint venture.