Joint Venture:- Success & Failure

International Business Presentation by Onkar Satam, MMS Sem. III

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 Joint Ventures and Alliances

can deliver more shareholder
value than Mergers and
Acquisitions can, but getting
them off the ground can trip
you up in unpredictable
ways
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JV - What?
A contractual agreement joining together two or more parties for the purpose of
executing a particular business undertaking. All parties agree to share in
the profits and losses of the enterprise.

Shared contribution of equity

Shared authority, control and responsibilities
Shared Revenues & Losses
Shared Assets

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Advantages
of a JV

Participating in joint ventures has the following advantages:

1. Helps an organization to enter in to new markets or new product lines
2. Access to increased resources and improved expertise & technology
3. Helps to build credibility with a particular target market by choosing a well
established and credible partner in that market
4. Reduces risk involved in business due to sharing of losses and expenses.
5. Exiting from the business in case of failure is easier as compared to solely
owned businesses.
6. Partners in Joint Ventures get preference in buying out the shares of other
partners and take over the company.
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Disadvantages
of a JV

Entering into Joint Venture agreements may pose certain threats or disadvantages to
the participating organizations:
1. It is time consuming and difficult to set up a Joint Venture and poses many
challenges.
2. The objectives of the JV may not be clear and understood by all if the partnering
organizations do not state and communicate them clearly.
3. Differences in the cultures and management styles of the organizations may lead to
a lack of cooperation and coordination.
4. Lack of thorough research and feasibility studies in the beginning of the JV may lead
to failure of the JV.
5. The individual partners may not treat the JV as an integral part of their business and
may lead to lack of attention being given to the JV
6. There can be an imbalance in levels of expertise, investment or assets brought into
the venture by the partners
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Steps in formation of Joint Venture

Planning

Partner
Search

Feasibility
Study

Incorpor
-ation

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Planning
a JV

The Planning Stage involves decision making on the following issues:

1. Specify the Goals and Objectives
2. Determination of the product and market
3. Market Analysis
4. Technology Decisions
5. Financial Requirements
6. Foreign Exchange analysis
7. Human resource and skill requirements
8. Revenue Predictions
9. Cost benefit Analysis
10. Personal SWOT Analysis

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Partner
Search

The following considerations have to be made while selection partners for JV

1. Financial resources of the prospective partners
2. Technological know how and capabilities
3. Presence in the target market
4. Organizational culture and management style
5. Type of organizational structure adopted
6. Credibility study
7. Ranking of the prospective partners based on above mentioned criteria
8. Selection of partners for the feasibility study
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Feasibility
Study

Predication of the culture and structure of the Joint Venture

Analysis of partners comfort with and adaptability to the new technology and
culture of the JV
Analysis of the authority, responsibility and financial gains and loss sharing
among the prtners
Market analysis and viability of the JV
Analysis of the sustainability of the JV in times of uncertainty
Cost Benefit Analysis
Environmental Analysis of the JV in the market
Growth Predictions
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Incorporat
ion

A JV can be brought about in the following major ways:

Foreign investor buying an interest in a local company

Local firm acquiring an interest in an existing foreign firm
Both the foreign and local entrepreneurs jointly forming a new enterprise

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Critical Success Factors in a

Joint Venture
1.Good communication,
cooperation and
coordination among

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Factors hindering the

success of a JV
1.Lack of understanding
between the partners
2.Lack of patience and

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Successful Joint Ventures

VOLVO EICHER JV
TATA DOCOMO
Failed Joint Ventures
Chrysler Diamler AG
Yamaha Escorts
JVs Leading to Takeover by one partner

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 Launching and running a world class JV is a complex and demanding task. If

done right JV promises a better ROI than mergers and acquisitions.

It is necessary for all executives involved to understand the unique demands of

JV and invest in early planning

Right investments during launch phase will reap big rewards

If you get the launch right, the rest will take care of itself
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Sources

http://www.investorwords.com/2671/joint_venture.html
http://www.businesslink.gov.uk
http://sbinfocanada.about.com/od/management/a/jointventure.htm
http://en.wikipedia.org/wiki/Joint_venture
http://www.bharatentrepreneurs.com/2008/09/26/successful-joint-venture
s-in-india-in-2008

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Thank You
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