Question 1.

What are the factors that a multinational firm should consider when deciding to
use a joint venture as a market entry strategy for a developing country? What
are the potential benefits and risks in taking this course of action?

Join ventures is one of the many market entry strategy for big foreign firms to
ally with a local company that has already been established in the market. With
both sides benefitting from the alliance created, foreign companies would see
entering the market smoothly and expanding into it ideal. (49)

Benefits of joint venture

Although a potential market, developing countries are risky for multinational
companies. Thus, joint venture will minimize risks and allow a multinational firm
to rely on the local firm. Having a local company saves the effort to have to
research and analyze the market at great lengths; they are already established in
the local market and have the insight and expertise that is needed. With that,
they can guide and impart knowledge (Verbeke, 2013) to the foreign company
such as upcoming market trends and common customer preferences. Aside from
that, foreign partners will be able to save a huge sum of money as local firms
would already have all the necessities that a company would need in order to
operate. Not only does foreign companies not need to find distribution channels
as local companies have already (established) their own channels of distribution,
shipping and infrastructure are already established and foreign companies can
focus on the business aspects. With their partners being local, foreign companies
will not have to worry about building rapport with suppliers as there is already a
relationship between the companies and enjoy reasonable prices as it is well
known for locals to overcharge and extort from those who are ignorant of market
rates. Most importantly, local companies will already have their own customer
base that foreign firms can take advantage of and build their own base of loyal
customers from there.
With all the advantages that come with a joint venture, it will encourage such
foreign multinational companies to create such alliances. It will help them

assimilate in to the new market better and expanding without worrying about
cost. (271)

Risks of joint venture

Joint ventures not only have enticing advantages, but have its own set of risks
too. When using this particular market entry method, the possibility of losing
decision making rights, burden of duty, conflict of agreements, technology
transfer and government intentions deters foreign companies from using joint
venture as an way of entry into the market. With a multinational company allying
with a business in a developing country that is comparatively smaller, it might
hinder the growth of its foreign ally due to its size and ability in the market. A
bigger company will have the obligation to support the local firm should
expanding and resources be a limitation e.g. size of warehouse, quality of
manufacturing plants, lack of manpower, dated equipment, behind technology,
etc. With that said, multinational companies may have newer technology and
may have to share with its local partners in developing countries as it is costly
and that may lead to technology issues between the two firms. Government may
also encourage foreign investments but limit the ability to have the final say in
decisions and will only allow local companies to have the majority in shares. In
addition, local companies may have a different idea from its foreign counterpart
which will result in conflicts and arguments with each interested in their own
benefits, instead of working together to grow and gain from the joint venture.
(228)
Total 548
Question 2.
Develop an outline international marketing strategy for a joint venture between
Danone, a French multinational food company, and a food producer from a
developing country. Explain which companies would be responsible for providing
the leadership and decision making for the various activities detailed.

When China joined the World Trade Organization (WTO) as a member, it attracted
a large influx of foreign investment and used joint venture as a way to markets in

China (Gregory, 2011). Danone is a famous French multinational food company

that has expended into markets such as Russia, United States and many others.
To have a successful venture, the relationship between both Danone and the
producing company should be nurtured and have a mutual understanding of
what is expected of the other party and set clear rules on how things should run.
(92)

1. Look for strong partners

As Danone is a multinational company, it should ally itself with a company
that is equally as strong in its local market. Should the joint venture be
paired with one that is weak and not trustworthy, it is highly possible for
the alliance to fail eventually. Partnering with a strong firm will not only
even out what both companies can contribute to the alliance but gain
equal profits. This way, Danone can focus on developing a good
relationship without distrust, and will thus develop a positive reputation for
its success in the venture with its partner, and gain reliable suppliers, ally
companies and a loyal customer base. (107)
2. Limit at the beginning, extend in future
With a new partner, Danone should not put all its eggs in one basket. Both
Danone and the local producing company should start small, and when
trust is being established and the partnership proven that the venture is
moving in the right direction as hoped, then Danone can opt to further and
extend the scope of the venture should the beginning results of the
venture be a success. One example would be to start producing one
product, and should it be a success there will be plans to further
manufacture and produce varieties. Placing high expectations on a newly
joint venture will strain ties between Danone and the local producing
company and will be detrimental towards both reputation and outcome of
the alliance. (123)
3. Put agreements in writing
It is highly ideal for companies to come to an agreement after a period of
negotiation, but it is not only a smart but also a safe move to put all

agreements discussed in writing. That way, it will ensure that should either
company retract their words or act unethically, there is a mutual
understanding of the consequences and repercussions of going back on
the terms and conditions set down initially. For example, citing from the
case of Danone vs Wahaha (Forbes, 2009), the partnership turned sour.
Danone was in charge of contributing capital, expertise and technology
while Wahaha produce and supply its trademark but Wahaha was found
illegally selling its products using distributors not listed in their joint
ventures. (120)
4. Establishing protocol for dissolving joint venture if it fails
It is good for companies to draw up a plan on how to dissolve the joint
venture when the time comes for both parties to go their own ways.
Shared assets such as infrastructure, technology, capital and machinery
will have to be discussed and written down as to how assets will have to
be divided. Without it, dissolving a joint venture will get ugly and may
result in lawsuits. (69)
Conclusion
The essay is to discuss the benefits and risks of using joint venture to
enter markets in developing countries and at the same time to suggest
agreeable marketing strategies for a joint venture between Danone and
the local food producer. With Danones experience on foreign investment
there should be no qualms on Danone finding success in the new market.
(59)
References:
Verbeke, A. (2013). International business strategy. Cambridge University
Press
Kwok, V. (2009). Danone Gives Up China Fight. [online] Forbes. Available
at: http://www.forbes.com/2009/09/30/danone-wahaha-dispute-marketsbusiness-trademark.html [Accessed 1 Sep. 2015].
Bennett, R. (1998). International marketing. London: Kogan Page.
Markman, G. and Phan, P. (2011). Competitive dynamics of
entrepreneurial market entry. Cheltenham, Glos, UK: Edward Elgar.