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Group Effort & Presented By:

Abhishek Das
Amit Puri
Abhinav Shukla
Anurag Gupta
Harshit Sultania
Neha Topno
Prateek Singh Gautum
Pallavi Arun
Paritosh Jha
Saksham Gurha

26 August 2010 2

 


A è
 is an entity formed

between two or more parties to
undertake economic activity together.
The parties agree to create a new
entity by both contributing equity, and
then they share in the revenues,
expenses, and control of the
enterprise

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  |

Î JV provides a lower risk option of entering

into a new country. .example- motorola enterred
India in JV with blue star company, a brand with
repute and vast distribution network.
Î It also provides an opportunity for both
the partners to leverage their core
strengths and increase the profits.
Î It also provides a learning opportunity
for both the partners.
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|

p
   

p
p 



 p  

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1) Building on company's strength.

2) Spreading costs and risks.

3) Improving access to financial resources.

4) Economies of scale and advantages of size.

5) Access to new technologies and customers.

6) Access to innovative managerial practices.

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  !"

# 
1) Influencing structural evolution of the industry.
2) less competition.
3) Creation of stronger competitive units.
4) Speed to market.

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 #
# 

1) Shared risk.

2) Transfer of technology/skills.

3) Diversification.

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"$%&|
1. Valuation Problems.
2. Transparency.
3. Conflict Resolution.
4. Division of management responsibility
and degree of management
independence
5. Changes in ownership shares.

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6. Dividend Policy.

7. Marketing and Staffing Issue.

8. Cultural Problems.

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|''

Ú Both partners should appreciate the need for the

joint venture.

ÚThe partners should clearly agree on the way the

joint venture will be managed.

ÚTake measures to be sure that the partner has a

compatible work culture.

ÚBe sure about the organizational behavior of the

partner to ensure synergies.
|''
Ú It is important that both partners work towards a
system based on trust and transparency.
Ú To make for the long term success of the joint
venture, it is also important that both partners
are equally able to service its growing need for
capital as the business expands.
Ú Need to have a clear long term goal and set the
terms and conditions of the JV.
Ú Clearly define the role and responsibility of each
partner.
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 ((%)*+,
Ú Each participant has something of value to bring to the
venture.
Ú The participants should engage in careful preplanning.
Ú The agreement or contract should provide for flexibility in
the future.
Ú There should be provision in the agreement for
termination including buyout by one of the participants.
Ú ey executives must be assigned to implement the joint
ventures.
Ú A distinct unit be created in the organizational structure
which has the authority for negotiating and making
decisions
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-&% ,.

Ú Virgin Group and Tata Tele Services

Ú Maruti Suzuki
Ú Marks & Spencer and Reliance Retail of
India

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26 August 2010 15
 Concerns in a JV
Ú V
 

 

 
 


 


 

 
Ú The JV between Hotline group(india) and Haier(china)
missed at that point.
Ú Haier planned to increase its share to 49% to introduce
wide ranges of products including washing machines,
multi-split AC¶s etc.
Ú Haier wanted to focus in imports.
Ú Hotline disagreed to these, the JV broke off before the
operations started
Ú Haier re-entered indian market with a 100% subsidiary in
2003.
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 Concerns in a JV
Ú In some cases access to technology or
capital provides sufficient confidence in
the partners to go alone, making the JV
redundant
Ú
or example- JV between TVS group
(INDIA) and Suzuki(japan) formed in 1983
was called off in 2001.

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 Concerns in a JV
Ú At times either of the partners are accused
of breaching the terms of the JV creating
tensions in it.
Ú
or example- Wadia accused Danone of
using the popular Britannia brand Tiger
products outside india, not permitted as
per the existing agreement between the
two.

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 Concerns of doing a JV
There are cases of JV falling apart due to
lack of synergy.
Ú
or example- the 40:60 JV between Godrej and GE
formed in 1993 , was called off in 2001
Ú The JV failed to meet the projected turnover of Rs 35
billion and managed only 1.83 billion in 1998-99.
Ú There was poor cultural integration between the two
partners. GE alleged lack of professionalism in the
Indian partner.

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%)*
Ú Inadequate preplanning for the joint venture.
Ú The hoped-for technology never developed.
Ú Agreements could not be reached on alternative
approaches to solving the basic objectives of the
joint venture.
Ú People with expertise in one company refused to
share knowledge with their counterparts in the
joint venture.
Ú Parent companies are unable to share control or
compromise on difficult issues
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-&% ,.
Ú ufthansa and Modi Group
Ú Daewoo and Proctor & Gamble
Ú inetic Honda
Ú Tata IBM
Ú M Piaggio

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26 August 2010 22
|
Ú The number of joint ventures will continue
to increase in the near future
Ú More and more companies are adopting
the JV approach as a part of their growth
strategies.
Ú
oreign companies can benefit mutually
by combining their technological and
monetary resources and taking advantage
of respective market conditions.
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