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International Joint Ventures
• Motivations• Macro-structure• Cooperative Activities and Modes• Role of IJVs in International Strategy• Nora-Sakari as exemplar
International Joint Ventures
• Motivations – Complementarities vs. Size: – Market access– Risk / experience (lack of / superior)– Too small / resource pooling – Intense competition– Technology (lack of / superior)– Learning
International Joint Ventures
• Range of Possible Cooperative activities:– R&D– Manufacturing– Marketing– Sourcing– Service
– Everything?
International Joint Ventures• Forms of agreement:
– Equity vs. arms-length contract/agreement
• Structure:– Ownership (50-50 … 51-49 … 90-10)– Contribution ($, technology, plant, marketing)– Strategic and operations roles & responsibilities
• Active vs. Passive• Value-chain scope
Cooperative Modes
• Independent– Act as two separate companies; no constraints
• Coordinated / Complementary– Act as two separate companies with established
operational, product, or geographic domains or constraints
• Joint– Act as single company
Independent R&DCoordinated Marketing
Acme Inc.U.S.
Braunschweiger AGGermany
NorthAmerica
EuropeanUnion
Independent R&DCoordinated Marketing
Joint ManufacturingAcme Inc.
U.S.Braunschweiger AG
Germany
NorthAmerica
EuropeanUnion
A-B Mfg. SA, Mexico
International Strategy:Managing Dual Pressures
Pre
ssur
es f
or G
loba
l Effi
cien
cy
Pressures for Local Responsiveness
High
Low
HighLow
MultidomesticStrategy
Multidomestic StrategyAcme’s Intended Strategy
Germany
Mexico
JapanEntry Mode Decisions• What Acme wants? • What can Acme achieve?
Acme Inc.U.S.
Multidomestic Strategy
Germany
Mexico
Malaysia
REMEMBER: IJV is also an entry mode
Acme Inc.U.S.
Who does marketing in these countries?
IJV in Multidomestic Strategy
Acme Inc.U.S.
Braunschweiger AGGermany
Cervesa SAMexico
Sashimi LTDJapan
Local JV partners can do marketing
Acme needs local JV partners to help it build its Multidomestic strategy
IJV in Transnational Strategy
Acme Inc.U.S.
Braunschweiger AGGermany
Cervesa SAMexico
Sashimi LTDJapan
Nora-Sakari IJVTale of the Tape
Nora• Sales: $100 million• Employees: 3,081• Deal % of sales:
123%• Big Picture:
– Needs technology– Local knowledge– Government ties– Deal in hand– Seeks regional
expansion
Sakari• Sales: $4 billion• Employees: 29,000• Deal % of sales: 3%• Big Picture:
– Has Technology– Seeks regional presence– Lacks local knowledge– Has other options
Negotiation Issues
• Equity ownership• Technology transfer• Royalty payments• Expat salaries• Arbitration
Negotiation Issues
• Equity ownership• Technology transfer• Royalty payments• Expat salaries• Arbitration
How is each related to:• Entry mode decision• International strategy
implementation• Capabilities
Negotiation Issues
• Equity ownership• Technology transfer• Royalty payments• Expat salaries• Arbitration
• Creative alternatives??
How is each related to:• Entry mode decision• International strategy
implementation• Capabilities
e.g., Two JV’s• Long-run & short-run• Mfg. & mkt./distrib.
Big-Picture Issues
• What is Sakari’s overall international strategy? – What does it want?
• What is Nora’s overall international strategy?– What does it want?
• What role should the joint venture play in facilitating each company’s intended strategy?
Nora’s Technology Acquisition Strategy
20% of MalaysianTelecom Market
Indonesia
Thailand
Vietnam
Export MarketsNora Sakari
Technology Transfer
Sakari’s International Strategy
NorthAmerica
Malaysia
S.E. Asia
Finland
Sakari HQ E.U.
Expan
d to
New
Reg
ion
What ‘Actually’ Happened?• Equity: 60% Nora -- 40% Sakari, JV must
export ~ 40% of production• Technology: JV will assemble low-tech
SK33 switch for TMB contract, jointly develop new/high-tech switch for export
• Royalty: 3% of net sales• Components: 65% discount• Wages: Nora’s rates• Arbitration: Switzerland