The Design and Management of International Joint Ventures

International Joint Ventures

An international joint venture is a company that is owned by two or more firms of different nationality.

Strategic alliances vary widely in terms of the

level of interaction and type, and equity joint ventures usually require the greatest level of interaction, cooperation, and investment.

International Joint Ventures

Joint ventures have moved from being a way to enter foreign markets of peripheral interest to become a part of the mainstream of corporate activity.

The popularity and use of international joint ventures and cooperative alliances has remained strong.

However, failures do exist and are usually widely publicized.

Why Companies create International JVs

New Markets

To take existing products to

foreign markets

To diversify into a new business

Existing Markets

To strengthen the existing business

To bring foreign products to local

markets

Existing Products New Products

Strengthening the Existing Business International JVs are used by firms wishing to

strengthen or protect existing businesses through: Achieving Economies of Scale. Raw Material and Component Supply.   Research and Development. Marketing and Distribution. Divisional Mergers.

Joint Ventures are also used for: Acquiring technology in the core business Reducing financial risk

Other motives for International JVs Taking products to foreign markets

Following customers to foreign markets Investing in “markets of the future”

Bringing foreign products to local markets Complementarily of interests

Diversification

Requirements for International JV Success

Testing the Strategic Logic Partnership and Fit

Complementary Needs Acquisition of capabilities due to learning Corporate culture compatibility

Shape and Design Strategic freedom Managerial roles

Requirements for International JV Success

Doing the Deal Trust vs. Legal considerations

Making the Venture Work Managing Cultural Differences Flexibility