Transcript Diapositiva 1

UNIVERSITY OF PARMA
DEPARTMENT OF ECONOMY
PROJECT WORK IN COOPERATION AND COMPETITION AMONG
FIRMS
Prof. Alessandro Arrighetti
Dibuono Giuseppina
Sznida Edina
Er-Raji Loubna
Academic year 2013 - 2014
WHAT IS A JOINT VENTURE?
A joint venture is a strategic alliance where two or more
parties, usually businesses, form a partnership to share
markets, intellectual property, assets, knowledge, and, of
course, profits, in order to reach a specific task. This task
can be a new project or any other business activity. Joint
ventures can be rapid and very effective mechanisms for
strategic growth.
Joint ventures
developed countries
developing countries
FEATURES OF JOINT VENTURES:
Joint venture is a special partnership without a
firm name;
 The members of joint venture are known as coventures;
 Joint venture is a temporary business activity;
 In joint venture, profits and losses are shared in
agreed proportion;
 The establishment of joint ventures requires the
presence of important factors.

HERO MOTO CORPORATION
HONDA MOTOR
COMPANY of
Japan
India’s HERO
GROUP
WHAT DO THEY WANT TO DO?
quality, satisfaction and extensive growth;
•Launching new products and innovating existing products;
•Increase of investment on distribution channel;
•Reengineering;
•Coordination of information technology (IT) .
•Ensuring
HERO MOTO CORPORATION
fuel efficiency
pollution control
quality
KEY FACTORS FOR MANAGING JOINT
VENTURES
Creating a successful Joint Venture entails taking seven steps:
1.
2.
3.
4.
5.
Identify: Identify strategic logic and drivers;
Valuate: Valuate each firm’s product architecture;
Construct: Construct an effective operating structure;
Define: Define the new business model;
Create: Create an economic system that will work for
all;
6. Ensure: Ensure that all negotiations are win-win;
7. Shake hands: Shake hands and lock arms.
SWOT ANALYSIS OF HERO MOTO CORPORATION:
JOINT VENTURES FROM DEVELOPED
AND DEVELOPING COUNTRIES
unstable
unsatisfactory performance
BUT WHY?
PROBLEMS RELATED
TO
MULTINATIONALITY
•
•
Often: Joint Ventures involve Multinational
Companies
Differing basic objectives of the two types of
firms
1.
EXPORT RIGHTS: MNC prefers not to allow the
JV to export products into markets already
served. For the developing country
the
venture is considered as a vehicle for entering
into foreign markets.
2.
DIFFERENCES IN PARTNER SIZE: Local
partner is probably smaller. But, requirement
of capital infusion may occur for a developing
country.
BUT HOW?!
OWNERSHIP AND CONTROL PROBLEMS

Sometimes the owners’ attitude changes
If the local partner is a family corporation, the
patriarch may be succedded by other relatives
with different interests.
CULTURAL PROBLEMS
Managements
are often from
different cultures

MNC executives
might considered
to be ‘arrogant’,
’narrow minded’.

For the
developing
country partner
deeply
embedded
corruption can
be normal.
PROBLEMS RELATED TO DYNAMIC
CHANGES IN THE RELATIONSHIP
Ever changing environment!
 For example: learning -> modification of
partners’ views

What have you
done for me
lately?
Are the
contributions
offered by you
enough?
RISKS IN DEVELOPED AND DEVELOPING COUNTRIES
India
•lack of preparation
•more
like a continent
•changing
or
unpredictable
regulations
•inflation
and with lack
of fiscal discipline at
the government level
DEVELOPING COUNTRIES
Growing market opportunity
COMPLEXITY
Crude complexity
Effective complexity
A function of the irregularity and
hence unpredictability of a system of
Elements and relationships
Complex organizations
And complex environments
JOINT VENTURES IN DEVELOPING
COUNTRIES(A.B. SIM AND YUNUS ALI)
The rates of instability and unsatisfactory performance of joint ventures are
relatively higher in developing countries than in developed countries
●
●
●
●
●
●
●
●
●
Firm size;
Extent of multinationality;
JV experience;
Extent of linkages;
Relatedness;
Resource complementarily;
The management(control, cooperation );
Technology;
Culture.
JOINT VENTURES
Developing countries(DG)
Developed countries(DC)
Larger parent firm'size
●Multinational
●Joint venture experience
●Greater vertical linkages
●Higher technological level
●Higher psychic distance
●Higher percentage of export
●Oriented firms
●
NIE
Export-oriented
LDC
Closer psychic
distance
●Better cooperation
●
INVESTING IN CHINA VIA JOINT
VENTURES
●
●
●
●
●
●
●
Why foreign companies have the need for a
Chinese Partner?
Less expensive
The nature of industry sectors
Capabilities of the Chinese partners
Consumer behavior
Brand
Language
Supply chain
Regions of investment in China
Frequency
%
Special economic
325
zones
Economic and
226
technical development
zones(14 coastal cities)
38.7
Beijing
5.0
42
26.9
Other regions of China 247
29.4
Total
100.0
840
Source of JV investment in China
Frequency
%
Hong Kong and
Macao
USA
658
78.3
59
7.0
Japan
55
6.5
Europe
31
3.7
Southh East Asia
30
3.6
Australia and New
Zealand
Total
7
.8
840
100.0
Industry divisions for JV investments
in China
Agriculture and related services
Frequency
5
%
.7
Fishing and trapping
Mining
Manufacturing
Construction
Transportation and services
10
19
408
40
20
1.5
2.8
59.9
5.9
2.9
Wholesale trade
Retail trade
Finance and insurance
Real estate
Business services
Educational services
Accommodation
Other
Total
26
2
2
3
23
1
66
56
681
3.8
.3
.3
.4
3.4
.1
9.7
8.2
100.0
WAHAHA MIKADO JOINT VENTURE COMPANY
Danone
In 1996 Danone bought a 51% stake in a joint venture (JV) with the founder of Wahaha, Mr.
Zong Qinghou
●
2006-> the turnover of the joint ventures contributed €100 million to the top line of Danone, and
in excess of 5% of Danone's total net profit.
●
2007->the business had grown into 39 joint venture entities, and the total injected capital
amounts to US$131 million.
●2007->Danone accused Wahaha and Mr. Zong of trademark infringement for manufacturing
and marketing beverage products under the same Wahaha brand outside of the JV
●2009-> Danone Group sold their 51% stake in Wahaha Group to Wahaha Group for an
estimated $500 million
●
REASONS FOR THE FAILURE OF THE JV
According to Zong:
"Most of the decisions had to be approved by Danone board
members at board meetings once every quarter. How you want me
to run the business under such conditions?"
"Whenever we wanted to expand the business, they said no. They
refused to invest more. But they let us spend the money and then
when the ventures made money they wanted in.“
An old joke begins with a conversation between a chicken and a
pig. The chicken suggests: ‘Let’s get together to form a
breakfast business. I’ll supply the eggs, and you can supply the
bacon.’ The pig responds: ‘Well, I have a problem with that,
since you can furnish the eggs and go on living, but that’s not
true with my supplying the bacon!’ The pig concludes, ‘Someone
wins and someone loses in any joint venture!’
REFERENCES:
IMA
CFO CONNECT (2014), “The HERO re-born”;
http://www.cfoconnect.com/title_detail.asp?art_id=1055&cat_id=10;
NDTV PROFIT NSE (2013), “Hero MotoCorp Ltd.”;
http://profit.ndtv.com/stock/hero-motocorpltd_heromotoco/reports;
Mba School (2013), “SWOT ANALYSIS HERO motocorp”;
http://www.mbaskool.com/brandguide/automobiles/1196-heromotocorp.html
London Business School (2013), Making Joint Ventures A
Strategic Success
http://www.forbes.com/sites/lbsbusinessstrategyreview/2013/11/2
6/making-joint-ventures-a-strategic-success/
REFERENCES:





http://italiaindia.com/index.php?/news/category/jv
Potential risks to international joint ventures in developing economies: the
Ghanaian cunstruction industry experience. Ahiaga-Dagbui, D.D., F.D.K. Fugar,
J.W. McCarter, E. Adinyira
International Joint Ventures in Developing Countries. Robert Miller, Jack Glen,
Fred Jaspersen, Yannis Karmokolias
http://www.sciencedirect.com/science/article/pii/S0969593107001400
Africa: Now Open for Business - Weighing the Opportunities and Risks.
http://www.alixpartners.com/en/Publications/AllArticles/tabid/635/articleType
/ArticleView/articleId/582/Africa-Now-Open-for-Business.aspx
http://www.eurasiagroup.net/pages/top-risks-2013
Index of Economic Freedom: Promoting Economic Opportunity and Prosperity by
Country
http://www.heritage.org/index/
REFERENCES:
•Cooperative
Strategy: Managing Alliances, Networks, and Joint
Ventures, John Child, David Faulkner,Stephen Tallman, chap. 16,pag
359
•Multinational Joint Ventures in developing countries, Paul W.
Beamish,chap.2,8
http://www.chinaeconomicreview.com/node/24126
http://www.economist.com/node/9040416
http://www.china-briefing.com/news/2009/10/27/china-jointventures-as-a-strategic-investment.html
http://www.danone.com/wps/portal/jump/DanoneCorporateIntl.Pres
s.Commun2004PressReleases?
http://www.thestandard.com.hk/news_detail.asp?pp_cat=20&art_id
=48399&sid=14362324&con_type=1&d_str=20070706&sear_year=
2007