7 The Design and Management of International Joint Ventures Key Points International Joint Ventures Why Companies are Creating International JVs Strengthening.

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Presentation transcript:

7 The Design and Management of International Joint Ventures Key Points International Joint Ventures Why Companies are Creating International JVs Strengthening the Existing Business Other Motives for International JVs Requirements for International JV Success

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 ProductsNew 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