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MKT630 - International Marketing
GDB NO. 3
Total Marks 5


Starting Date Monday, June 13, 2011
Closing Date Tuesday, June 14, 2011


Question:
In recent years it has been seen that number of cross-border joint ventures are increasing. But it is dangerous to ignore the fact that the average lifespan for alliance is only about seven years, and nearly 80% of joint ventures ultimately end in a sale by one of the partners. List only the four reasons for the failure of cross-border joint ventures.


Objective:
To know the different modes of entry into international marketing
To know the cross-border joint ventures
To know the basis for joint ventures
To know the factors that influences the joint ventures

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Replies to This Discussion

Reasons for Failure Cross-border alliances between businesses fail for a variety of reasons, and often several reasons operate simultaneously . Typical reasons for
failure include :
•Unrealistic expectations
•Hastily constructed strategy, poor planning, unskilled execution
•Inability to unify behind a single macro message
•Talent is lost or mismanaged
•Culture clashes between the partners go unchecked
•Lack of trust between managers from the previously separate firms
•Unexpectedly high costs associated with the transition and co-ordination
SOLUTION MATERIAL

WHY JOINT VENTURES FAIL

Joint ventures fail for many reasons. In addition to those mentioned above, other factors include: disappearing markets, lagging technology, partners' inability to honor the contract, cultural differences interfering with progress, or governmental and macroeconomic de-stabilizing factors. However, many of these reasons can be eliminated with careful planning.

Inconsistent government interference is a difficult problem to overcome. For example, the United States government has long maintained restrictions against exporting certain technologies to selected foreign countries, such as those utilized to produce jet engines and computers. These restrictions place American companies at a competitive disadvantage, since other countries do not place similar constraints on their businesses. Thus, American companies are unable to engage in certain joint ventures.

Companies that engage in military-oriented joint ventures are often subject to unanticipated risks. The federal government may allocate funds for the production of certain weapons, sign contracts with manufacturers, and then discontinue the project due to changing needs, budget restrictions, or election results. Such government actions are a common risk to these joint ventures. They introduce an element of insecurity into the projects, which is something that partners try to avoid as much as possible.

Another problem with joint ventures concerns the issue of management. The managers of one company may be more adept at decision making than their counterparts at the other company. This can lead to friction and a lack of cooperation. Projects are doomed to failure if there is not a well-defined decision-making process in place that is predicated on mutual goals and strategies.

For example, if two auto manufacturing companies engage in a joint venture, it is imperative that they be similar in their structures and approach to business. If one company relies heavily on nonunionized workers who operate in an autonomous team-building environment, and the other comprises a unionized workforce oriented toward assembly line production in which workers specialize in narrow tasks, the chances of success are poor. The workers at the first plant would be prone to making decisions and solving problems on their own, which would reduce the levels of bureaucracy needed to manage production. Conversely, the workers at the second plant would likely defer to higher-level managers to make decisions. The differences would be difficult to overcome and would lead to higher costs and slower production. While the differences could be alleviated through planning before the actual manufacturing process began, the time expended might lead to technology gaps and other impediments to earning a profit. Most companies engaging in joint ventures would prefer not to deal with such problems after a project was implemented. Rather, they aim to eliminate them through careful planning. Doing so increases profits in the long run, which is one of the many benefits of successful joint ventures.
Solution:

Joint venture

When two or more firms agree to work together and create a jointly owned but separate firm to promote their mutual interests

International franchising commonly involves “Master Franchising” and joint-ventures In a joint venture, two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control.

 

Cross border Joint venture failure:

Factors of joint venture failure (write only 4 factors)

 

    Strategic Vision: The partners must have strategic visions which can support for joint ventures
    Lack ness in Top Management commitment
    One of the partners is not participating actively i.e. the one partner who takes primary responsibility is not working
    Wrong negotiations
    Failure of Delegated arrangement – One of the partners fails in delegation of management to the joint venture’s executives
    Lack of organizational support
    Lack of capabilities of the local partner
    Lack of support by Staff of local partner
    Cultural differences

International Joint Ventures fail due multiple factors some of them are I) Selection of wrong partners, II) Cultural differences, II) Poor / Unclear leadership (who will control the operations of the project), III) Conflict over management style and carport culture, IV) Lack of comprehensive planning, V) Insufficient resources (usually capital), VI) Deficiency of commitment and trust between the parties, VII) Over estimation of revenues/profits (in respect of time and quantity)  

MKT-630

International marketing 3rd GDB

 

 

 

Finance arrangements are not done between the parties.

Specific obligations are not be set

Appointment of directors is not properly with the permission of parties

Conduct of the affairs of the JV Company (Notice, Agenda, General Meetings, Circular Resolutions, Accounting and audit)

Transfer pricing and buy/sell agreements

Share transfers

Distribution / Dividend Policy

Name/ Brand licensing agreement

Confidentiality/ Secrecy

Period of agreement are not specified by the parties.

Termination

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