Ch 7 International Joint Ventures Flashcards
IJV def
created by the investments of two or more parent companies
separate legal organization identity
jointly controlled by its parents
parents equally independent of each other
at least one parent is located outside the country where the IJV operates
4 strategies for internationalization?
Lessassy and Jolibert
Franchising
Direct acquisition
Joint venture
Operating a subsidiary
Reasons why both partners may want to take part in IJV
greater market power by combining resources
reduce risk by sharing risk
reap economies of scale
avoid expensive competing
Why one partner may want IJV
benefit from transference of technology
acquire management systems
regain competitive edge for a failing company
symbolic benefits
first stage in taking over and controlling subsidiary
why foreign partner wants IJV
meet official requirements for doing business in the country
learn about local markets and develop customer networks
gain access to local resources
why government wants IJV
encourage foreign investment
foreign partner contributes
international know-how and access to international connections
international reputation
access to international product markets, labor markets, finance, technology, resources, and distribution
local partner contributes
access to local contacts, including local government
local reputation
knowledge of government regulations and local culture
access to local product services, labor markets, resources, and distribution
why IJV not always a good choice
do not expect to receive benefits
not prepared to make contributions necessary
risks unjustifiable
not able to make necessary investment
lack of experience and knowledge of country
not prepared to meet government regulations
do not want to share control
alternative arrangement more profitable
finding appropriate partner requires 2 things
investment and research
strategic fit means compatibility in 4 dimensions
compatibility in interest
resource complimentarity
compatibility in size
compatibility in time-scale
what does trusting mean
understand the others needs and interests and feel competent to predict their behavior in routine circumstances
does trusting involve emotional committment
not necessarily
possibilities of partnership success increase when there are compatibilities and can also agree on…
priorities in planning and implementing
contractual details
development stages
design of management style, structure, and systems
systems for communicating
criteria for evaluating IJV development and success
trust HAS to be found
between partners
