Category: Joint Venture

Why is it important for Woolworth’s Safeway to have strategic alliance (Joint Venture) with Caltex?

The main factors that conditions the importance of the strategic alliance between Woolworth’s (Safeway) and Caltex is the need, stressed by scholars like Dyer et al. (2001) and Kale et al. (2000), to be able to compete with the other market players under the conditions of growing competition and the necessity to reduce costs and prices to remain competitive (Dyer et al. 2001, p. 38; Kale et al., 2000, p. 220). In other words, the main point that made it vital for Woolworth’s (Safeway) and Caltex to have the strategic alliance is their desire to catch up with the market and not to stay behind such competitors as Coles and Shell Australia. Further on, the alliance between Woolworth’s (Safeway) and Caltex can be called a horizontal one as it united two potential competitors in the fuel and retail consumer goods trade in Australia.

According to Koka and Prescott (2002), there are horizontal and vertical strategic alliances. The former are made up by the potential competitors that are on the same stage of the supply chain, while the latter are the unities of manufacturers and suppliers in which the parties have unequal rights and benefit distribution (pp. 797 – 798). Drawing from this, the strategic alliance between Woolworth’s (Safeway) and Caltex is a horizontal one as both companies enjoy 50% of participation and subsequent benefits from the sales. Such a horizontal alliance is beneficial for both companies, as Woolworth’s (Safeway) and Caltex obtain additional promotion through the stores and fuel stations of each other, and can enhance each other sales through discount programs connecting the customers’ purchases in Woolworth’s (Safeway) stores with petrol discounts and vice versa.

Why is Cooperative strategy important to Woolworths when competing in the 21st century competitive landscape?

The importance of the cooperative strategy in the 21^st century competitive landscape cannot be doubted. Generally defined by Johnson (2009) as “a strategy in which firms work together to achieve a shared objective”, cooperative strategy allows the companies adopting it to unite their effort, funds, and resources, both material and human, for being more competitive in the permanently changing and rather liberalized international market (Lin, 2008, p. 766; Naughton, 2006, p. 170). According to Phoocharoon et al. (2001), “cooperative strategies are based on two crucial strategic variable choices of the competitive strategy and the use of various cooperative arrangements” (p. 7). Drawing from this, a cooperative strategy is the set of techniques the companies plan to use to remain competitive combined with the number of tools that would facilitate their joint work.

Naturally, Woolworth’s (Safeway), as one of the leaders in the Australian retail trade market, can considerably benefit from the use of the cooperative strategy in the 21^st century (Woolworth’s, 2009). In the era of globalization and elimination of boundaries between countries and their markets, the cooperative strategy is the tool that allows Woolworth’s (Safeway) to still remain competitive and influential in the Australian market (Naughton, 2006, p. 170). While its major competitors choose to either outsource their production facilities or to reduce production costs, and respectively prices, in some other ways, Woolworth’s (Safeway) obtains the perfect promotional and developmental opportunity from using the cooperative strategy forming the strategic alliance with Caltex (Caltex, 2009; Woolworth’s, 2009). By this, Woolworth’s (Safeway) widens its promotional and sales scopes and can hope to remain competitive using the joint resources of its strategic alliance with Caltex (Woolworth’s, 2009).

Did Woolworth implement a competition response strategy? (In Australia, Coles and Shell were forced into an alliance involving petrol vouchers by the prior Woolworths and Caltex move into petrol offers).

As scholars like Dyer et al. (2001), Kale et al. (2000), Gans (2007), and Johnson (2009) argue, there are four major types of cooperative strategies. They include the forming of the vertical and horizontal strategic alliances, the use of uncertainty reducing, competition reducing and competition response strategies. The latter strategy is the most widely used technique by the business companies in the situations when their major competitors implement certain competitive activities that attack these companies or threaten their market interests (Dyer et al. 2001, p. 41; Kale et al., 2000, p. 230). Interestingly, strategic alliances are viewed by Naughton (2006) and Phoocharoon et al. (2001) as the tools the companies implement while using the competition response strategies (Naughton, 2006, p. 181; Phoocharoon et al., 2001, p. 18).

Thus, in relation the strategic alliance between Woolworth’s (Safeway) and Caltex, this alliance cannot be classified as the competition response strategy used by both companies to catch up with the fast developmental pace of their major competitors in the market of Australia, as far as Coles and Shell Australia were the companies that had to form an alliance forced by the strategic Woolworth’s (Safeway) and Caltex move. In this case, the strategy used by Woolworth’s (Safeway) can be classified in no other way but as the competition reducing strategy as it was aimed at obtaining the advantaged market position as compared to Coles and Shell Australia. Being one of the cooperative strategies, the competition reducing strategy has the attack of the competitors, but not the mutually beneficial cooperation, as its main goal. At the same, Coles and Shell Australia implemented the competition response strategy after the Woolworth’s (Safeway) forming an alliance with Caltex.

What risks are Woolworths likely to experience as the company uses cooperative strategies (in relation to their Joint Venture with Caltex)?

Needless to say, apart from all the positive influences of the cooperative strategy use upon the business development, this strategy displays a number of limitations that might lead to the companies involved in the cooperative strategy and a strategic alliance taking risks while cooperating with each other. As Koka and Prescott (2002) argue, there are four major areas of risks for the companies adopting the cooperative strategies. These areas can be listed as follows:

1. Opportunistic behavioral patterns of one of the parties to the strategic alliance reflected in the different understanding of the contract provisions and use of the benefits of the alliance;
2. Misperception of the potential contributions and overall usefulness of one of the partners to the strategic alliance that might often result in one party acting for the alliance’s benefit, while another one only enjoying the work’s results;
3. Failure to actually participate in the alliance by the company’s funds and resources;
4. Inequality of investments and resource contributions of the parties to the alliance (Koka and Prescott, 2002, pp. 799 – 800).

Basically, these are the risks that Woolworth’s (Safeway) is likely to experience as the result of its use of the cooperative strategy and forming the strategic alliance with Caltex (Dyer et al. 2001, pp. 42 – 43). To deal with those risks, Woolworth’s (Safeway) needs to either develop firm partnership relations with Caltex or provide the regulation of those risks in the alliance contract, according to which any party failing to fulfill its contractual functions should be held liable for the losses of the alliance and the associated losses of another party to this contract.

Reference List

Caltex 2009, What Drives You, Official Web Site. Web.

Dyer, J et al. 2001, ‘How To Make Strategic Alliances Work’, MIT Sloan management review, vol. 42, no. 4, pp. 37-43.

Gans, J 2007, ‘ Submission to ACCC Petrol Pricing Inquiry: Assessing the Impact of ‘Shopper Docket’ Schemes’, CoRE Research Pty Ltd, pp. 1 – 18.

Johnson, R 2009, Cooperative Strategies, Faculty Staff. Web.

Kale, P et al. 2000, ‘Learning and Protection of Proprietary Assets in Strategic Alliances: Building Relational Capital’, Strategic Management Journal, vol. 21, no. 2, pp. 217 – 237.

Koka, B and Prescott, R 2002, ‘Strategic Alliances as Social Capital: A Multidimensional View’, Strategic Management Journal, vol. 23, no. 9, pp. 795-816.

Lin, C 2008. ‘A cooperative strategy for a vehicle routing problem with pickup and delivery time windows’, Computers and Industrial Engineering, vol. 55, no. 4, pp. 766 – 782.

Naughton, D 2006, ‘Cooperative Strategy Training and Oral Interaction: Enhancing Small Group Communication in the Language Classroom’, Modern Language Journal, vol. 90, no. 2, pp. 169 – 184.

Phoocharoon, P et al. 2001, ‘Cooperative Strategy to Strategic Competitiveness through International Joint Ventures between ASEAN and EU Companies’, CAS Discussion paper, no. 33, pp. 1 – 23.

Woolworth’s 2009, The Fresh Food People, Official Web Site. Web.

The purpose of creating a joint venture between Jarir Bookstore and Mobily Telecommunications is to produce a new mobile device. Jarir Bookstore is the largest retailer of electronics and books in Saudi Arabia. In turn, Mobily is a telecommunication services company, offering the Internet and mobile telephony. In cooperation, these companies can produce a new device for reading books, making calls, and having access to the Internet. The device will have a touchscreen interface, an integrated camera for calls, and a range of reading options. It will use a mobile operating system to install the applications from both companies. This device will look like a mobile computer with a focus on providing customers with convenient reading opportunities.

Compared to smartphones and e-book readers, the proposed device will integrate the access to the Internet and electronic books. Today, a mobile phone is central for many people, who use it daily, but reading from the screen is not always comfortable. Customers need an integrated solution to their routine tasks. Therefore, the cooperation of Jarir Bookstore and Mobily seems to be especially effective in meeting their needs and exceed expectations. Among the distinguishing features of the device, there will be a bigger screen size, high-quality, increased battery life, and attractive prices. One of the versions of the product can be made waterproof, which is useful for its safety and a longer period of use. In the market of electronics, this device will be more valued due to its faster navigation and smooth experience, allowing connecting learning, business, and recreation.

The key benefit of the proposed product refers to a flexible format of reading and using the online resources. For example, if a person needs to read a boom and easily shift to the work-related discussion in social media, the device will be helpful. Students who need to read a lot of books and articles can also upload them to their mobile devices from Jarir Bookstore. In addition, the joint venture will allow making the prices affordable for customers. Namely, there can be several tariffs for the users of Jarir Bookstore and Mobily Telecommunications. The great variety of books is one more beneficial feature of the product.

The target market for the identified product is the electronic and mobile devices market. Currently, users have the products of Amazon and Apple that are expensive and have relatively low-resolution screens. The customers who purchase similar products have a limited choice of devices, which can be extended by means of introducing a new product. Accordingly, people engaged in business, students, and those who prefer convenient solutions will compose target audiences. Each of them can be offered a slightly different option to meet their needs. For example, a waterproof version can be delivered to those who love reading by the pool or in the bath. Premium materials can be used for more expensive options, targeting business persons.

The production and manufacturing of the proposed product will start with signing a joint venture agreement and the identification of contributions each of the partners will make. After that, the design, features, and costs of the product will be discussed. One of the factories located in Saudi Arabia will be contacted for placing the order. The materials for the device, including plastic, microchips, and so on, can be shipped from other counties, such as the US or UAE. It is expected that the production period will take approximately one year.

A brief overview of the case

The case involves the Charles River Laboratories (CRL) Company and the ALPES Company considering entering into a joint venture. This involves the senior vice-president, Dennis Shaughnessy presenting a report regarding this before the chief company leadership. The key aim of the two companies entering the joint venture is to engage in the production and pre-incubation of SPF eggs for international agricultural vaccine companies in Mexico which would serve in enabling the two companies to realize growth. This joint venture involves the Charles River Laboratories Company investing in the venture, two million U.S dollars in cash to fund the operations. On the other hand, the ALPES Company will have to make a contribution in kind in terms of facilities. Each company will have to obtain a 50 percent share from the joint venture. However, this venture can not be entered into before some issues are resolved. The CEO of CRL as well as some members of the board raises some issues that make entering into the joint venture not to be easily realized.

Analysis – Problems/Major issues identification

Several issues and problems are raised concerning this joint venture. Among these issues and problems are the ones that are raised by the chief executive officer of the company (CRL). The CEO sees that the joint venture would distract SPAFAS – specific antigen-free avian services as it went on expanding at a rapid pace in the United States of America. Another issue that is presented is the idea that investing in Mexico is a risky initiative to be taken by the company. This is for the reason that, in Mexico, there is some great instability regarding the changing currency and the uncertain market.

More so, concerns are directed towards the idea of partnering with a family-owned company. This family-owned business was not making a new investment of its own, but instead has full reliance on the capital of the Charles River Laboratories Company. Another issue, which is a final issue, is that, in the course of time, in a period of more than fifty years, the CRL had never attained any success in conducting business in Mexico.

The issues that are raised by the board members include the concerns about the complex organizational structures of Grupo IDISA, the large number of transactions between ALPES, IDISA and other Romero companies, and lack of transparency of a company that only held board meetings once a year and tended not to have strategic plans, the operating budgets, and the meeting minutes among other formal corporate documents which are always used by the U.S public companies.

The issue of the joint venture comes about when Romeros, owners of the ALPES Company, want to obtain the required funds to engage in the expansion of their business. CRL rules out the idea of lending money to this company as well as the idea of being minority shareholder in the company. Eventually it is considered that the two companies enter into a joint venture. Romero, points out that, if a fruitful consensus is not reached by both of them, then, his company will have to consider partnering with Lohmann-Tierzucht International of Germany which is a primary competitor to SPAFAS.

By ALPES entering into a joint venture, it will have to be able to increase the production to meet the ever-increasing demand and also to be able to meet the international quality standards in order to serve the European countries which were very strict on these standards. More so, on the other hand, CRL would be able to obtain more revenue from engaging in the production and distribution of SPF eggs that were in high demand in the international market. Also, by engaging in a joint venture, the CRL Company would avoid much competition from Lohmann-Tierzucht International of Germany which is a primary competitor to SPAFAS, if otherwise allowed to partner with ALPES. This will also serve to open up an opportunity for both the companies to operate on the international market. By CRL accessing the international market, it would improve its revenues to as much as 50 million US dollars from the 25 when it operates from within.

Developing Alternatives

Some consequences would come out of the two companies engaging in the joint venture or failing to enter the venture. Considering the issues and problems above, there tend to be more benefits that will have to come out of the joint venture than the losses. The ALPES Company will have to be able to obtain the necessary funds to engage in the expansion of its operations to meet the rising demands of the customers in the international market. On the other hand, the CRL Company will be able to increase its revenue and increase its base in the international market. More so, the CRL Company will have to gain from this company in that the company has been in the business operations in regard to the SPF eggs, especially in Mexico and it is well established and there will be not much effort to be carried out in terms of product promotion. More so, by the two companies carrying out the operations jointly, they will have to benefit from one another by employing a wider range of the management skills. These benefits will not be there if the joint venture is not entered in. The CRL may be affected negatively if the ALPES Company enters a joint venture with Lohmann-Tierzucht International of Germany which is a primary competitor to SPAFAS.

Recommendations, justifications and implementation plan

It is recommended that the two companies enter into a joint venture in order for both of them to enjoy growth in the market. There are market opportunities for the two companies. The ALPES Company is being faced with the ever-increasing demand for SPF eggs and the need to improve the quality standards to have access to the European market. On the other hand, the CRL Company has funds available and as well wants to expand in the international market. However, there are issues that come up that may hinder entering the joint venture on the side of CRL. The concerns about the complex organizational structures of Grupo IDISA, the large number of transactions between ALPES, IDISA and other Romero companies among other concerns by the CRL board members brings in complications. In regard to this, Dennis Shaughnessy has the responsibility to ensure that these issues are made clear to the board members to clear any doubts. This can be carried out by trying to establish the nature organizational structures of Grupo IDISA, and the transactions between ALPES, IDISA and other Romero companies

Since Shaughnessy has had an opportunity to interact directly with the Romero family and since he knows much about the family through his interaction with it more than any member of the board; he needs to make the necessary efforts to enable these members to have the right picture of this family like the one he has.

Shaughnessy should also make the CEO to be aware of the befits of entering in a joint venture by investing 2 million US dollars and the projected returns from this amount where it is projected that the joint venture will have produce sales-worthy 3 million in the year that will follow and more than doubling by year four. He should make the CEO to be aware of the fact that, by CRL accessing the international market; it would improve its revenues to as much as 50 million US dollars from the 25 dollars when it operates from within. Therefore this will serve to reduce his worries about the joint venture distracting SPAFAS – specific antigen-free avian services which he sees as expanding at a rapid pace in the United States of America.

In the implementation plan, there will be investing two million in cash in a new joint venture that will be located near Mexico City and this will be in exchange for 50 percent of the company’s equity. The partner, ALPES would make a contribution of the existing SPF and commercial egg (for vaccine) assets it has to the joint venture company for its 50 percent equity interest. There will be sharing of the profits equally by the two companies. This investment will be aimed at improving the quality of the products as well as raising the level of production to meet the demand.

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Introduction

Business internationalization has become an integral part of international trade that also spurs the globalization process (Rozkwitalska, 2010). Although trade and international business have effectively enabled the development of partnerships among countries to stabilize economically and strengthen their trade relations, organizational and national cultures existing between two nations influence trade activities.

Despite some recorded success, national and organizational differences in culture greatly influence joint ventures (Rozkwitalska, 2010). The United States and Poland is a perfect example of countries that have been trading partners through joint venture systems. In this viewpoint, this essay seeks to analyze the existing organizational and national cultures in the Polish-US joint venture.

Cultural Differences, Risks, and difficulties in Poland Compared to US

Business analysts perceive Poland as a nation that has survived through an old communist system with communist ideologies that have frequently discouraged quality performance, risk-taking, and completions among organizations (Rozkwitalska, 2010). Most of the Polish organizations have a culture of institutional ethnocentrism to maintain their communist ideologies, have a tendency of discouraging human resource practices, strategic orientation focused to the central offices, and acquisitive culture of maintaining old traditions in succeeding offices (Rozkwitalska, 2010).

Polish organizations have insufficient knowledge of selecting and utilizing of expatriates, and insufficient formal communication techniques. Nationally, individuals believe in communist ideologies of social collectivism rather than individualism, uncertainty avoidance, power distance or hierarchical order and gender egalitarianism.

Hofstede and the 7d Dimension Models

Hofstede discovered four major cultural dimensions associated with cultural differences in power distance, individualism and collectivism, uncertainty avoidance, and the masculinity and femininity aspects. Power dimension refers to the degree to which few powerful individuals influence institutional members and organizations to accept and practice hierarchical order (Hofstede, 2011).

Individualism is the practice where certain individuals uphold the perspective of personal autonomy, and collectivism is the behavior of individuals acting depending on communal social principles that bound them. Investors with Individualist behaviors protect their autonomous stand and value their personal beliefs, personal independence, and personal pleasure.

Individualism ideology is common among American investors and businesspersons, while collectivism is practical in Poland investors and their organizations (Hofstede, 2011). Uncertainty avoidance is the notion of living in a cultural fear of falling into threats of risks and uncertainties and individuals tend to avoid taking risky engagements (Hofstede, 2011). While American organizations and individuals believe in deviant actions and beliefs, Polish businesspersons rely on developing and adopting formal laws, stringent codes of behaviors to protect them from incurring uncertainties. Masculinity and femininity dimension is the notion that cultural differences involve distribution of social gender roles.

Similar perceptions exist in the 7d cultural dimensions model of Trompenaar, which include universalism verses particularism, individualism verses collectivism, neutral verses affective, specific verses diffuse, achievement verses ascription, internal verses external control and the past verses present (Hofstede, 2011). Whereas the Polish believe in universality, the Americans dwell in particularity. While American entrepreneurs believe in specificity, their Polish counterparts believe in social diffusion and concern for each other (Hofstede, 2011).

The Americans are effective, while the Polish are neutral and fear expressing their emotions. The Americans normally target achievement and success, while the Polish ascribe to life conditions (Hofstede, 2011). While the Americans believe on internal control, the Polish dwell on environmental (external) control.

Polish Workers and the US Management Styles

Polish employees view the notion of democracy that Americans managers practice as a risky business engagement since the hierarchical order of power is essential in organizational order and sanity. According to Rozkwitalska (2012), Polish workers believe that American managers are risking their businesses since superiority and hierarchical positions instill organizational order, make the decision-making process easier, and organizational planning.

Polish workers have the collectivism perception that makes them believe that social cohesion and populist ideologies are important within organizations (Rozkwitalska, 2012). Since American expatriates act contrary to the national and organizational cultures of Poland, polish employees view American expatriates as inexperienced managers and regularly distrust them.

Recommendations to the US Expatriate Managers

To have a significant breakthrough in Poland, American expatriates must adapt to the communication behavior of Polish people before considering imparting corporate changes (Rozkwitalska, 2012). Democracy is practicable even in organizations with hierarchical order and for the American expatriates to maneuver in Poland they must practice power and hierarchical organizational arrangement while they instill democracy in their management (Rozkwitalska, 2010). Just as the Polish organizations fear and avoid uncertainty, American managers must also understand that risky businesses are harmful to corporate growth.

Polish Cultural differences as an advantage

A great ideology, which may effectively improve the chances of survival for organizations managed by both the American managers and Polish managers, is the perception of uncertainty avoidance, which Polish individuals, organizations, and societies are keenly maintaining (Rozkwitalska, 2010). For firms to remain competent and survive the business world in the near future, risk management and uncertainty avoidance are imperative. As part of risk avoidance, according to Rozkwitalska (2010), Polish managers tend to offer high employee retention through the lifetime employment strategies. It is very important for American firms to understand that retention of key talents of an organization makes companies stable.

Conclusion

International trade and business internationalization are increasingly becoming an effective approach for the multinational or transnational firms. Nonetheless, managers must understand that organizational, communal, and national cultural differences between two nations are normally influential in business management and corporate practices. Adopting, adapting, and exchanging of important cultural beliefs about corporate governance are important facets for international trade partners. American entrepreneurs can emulate some cultural aspects of the Polish such as uncertainty avoidance that also fosters effective employee retention.

References

Hofstede, G. (2011). Dimensionalizing Cultures: The Hofstede Model in Context. Online Readings in Psychology and Culture, 2(1), 1-26.

Rozkwitalska, M. (2010). Barriers of Cross-cultural Interactions According to the Research Findings. Journal of Intercultural Management, 2(2), 37–52.

Rozkwitalska, M. (2012). Accepted and strong organizational culture in multinational corporations. Journal of Intercultural Management, 4(3), 5-14.

Introduction

A joint venture (JV) is a business partnership where two or more business partners agree to join together only for a period of time to work on a project. In this kind of venture, the partners agree on the amount of power sharing and divide the expenses and assets amongst the partners in the joint venture.

The business partners must agree and sign legal documents that are used as proof of their venture together and they agreed powers over the project.

A joint venture can be either equity-based or contractual. It may be on the long term in working on the project or on a short term basis for the realization of the project’s objective. The underlying facts and characteristics are the major factors that determine the nature of any particular joint venture. In addition to that, the nature of the joint venture depends on the resources and wishes of the involved parties.

Thesis Statement

In reference to the given cases study, this paper will conduct a strategic analysis of the situation presented in the case study and thereby give recommendations.

Discussion

India is the twelfth largest economy at market exchange rates and the fourth largest in purchasing power. According to economic reforms, it is the second fastest growing large economy in the globe. Today the emerging markets in India have become the most exciting in the world. Industrial licensing requirements have been substantially reduced by policy reforms.

Joint venture is the most preferred corporate entity by companies in India and all around the world. The joint venture companies in India are broadly divided into two types which are; financial collaborations which involves the foreign collaborations that have taken place in India.

The other type of joint venture in India is Technical collaboration which basically involves the licensing of technology by the foreign collaborators based on the compensation. There being no separate laws for joint venture in India, operations in India are set up by foreign companies by entering into collaborations with Indian partners.

The joint venture between Eli Lilly Company and Ranbaxy Laboratories was one of the most common cases in India. Lilly supplied active ingredients to the pharmaceutical companies in India and so in 1992 Ranbaxy approached Lilly with a proposal of providing low-cost sources of getting the ingredients that were being supplied by Lilly.

On the other hand, Ranbaxy had risen to become the second largest exporter of pharmaceutical products in India. The first meeting of the two partners in the joint venture was held at Lilly’s corporate center in the 1990. The directors of the two exportation companies were present in the meeting (Celly 7).

It was at this meeting that Lilly decided on forming a joint venture. The main focus of the joint venture was to market Lilly’s drug in India. In the event that one of the partners required to get rid of some shares in the joint venture, the agreement provided for the transfer of shares. The other objective of the joint venture was in marketing the generics and the two partners entered into another agreement in regards to this.

The joint venture came into force in March 1993 and an American citizen of Indian, Puerto Rico, was appointed as the managing director of the joint venture. Rajiv Gulati was appointed as the director in charge of marketing and sales (Celly 8).

The joint venture began launching products and moved to an independent place. It also hired more than 200 employees. All this happened by the 1993 and within a year after that it began gaining the trust of doctors and other professionals in the pharmaceutical industry.

The joint venture was a huge success in India in that most the professionals in the pharmaceutical industry in India opted for the products that were delivered by the joint venture than others (Celly 8).

Relevant “strategic imperative (s)” driving the global Pharmaceutical industry

Integrated

The global pharmaceutical industry as we know it today came about through the forward integration of some of the organic chemical producing companies. The rapid growth of this industry has been as a result of demand from the entire world for a better health care. Drug discovery was a very expensive process. This meant that leading firms would have to spend more than 20% of their sales in research and development of the drugs.

Responsive

Patent process was relied upon by most countries although it had a negative factor. It was very difficult to prove the originality of the process when it came to the patent process. The governments put price controls on the products in the pharmaceutical industry which made it difficult for the pharmaceutical companies to sell their original products in the market to be able to get money for further research of these drugs.

There was also the problem of the generics and Unbranded drugs which became more common in the markets because they were cheaper than the original drugs and thus meant that consumers went for them. In addition to that, the production of generic and Unbranded drugs was not expensive because no research had to be carried in order to manufacture these drugs.

Learning

Expenditures in the pharmaceutical industry in developing countries such as India was not that high because most of these countries did not conduct research on their own and wholly relied on import of these products from countries that had the production of these pharmaceutical products.

This in turn prompted the government of India through the Ministry of Finance to move in and substitute the import of these pharmaceutical products with the export of the same.

The government started recruiting skilled labor and persuaded pharmaceutical companies to go into joint ventures with foreign companies to enable them to conduct research and development in the pharmaceutical industry. The foreign ownership in the pharmaceutical industry in India rose from 40% to 51% as a result.

Relevant “organizational challenges” faced by the JV in India

JV’s Structure

Some of the challenges that the joint ventures faced in India include; lack of trust between the joint venture partners. When a joint venture is agreed upon by two different partners, for it to be able to achieve the objectives of the project there must be trust amongst the joint venture partners.

With the formation of joint ventures in India, the Indian companies lacked trust with their foreign counterparts in that they entered into joint ventures but did not trust the intentions of the foreign companies.

On the other hand, the foreign companies had a huge challenge of language communication with their Indian counterparts in that it was very hard for them to communicate appropriately and had a few misunderstandings during the time they were setting up the structure of the joint ventures.

There was also the lack of enough skilled human labor in India. The foreign companies had to import skilled labor from their countries to be able to train their Indian counterparts of the skills that are necessary.

JV’s Processes

About 40% of the joint ventures that were approved by the government were abandoned by the investors. This was after a lot of time was spent on the projects and a lot of money was used in the projects.

Some of the cited reasons for the failures of these projected were included: some of the local partners backed out of the joint ventures hence making the contract null meaning that their foreign counterpart had to move back to their countries of origin. In addition to that, the projects did not gauge the market prospects properly hence leading to losses within the joint ventures.

On the other hand, some of the technology that was supplied by the Indian partners was not approved by their foreign counterparts because it did not reflect the right quality of standards according to the then market.

The main reason for the failures in the projects was because the Indian companies were not able to adjust themselves to the new marketing environment. Most of the Indian partners backed out of the projected and cited inability to cope with the price competition.

Other factors that led to the failures in the projects included: poor project management where the projects were managed very poorly leading to their failures. There was also the lack of enough skilled labor to work on the projects because most of the Indian partners had laborers that were not qualified enough according to their foreign counterparts.

There was also poor operations control of both parties in the joint ventures thereby leading to the failure of the projects. There was also a lack of commitment from one of the parties in the joint ventures. This in turn led to the failure of the projects that the joint ventures were working on.

JV’s Culture

The Indian partners were not going into joint ventures again before and they did not believe in it so it was hard for their foreign counterparts to have to encourage them to join them into the joint ventures in that they had to spend a lot of time in trying to show them the advantages of the joint venture and their benefits.

The foreign companies also had a difficult time trying to source for companies that are willing to join them in a joint venture. The Indian partners did not believe in the culture of joint ventures and had a hard time trying to comprehend what the foreign companies were aiming at.

Most of the developed business had single ownership so this made it also difficult for the foreign companies to try and convince the Indians that the joint ventures would do better than the other businesses.

There was also the issue of the Indian partners not able to hold their end of the contract because they lacked the skilled labor and the equipment that was necessary for the projects and had a hard time. The Indian market also made it hard for the companies to sell their products because of the price issue. Most of the products were expensive and could only be bought by big corporation or the government.

Main “managerial implications” related to the JV and its future

Specific people that occupy specific positions

In joint ventures, the managers of the foreign companies and the managers of the local companies must be able to work together and strengthen their relationship in the joint ventures so as to able to achieve the specific objectives of the projects. The managers of the specific companies are tasked with the obligation of making sure that the relationship between the two companies remains intact.

They are to adopt a collaborative attitude. In addition to that, the managers are to acquire the right learning materials for their workers to keep them in the knowledge and must also be able to avoid opportunistic behaviours because this kind of behavior will only develop crisis between the joint venture partners thus limiting the potential of realizing the project’s dreams and ambitions.

Individuals make decisions NOT the organization

The managers who are directly involved in the joint venture process should posses skills which include; trustworthy, knowledgeable and proficient so as to be able to make decisions on their own without having to call for long meetings so as to be able to make the decisions. By possessing these skills, the managers will be able to make informed decisions that will in turn translate into higher profits in the ventured projects.

The decisions must also promote quality aspirations for the project for it to be able to make high profits in turnover. The managers must also demonstrate collaborative behaviors so as to be able to make decisions together. The decisions they make must reflect the dreams and ambitions of the projects in question.

Concrete reality

Managers of the partners in the joint ventures should be held accountable for every decision that they make. The managers made the decision in regards to the project in question which were aimed at saving time and energy.

These decisions had to reflect the focus of the project and inspirations and were made in collaboration with the managers from the other partners in the joint ventures and this meant that if anything went wrong with the project, they were to be held accountable. The managers also had to make decisions with regard to the labor of the project which meant that they were in control of the number of workers in the project.

Negotiate

The managers had to negotiate with the other partners with regards to the project in that they were to know the needs of the organizations they represented.

This meant that the managers were tasked with the responsibility of having to meet the other managers and negotiate the strategies that were necessary for obtaining higher profits from the project in question. They negotiated with the other managers with regards to the labor and other cases that were related to the smooth running of the project.

Discuss

The managers were also tasked with having to discuss the matters that arose from within the joint ventures and had to deliberate on what solutions were necessary in the process. By doing this, the managers had to have the dreams and ambitions of the whole project so as to be able to know what will be beneficial for the project to be able to maximize the profit margin.

Communication

The managers had to be able to motivate their employees. Communication had to be frequent and was used to create the vision of the project. In addition to that it established a connection with leadership. The managers had to explain the new rules and had to support individual transition process.

They also had to share as much information as they could and never made false promises to the employees to maximize the profit margin of the project.

Work Cited

Celly, Nikhil. “Eli Lilly in India: Rethinking the joint venture strategy”. PDF file, 16 Sep. 2004. Web.

Problem statement

In this case study, the General Manager of Qualibrand, Mr. Orosa is faced with a prospective joint venture proposition. A quick look at the situation reveals that Qualibrand Company is the right choice to consider in the joint business venture with Autoliv because it has good marketing capabilities in the targeted market in terms of sales of its products.

However the venture involves production and distribution of a new product which Qualibrand lacks knowledge in and thus possesses limited technological expertise to produce.

In addition to this, Mr. Orosa has not factor in the future goals and objectives of Qualibrands as related to possible profits and losses or further market expansions derived from increased demand.

Another problem that is inherent in this assessment structure is that Qualibrand does not cover all aspects required before involving itself in a joint venture.

In addition to this, the potential market (Thailand) is already saturated by other self established suppliers of the same product and this will pose a serious problem when it comes to distribution and marketing.

Problem analysis

Qualibrand Company has been dealing with the production of minor car accessories and distribution of differentiated products on a local level. This venture proposes a production capacity higher than what qualibrand can handle.

In addition to this, it is a new product to Qualibrand which means new technology, better labor and new marketing and distribution strategies in order to efficiently ensure success in this joint venture.

On the same note, there are some aspects that have been neglected during the whole process. For example there is no specific timeframe as to how long the alliance will last or how the profits and losses will be divided in the future of the venture.

To add on this, there is no clear information on how the joint venture will affect Qualibrand’s current operations. Also Mr. Orosa would be the general manager if the joint venture went through but it is clear that he and Qualibrand as a whole lacked the expertise to produce and market this new product both in terms of skills and experience.

As Schniederjans (1998) literates, poor management skills leads to poor results and without this knowledge, the venture was bound to fail. Also, Autoliv has not fully addressed the human resource aspect.

This is because SMACA as a partner is given a small portion on the overall management of the venture yet its contribution is of great significance to the whole operation. This would bring some unforeseen conflicts in the future if not addressed.

In addition to this, Qualibrand has not considered how it will handle its human resource during the transition. As suggested by Autoliv, in order to be fully compliant they require new employees who are conversant and experienced with the technology and production of the seat belts.

The other option would be to offer training to the current employees a process which would evidently take time and consume more resources in terms of finances.

This is the most important aspect to consider because the employees are core to the success of any venture. Qualibrand should instead figure out a better option through which they can maintain their worker and equip them with the necessary skills.

Another problem that may arise from this venture is the communication issue. For any joint venture to realize full potential there must be efficient communication channels between the partners (Dianne, 1995). From the provided case it is evident that there is a communication problem.

This is evident from the fact that there has not been any meeting convened between the key players of this venture. This means that Autoliv is trying to manipulate the whole deal without considering the different opinions in strategy that the other partners may have.

Probable solutions for the problems

Before signing the final papers, all the partners must ensure that they meet and discuss the whole venture. In so doing, they will be able to settle any differences that they may have and at the same time come up with ideal solutions and decisions.

In addition to this, they all must produce their financial statement and other information accompanied with their set goals as pertaining to the venture to ensure that trust prevails through out the venture. Also, a detailed SWOT analysis should be presented to all partners so that they can further understand the dynamics of the venture.

On the same note, an implementation model should also be designed to ensure that the proceedings are systematic, and all the political, economical, social and technological (PEST) aspects are covered and handled accordingly.

Additionally, a recruitment strategy should be put in place to ensure that all the employees in this venture are more than qualified for the available jobs and the process of recruiting, retraining and hiring is balanced between all the involved partners.

Gutterman acclaims that a good joint venture is one that evaluates all the strengths and weaknesses of the partners and maximizes on them irrespective of the prevailing conditions (2002).

Applicability of the solutions

In presenting the SWOT analysis of each partner, the strengths, weaknesses, opportunities and threats surrounding each individual company shall be known. The information gathered from the analysis can be used to identify which firm best suits a particular responsibility.

For example Qualibrand lacks the technology and skilled man power needed for the success of this venture but this is covered by Autoliv which has both. On the other hand, Autoliv’s lack of marketing and distribution channels in the Philippines is compensated by Qualibrand’s efficiency in the same.

The PEST analysis would help this venture in evaluating how other factors may influence the venture. For example, the impact that taxes, fiscal policies, political atmosphere, social and environmental factors have on the prices and demand of the product.

In so doing, production limits and prices can be set in relation to the demand and supply tendencies of the targeted markets.

The recruitment process is core to the survival of any business venture and by carefully selecting the most qualified candidates it ensures that the venture will survive the developing stage which is the hardest stage in a business cycle. Also, the process helps create a unified vision among the partners and employees hence motivating them to work even harder.

Impact of the solutions to the company

As a result of the PEST analysis, the company will be able to minimize the overall cost of production because an illustrative study of the market will always be available. Also the information gathered can be used to monitor demand and therefore reduce the rick of over or under production.

The SWOT analysis will help the company fully utilize the available resources from the firms efficiently thereby providing it with a competitive edge against other competitors. The recruitment strategy will have the greatest effect on marketing, production and service provision.

If the most qualified and experienced workers are employed in the various departments, then the company will run with lots of ease due to the high level of professionalism employed by the workers.

Possible issues arising from the solutions

Due to the changes in operation, some of the employees currently working in Qualibrand will have to be laid off. This is bound to cause commotions and a demonstration is likely to occur due to the drastic move.

However the managers of Qualibrand should organize a compensation package to all the employees that have dedicated themselves to the company but do not have adequate qualifications for the transition.

Due to the importation of man power from other countries, there should be some training offered to the foreigners so as to bridge the cultural diversity that would arise from the employees. This will help in reducing conflicts that may come up due to the various differences that the employees may have.

Conclusion

From the above analysis, a detailed discussion has been offered concerning the alliance of Qualibrand and the partners. The potential problems have been highlighted and solutions given.

Also the social and ethical impacts of this joint venture have been mentioned and recommendations as to how they can be resolved have been put across. If implemented, the joint venture would be as productive as expected.

References

Schniederjans, M. J. (1998). Operations Management in a Global Context. NY: Greenwood Publishing Group

Gutterman, A. (2002). A short course in international joint ventures: negotiating, forming, and operating the international joint venture. World Trade Press.

Dianne, J, C. (1995). The human resource challenge of international joint ventures. Greenwood Publishing Group.