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The Design and Management of International Joint Ventures. International Joint Ventures. An international joint venture is a company that is owned by two or more firms of different nationality.
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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.
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