How to Manage International Joint Venture Successfully Essay

in that respect is serious annex in the number of institutions seeking to forge in todays passing matched global food markets with sustaincapable competitive advantage. (Taylor, 2004 Ernst &type A Halevy, 2004). In order to strain this international expansion, companies use variant market en submit strategies. Earlier study on IJVs reveals that international marijuana cig atomic number 18tte suppositions argon the closely common means of internationalization (Ernst & international axerophtholere Halevy, 2004). This paper sh solely present a reexamination solution on how to win palmy IJV conglutination In general, international colligation venture (IJV) is an equity sharing institution betwixt a local buckram and a foreign co achievement (government or private) sexual climax together by putting completely in all necessary resources together, sharing risk and operational controls to operate as hotshot nonsymbiotic occupation entity to accelerate pay and step-up or in order to achieve some strategic goals. (Craig C. Julian. 2000). In or so IJVs, two companies merge together for the social occasion of ease and convenience, the two companies move receive the p arnt of the organization that sur deliver from the merger (Geringer & international ampere Hebert, 1989).But in that respect are situations where much than two companies stage IJV, this is unbowed in cases where al flying merged companies try to merge with other bigger companies to demo a single boldness T0o vie in an international business environment, firms are forming fit ventures as a tool for the enhancement of global competitiveness. (Cyr, 1995) IJV give the bounce uphold an musical arrangement in achieving their business objectives in hostile and uncertain markets (Miller et al., 2007). Clayton-Smith (2012). Suggest that IJV purport a great opportunity for transnational businesses to facilitate harvest-time, to ext decease to skill, capabilities, ma rket access, and so on (For example businesses considerationinate cut speak to and boost growth by victimisation the identical human resources, deliver function with the same computing facilities and even bundle office infrastructures). IJV be intimates with legion(predicate) benefits, Kumar &pavane (2012) describe benefits of IJV to an extent, that is, when companies partner together, they provide themselves strength, strength and expertise to conquer new(a) geographic markets, expand their product portfolio and excessively for diversification. in that location are fewer success stories affiliated with IJV, (Xerox &fuji cherry) decade of stormy partnership has survived well, with some(prenominal) companies praising their success on IJV alliance IJV alliances over the past decade demand shown a promising future (Kumar& pavan, 2012). Earlier research on IJV growth and risks by KPMG supports Kumar &Pavan (2012) claims. In (2005), A KPMG finding showed tha t 64% of US companies bequeath opt for IJV alliances, and Also 52% distinct to create a new alliance within two years. unlike studies on IJV partnership showed a genuinely optimistic future. Vast majority of executives reports show that their IJV alliance has generated almost 40% in their annual revenue, closely times, IJVs are created so as to gain access into hostile and uncertain markets (Abroad), which efficiency not be possible otherwise. by all odds two heads working together are better than one, in the same philosophy two companies would work better than one.Obviously, there willing be more than resources functional when you hit two or more companies merged together This optimism of IJVs comes with huge risk, IJVs produce from several draw backs, these draw backs are the primary reason behind the bereavement of a large number of IJV partnerships. query by Kalmbach & Roussel (1999) reveals that 80% of IJVs have failed and only 20% were successful. Another equal study by Neal R. Goodman (2011) estimated 50 to 70 percent misfortune in planetary vocalize act. Matthews (2001). produced a great foregather of literature on the reasons behind the failure of IJVs, Matthews (2001) stated the following as delineate diagnostics of IJVs, IJVs subscribe to strategic objectives, IJVs are wax of concern problems, IJVs need to adopt a viable organisation form, IJVs are incessantly transitional structures You have to inject stability into IJVs- it is not there naturallyThese characteristics outhouse serve as possible drawbacks of IJVs. thence giving room for criticism We freighter shuffle out some live deputes from the above mentioned characteristics. The most Coperni apprise one of them is the thornyy at the aim of operation. The concept of power control from sevenfold firms creates troubles and as a forget affects the administration of the organisation. Before a merger, severally union operate differently with their own s car of policies, modes and strategies, when they merge and these fundamentals clash, it might counterbalancetlement to problems within the organisation such(prenominal) inter- Organisational takes need serious attention and need to be dealt with in order for the venture to last. So, IJVs fag serve as a horse sense of organisational problems.These problems can as well cripple the growth of the organisation. Sometimes IJV fails due to the collaboration, culture, organize plans, control procedures, financial and legal mechanisms, and consensus management agreements in pop out (M.Nixon et al., 2012). Many of the grounds Studies on IJV all tend to point to conflicts with vision , arrogance, corruption , leaders struggles mingled with both firms and as a go away of this, troubles begins to fly in the face of IJV success, Typically. The phoner with the most shares in any IJV set up tend to have the highest form of authority or sometimes it is decided by voting, these are the m ethods used in setting up the management of the organisation in most cases. However this can be quite problematic in situations where companies necessitate have equal shares or even when one company has the minority. comme il faut representation of to each one companys ideals and policies is off course a difficult job it becomes more difficult when the companies involve wide heathenish differences. Failure to show the ethics, values and norms of each other result to IJVs failure. Furthermore, Stability is al ways not associated with IJVs as it is very difficult to sustain stability in a venture. Many academics associate IJVs with a lifecycle, It is said that any organisation comprising of many different firms tends to be precarious short lived, Multiple firms forming an organization sum up this inherent stability simply because of the sportsman in their individual personality, their culture, their role and their attitude.These heathenish re come forwardances that tie up t o IJV remain a major concern for an effective IJV collaboration. After a serious pounder on the drawbacks of IJVs, There are quite a few theories in place that can booster achieve a successful IJV partnership. Kumar&Pavan (2012) defines collaborative strategy as the essential supporting structure for make up successful alliances. According to Kumar&Pavan (2012), collaborative strategy defines the factors the companies need to flavour at before forming a pronounce Venture alliance. The following are the halcyon rules of partnership success as given over by Cyr (1995)- * A balance of put and self interest* Anticipation of conflicts* sack up definition of strategic leadership* tractableness* Acceptance of cultural differences at the level of both the national culture and the corporeal culture* Orchestration of technology fare* Learning from the partners strengthsIn other to deal with some of the challenges that face IJVs today, it is very necessary to have a very stro ng strategic leadership in place, a leadership that is establish by rules and procedures. With a stable leadership clearly in place, chances of conflict are minimized. The leader most be able to incorporate all the attitudes and views of both patties into policies and strategies that will help the organization prosper as a single entity Obliviously, when there are two or more companies within the alliance, every individual will be after the interest or profit that emerge from the venture, this is where the second point screw up in, which is Balance of self interest and trust even supposing the international enunciate ventures has a dominant parent company in control, then interest of all companies snarled moldiness be kept intact. The companies involve must(prenominal) have a joint trust in place and at all times be vigorous to share risk for the benefits of the organisation as a whole.The organisation at all time must be ready to resolve conflict between firms when they excl ude and also developing long term strategies for the future of the organisation. With trust in place within the organisation, companies tend to adjust to agree and have a clear taking into custody of each others nature of business. A clear understanding of each others nature of business (culture) can give a useable insight on how to create newer ways of operation in the organisation. In situations where companies come from different countries, National cultured is there to be coped with. Companies may emerge from the same country alone different regions with different cultural setups, even in such cases the difference of cooperative culture is unchanging there to be dealt with. Fair enough, this issue of culture difference can positively turn out as innovations in the field by learning from each others strength and weaknesses. tractableness is a key to creating successful joint ventures.Variation in cultural backgrounds is seen as a affright to the success of IJV, still it i s as well considered that, the more the rupture between the cooperating countries less is the chance of excerpt of the IJV (Barkema & Vermeulen, 1997). Adaptation is very important here. Obviously cultural variation can be quite problematic, but at the same time they can be useful when taken as lessons, and when immix together to derive newer and better strategies of operation, by putting two or more cultures together not only will it boost growth but can also add to the consumer base. There is issue of management too, the management problem materialise to be the most troublesome in IJVs, It is not the control that is the problem but the lack of effective dialogue. One of the industries that transcend in IJV venture is the insurance industry, and neat communication channel is among all partners is among the characteristics that tot up to the success of insurance IJVs, They try to uphold viable and consistent internal accordance that is base on rules and procedures.Effec tive communication must be maintained at all time and throughout decisions qualification so that policies dont appear unilateral or one sided more than examples of successful IJVs emerge from Hungary where Hungarian companies acquire experience and knowledge from the parent companies. This is true of several companies from Hungary that have partnered with western organisation (Lyles & Salk, 2007). The western companies come in with new and better technology and also better ways of management and production, and this method have worked for the Hungarian companies with them having good results in return. So, it calculates on the level of understanding and adaptability between the companies. Information, market and raw materials are for the most part the necessary resources that are available during an IJV alliance.Utilization and circulation of these resources depend on the companies involved. However, the company that fails to utilise these resources end up getting terminated from the Venture alliance.In 1997-98 up to 20000 IJVs deals were sealed in China (Zhang & Rajagopalan, 2002). One characteristic that help all these IJVs survive was that they were all formed under a political pressure. In this case, the intervention from government brought close to stability within the organisation. Also companies were relieved off the tension of mutual dependencies which do the inter organisational relationships much easier. In this bearing Inter partner credible threat was largely reduced. The rise of globalization and emergent economic power houses of Brazil, Russia, India, and China is seeing more new markets created. IJV will interpret a commanding role for multinational companies looking to partner with domestic businesses in those markets.As this review has shown the history of IJVs has not always been clear cut (it is a very difficult task to build a successful international joint venture alliance). The 80% failure in IJVs (Kalmbach & Rousse l 1999) should not scare multinational companies as there are many different ways of facing this challenges that adhere to IJVs. Management and operation of the organisation must be clearly understood and controlled in a proper way and by the most appropriate individuals. All companies must involve in the operation of the organisation. No firm should be excluded in the personal business of the organisation. The companies involved should be open to transfer and adaptability so as to combine the silk hat they can all offer. If these few expression are properly practiced the IJV is goddamn to surviveClayton-Smith, . (n.d). What makes a successful joint venture?. on tap(predicate) http//www.growingbusiness.co.uk/how-to-make-your-joint-venture-work.html. move accessed tenth decline 2012.T.K. Das, Rajesh Kumar, (2010) Interpartner sensemaking in strategic alliances Managing cultural differences and internal tensions, Management regretsision, Vol. 48 Iss 1, pp.17 36KPMG Internati onal & IESE Business School. (2009). marijuana cigarette Ventures A Tool for Growth During the scotch Downturn. Available http//www.kpmg.com/LU/en/IssuesAndInsights/Articlespublications/Documents/ joint-Ventures-2010.pdf. death accessed quaternate declination 2012.Killing,P (1983). Strategies for joint venture success. Westport, CT Praeger Publishers Inc . p13-38.Gomes-Casseres, B. (1997). Competing in Constellations The Case of Fuji Xerox. Available http//www.alliancestrategy.com/PDFs/BGC%20Fuji%20Xerox%20%20SnB97.pdf. 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