Factors responsible for success and failure of Joint ventures.

1. Joint Venture:- Success &
International Business Presentation by Onkar Satam, MMS Sem. III
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2. “ Joint Ventures and Alliances can
deliver more shareholder value
than Mergers and Acquisitions
can, but getting them off the
ground can trip you up in
unpredictable ways”
--- Harvard Business Page 2

3. JV - What?
A contractual agreement joining together two or more parties for the purpose of
executing a particular business undertaking. All parties agree to share in
the profits and losses of the enterprise.
• Shared contribution of equity
• Shared authority, control and responsibilities
• Shared Revenues & Losses
• Shared Assets
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4. Advantage
s of a JV
Participating in joint ventures has the following advantages:
1. Helps an organization to enter in to new markets or new product lines
2. Access to increased resources and improved expertise & technology
3. Helps to build credibility with a particular target market by choosing a well
established and credible partner in that market
4. Reduces risk involved in business due to sharing of losses and expenses.
5. Exiting from the business in case of failure is easier as compared to solely
owned businesses.
6. Partners in Joint Ventures get preference in buying out the shares of other
partners and take over the company.
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5. Disadvantag
es of a JV
Entering into Joint Venture agreements may pose certain threats or disadvantages to
the participating organizations:
1. It is time consuming and difficult to set up a Joint Venture and poses many
challenges.
2. The objectives of the JV may not be clear and understood by all if the partnering
organizations do not state and communicate them clearly.
3. Differences in the cultures and management styles of the organizations may lead to
a lack of cooperation and coordination.
4. Lack of thorough research and feasibility studies in the beginning of the JV may lead
to failure of the JV.
5. The individual partners may not treat the JV as an integral part of their business and
may lead to lack of attention being given to the JV
6. There can be an imbalance in levels of expertise, investment or assets brought into
the venture by the partners Page 5

6. Steps in formation of Joint Venture
Partner Feasibility Incorpor
Planning
Search Study -ation
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7. Planning
a JV
The Planning Stage involves decision making on the following issues:
1. Specify the Goals and Objectives
2. Determination of the product and market
3. Market Analysis
4. Technology Decisions
5. Financial Requirements
6. Foreign Exchange analysis
7. Human resource and skill requirements
8. Revenue Predictions
9. Cost benefit Analysis
10. Personal SWOT Analysis
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8. Partner
Search
The following considerations have to be made while selection partners for JV
1. Financial resources of the prospective partners
2. Technological know how and capabilities
3. Presence in the target market
4. Organizational culture and management style
5. Type of organizational structure adopted
6. Credibility study
7. Ranking of the prospective partners based on above mentioned criteria
8. Selection of partners for the feasibility study
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9. Feasibility
Study
 Predication of the culture and structure of the Joint Venture
 Analysis of partners comfort with and adaptability to the new technology and
culture of the JV
 Analysis of the authority, responsibility and financial gains and loss sharing
among the prtners
 Market analysis and viability of the JV
 Analysis of the sustainability of the JV in times of uncertainty
Cost Benefit Analysis
 Environmental Analysis of the JV in the market
 Growth Predictions
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10. Incorpo
ration
A JV can be brought about in the following major ways:
•Foreign investor buying an interest in a local company
•Local firm acquiring an interest in an existing foreign firm
•Both the foreign and local entrepreneurs jointly forming a new enterprise
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11. Critical Success Factors in
a Joint Venture
1. Good communication, cooperation and coordination among partners
2. Common goals and shared vision among partners
3. Dedication towards the success and long term sustainability of the JV
4. Proper sharing of profits and benefits among partners
5. JV should work towards the benefit of all the partners
6. Proper planning and research prior to the incorporation of the JV Page 11

12. Factors hindering the
success of a JV
1. Lack of understanding between the partners
2. Lack of patience and motivation among partners
3. Entry of a wholly owned subsidiary of a partner in the same business and
market (E.g.. Hero Honda)
4. Benefits lower than the expectations
5. Operational Difficulties due to geographical location of the partners
6. Differences and conflicts between partners on various issues.
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7. Incompatibility of the culture and management styles of the partner

13. Successful Joint Ventures
VOLVO – EICHER JV
TATA – DOCOMO
Failed Joint Ventures
Chrysler – Diamler AG
Yamaha – Escorts
JVs Leading to Takeover by one partner
Hero Honda (Takeover by Hero Group)
Virgin – TATA ( Takeover by TATA)
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14.  Launching and running a world class JV is a complex and demanding task. If
done right JV promises a better ROI than mergers and acquisitions.
 It is necessary for all executives involved to understand the unique demands of
JV and invest in early planning
 Right investments during launch phase will reap big rewards
“If you get the launch right, the rest will take care of itself”
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15. Sources
http://www.investorwords.com/2671/joint_venture.html
http://www.businesslink.gov.uk
http://sbinfocanada.about.com/od/management/a/jointventure.htm
http://en.wikipedia.org/wiki/Joint_venture
http://www.bharatentrepreneurs.com/2008/09/26/successful-joint-
ventures-in-india-in-2008
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16. Thank You
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