International joint venture12/14/2023 (Otherwise, don’t use a JV.) Then you have a third perspective, namely the JV’s General Manager, who must hold the interest and performance of the JV itself above those of either partner. Obviously, if congruity between the two partners’ does not exist, major efforts must be made to adjust or eliminate conflicting goals. In contrast, the local partner might see the JV as an opportunity to begin or boost exports and to obtain the newest technology. For example, this partner may want to use the JV to maximize local sales and exploit peripheral or mature technology. The first is the foreign partner’s point of view. These have to be looked at from multiple perspectives. You’ll need to determine if the measures that you and your partner will use to measure performance are congruent. How can they determine if a potential partner is a good fit? These include such things as each partner’s role in managing the JV, in which country the profits will be booked, how additional funding needs will be provided, etc… Adequate planning and capitalization will go a long way towards laying the proper groundwork for a successful JV. Second, the two partners must be convinced that they will be able to resolve the sticky but predictable issues that may develop in a JV. There must be a solid underlying rationale that tells you that an equity JV makes more sense than any other type of partnership or investment, and that it will provide the required returns. First, you need to ask yourself why you are discussing working together. You need to ask a series of questions that, if answered satisfactorily, will lead you on to discuss the fit, shape and design of the partnership. Mostly it involves testing the strategic logic underlying your decision. What sort of due diligence should a firm do to determine if a JV is the best way to establish an international footprint? But research and the experience of many companies have proven these concerns can be managed. They also believe that they may lose their proprietary technology and intellectual capital, especially if the JV fails. There are still some managers and business leaders who believe that a JV, by its very nature, is not as profitable or easy to manage. A JV can be just as profitable and successful as a wholly-owned subsidiary. What accounts for their popularity?Ī Joint Venture (JV) can be an excellent vehicle for doing business in a foreign market, while sharing the start-up and operating risks - and profits - with a partner there. Joint ventures are becoming more common for North American companies wanting to do business in China or other Asian countries.
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