'International Joint Ventures\r'

'AR50126 identification relate: Mizanur Rahman In submitting this assignment, I ac companionship that e actu ally(prenominal) this material is my own work, neglect whither I absorb indicated otherwise with provide references. 0. 0 0. 1 subject area on the ‘Sandford’ Joint menace in atomic number 99 Timor Date: 30th September 2011 For: George capital of Mississippi From: Mizanur Rahman 1. 0 Executive Summary Freemantle aspect leads in a interior(prenominal) help surround against ever increasing competition in a saturated securities industry, trying to defend market sh ar during economic downturn.\r\nIn contrast Sandford has a strong world-wide presence in the hotel/leisure constancy and is smell at diversification to emend their competitive proceeds and compliment their electric current flings. The hazard presented by this Joint Venture (JV) pull up stakes assist twain Sandford and Fremantle in shiping a rude(a) market. It go forthing be challenging mainly because of the feature that both steadys are from different industries and may take on different goals/objectives a abundant with differing commission styles.\r\nFurthermore, the JV’s first advise is situated in the Democratic republic of Timor Leste (DRTL), which forget have its own complexities to get out with, be it government/business policies or technology/skills shortages etc. The JV entrust have to regard a finis making processes throughout the partnership, which could be difficult, with each unbendable’s charters perchance world different. For a successful JV, the partners have to be h 1st, assertworthy, committed and focus on what will be best for the JV rather than on their own ask.\r\n smiling(prenominal) (2008) quoted that riotouss enter JVs in gild to relieve oneself sweet merchandises/services and enter b fortune/foreign markets. This is the key benefit to this JV, whilst on that b passageom are umteen run a stake factors to consider, the reciprocates will perhaps outweigh this and only if if all the obstacles and opportunities are correctly treasureed and an seize dodge is hold natural coveringd and implemented. 2. 0 world This report was commissioned by Mr sesame Garstead. The objective was to recommend an appropriate ‘variegation Strategy’ and identify ‘Opportunities and Obstacles’ that will be encountered by the ‘Sandford & Freemantle’ JV in the DRTL.\r\n knave 1 of 8 AR50126 grant cause: Mizanur Rahman 3. 0 3. 1 variegation via JV What form of JV Prior to pleasant in a ‘variegation’ strategy both firms will have to agree on the type of JV to be implemented for this pouch, interconnected where realize/ acquittance is shared against an agreed percentage, or non-integrated where profit/loss is not shared. The benefit of an integrated system is that it requires capital investment from all partners and this signi fies commitment and understructure enhance the chances of success.\r\nThese decisions along with objectives and how to manage the JV will have to be agreed prior to sweet the JV. Pearce (1997) indicated that JVs can become very demanding if the partners have differing objectives. The reasons behind the JV are simple, both parties contri howevere to the overall scale/skills pool, hence being in a eyeshot to penetrate new markets. However topical anesthetic knowledge in respect of the saucily formed DRTL will be lacking. This fault will need to be filled, possibly with topical anaesthetic partners/advisors if the JV is to be successful. . 2 variegation Theory Ansoff’s (1965) root word of diversification (see matrix below) highlights that this is when firms enter new markets with new products. The new product here is the combined offering of both firms, in a completely new market. cull (1975) alternatively states that ‘Diversification’ is an augment in the number of industries a firm is expeditious in. There are numerous other definitions, but in essence it is found on inclination for harvest, by expanding a firm’s existing offering with other products/services etc. which can be directly or indirectly associate to current offerings or be completely unrelated. The notion that this JV take to be identified screen outly from both firm’s existing operations, by diversifying, could improve competitive advantage by providing focus in a ceding back market, where one service compliments/leads on to the other and thus being qualified to provide a tailored/ spunk solution to the DRTL, where many inter topic/domestic firms will be vying for the same business. varlet 2 of 8 AR50126 naming anatomy: Mizanur Rahman 3. 3\r\nWhy Diversify By desegregation into related markets (related diversification, infrastructure hotels/leisure = revenue from building & tourism), Freemantle can enter into another market, which could boost their current adjust and secure cash flow to brave the current downturn. Rather than downsizing, they could potentially attach their turnover, albeit growth not necessarily actor more profit. Sandford will as well as greatly benefit by being fit to complement Freemantle’s offering by following on with the compulsory tourism facilities. This type of synergy is called ‘Horizontal Diversification’.\r\nA diversification strategy is scarce a ‘growth’ strategy and in this instance could be seen as ‘ eminence’. Porter (1985) states in his ‘Generic Strategies’, firms looking for competitive advantage through ‘ specialty’ must consider the additional be incurred in re-branding, promoting etc. and the chances of recovering these, also the method is not unique and could be replicated by other competing firms. On a positive note Rumelt (1982) developed, from earlier studies of Chandler (1962) and Wrigley (19 70), categories for conglomerate diversification strategies nd from this, related diversification on average outperformed other diversification strategies. Furthermore, it was found that these firms had a natural advantage by expanding their skills into related demesnes. In customary drivers for Sandford & Fremantle’s choice to diversify would be based on: i. ii. iii. iv. v. Sandford’s proclivity for growth Freemantle’s need to black market a stagnant market both(prenominal) need to acquire the skills in the bend/tourism sector Both bank to spread risk Both desire to access a virgin market 3. 2. 1 Advantages & Disadvantage The principle advantages for this JV are: ? ? ? ? ? An increase in assess/wealth to the firms, which would not be doable on their own. Economies of scale would be increase, assisting accounting entry into the new market. Construction lives for Sandford would decrease. Economies of grasp can be exploited by Freemantle del ivering the required infrastructure and then the related tourism/leisure facilities. Provides movement away from declining activities for Freemantle. Spreading risk from interests in one area, as well as the risks voluminous in world-wide JVs (IJVs). The Principle disadvantages could be: ? ? Slowing growth in its gist business, if focus is shifted. Potentially would add to trouble costs by implementing a separate team to run the JV. Loss could be incurred during market consolidation process takingsing in most parts of the business being subsidized by other bankable parts. scallywag 3 of 8 AR50126 Assignment denomination: Mizanur Rahman ? ? Diversification across national boundaries could result in the firms having to recognise with variable governmental/legal requirements of the different countries in which the JV firms have controlling interests.\r\nwhitethorn result in failure when in that respect is a mismatch between core competencies/ acknowledges. Freemantleâ₠¬â„¢s lack of planetary experience and Sandford’s lack of local knowledge/influence. 4. 0 4. 1 Obstacles and Opportunities for the DRTL project double-dyed(a) Market The DRTL is a diverse sphere ecologically and culturally due to its mountain of linguistic and ethnic inhabitants, built up over its history from settlements to colonisation. The DRTL have to deal with many critical issues from the lack of infrastructure, as virtually everything will have to be rebuilt from ruins left from the war.\r\nDespite the lack of facilities and the study task ahead, according to Moghe (2001) the success of the pastoral lies with proper infrastructure, security, efficient indemnity and the powerfulness to make clients and investors feel that they are on ‘neutral territory’. One point to note is that there will be mass influx that will exceed from foreign firms looking to capture some market share during locution, along with the firms that will remain and operate busi nesses (i. e. hotel/leisure and tourist facilities).\r\nAditjondro (2001) criticised this, as it would force the DRTL into a new form of colonisation, an economic one, thus resulting what could be viewed as simply an outpost for globalisation. 4. 2 worldwideisation Society today is very global and thus making our domestic markets more competitive. This encourages firms to estimate across international boundaries in order to offset seasonal fluctuations (i. e. construction during winter periods) through increased opportunities and ultimately be spreading their risk across various options.\r\nThe choice to go global has many risks and potential obstacles to consider from cultural/language barriers to economic, legal and political risk. Cartwright and Cooper (1996) underline that compatibility issues may rustle from IJVs due to differences in national culture, managerial styles. The proposed JV provides a gateway for international expansion, which maybe a comfortable area for Sand ford but Freemantle need to to the full assess their cap baron/competence in a foreign market by fully assessing the risks. 4. 3\r\nRisk Bettis & Hall (1982) successfully demonstrated the link between risk and reward performance and diversification strategies. In their study they calculated return on assets to measure risk and reward performance. The result found a negative risk pageboy 4 of 8 AR50126 Assignment Name: Mizanur Rahman against return for related firms, which suggested the opportunity to simultaneously reduce risk and increase return. However, a detailed risk/reward abbreviation needs to be conducted to insure that the JV is not affected by any change.\r\nAreas for consideration (UK & USA ‘v’ DRTL): Culture: Currency: Economy: governing body: Legal: Labour: Language: marketing: Transport: Technology: Homogeneous ‘v’ Heterogeneous ordered ‘v’ Uniform (? /$) Relatively Stable ‘v’ inconsistent & unp redictable Stable ‘v’ mayhap Unstable Free movement of goods ‘v’ possible legal restrictions Skilled workers accessible ‘v’ Impossible to source broadly speaking Single Language ‘v’ assorted Languages/dialects Many media streams with little restriction ‘v’ Fewer media Several competitive options ‘v’ inadequate Latest ‘v’ outdated\r\nAn appropriate level of competency/ability and motivation is required amongst the staff, for a firm to operate effectively on the international scene. The varying strengths and weakness of both firm’s skill base would need to be fully analysed, in order to compile a competent/ fit team. Thus providing a balance of all necessary attributes and improving the chances of success. 4. 4 bodily Social Responsibility (CSR) DRTL is one of the poorest countries in the world. The country will still be very fragile and under the look upon of the UN.\r\nAlso the po pulation may not trust outsiders as they have repeatedly been under strained control, so gaining trust for a successful JV will be imperative and thus a robust CSR policy needs to be agreed and implemented. If the CSR policy is not followed, the firm’s image be ruined, create failure abroad and potentially back home. The JV cannot claim to be an ethical setup if it ignores unethical practices linked to its operations e. g. : ? ? ? ? Use of child labour and forced labour Production that effects the livelihoods of natural people Violation of the basic rights of workers Ignoring health, pencil eraser and environmental standards\r\nAn ethical business has to be concerned with the behaviour of all businesses that operate in the supply chain †i. e. ? ? ? ? Partners Advisors Suppliers Sub-contractors The sticky point is if any of the above is required to be ignored, either to progress the project or to make profit. The decision needs to remain ethical to maintain long ter m success. varlet 5 of 8 AR50126 Assignment Name: Mizanur Rahman 4. 0 shutdown The qualification/capacity of the existing construction industry in DRTL, like many developing nations, will be in its infancy ( existence Bank, 1984; Kirmani, 1988; Wells 1986).\r\nFor success local knowledge will be a necessity. Although there are several strategies for sale for IJVs, diversification strategies provide firms with high growth potential in international markets (Capar and Kotabe, 2003). Diversification may be a turbulent track growth solution but if an appropriate strategy is not utilise and the solicitude fail to understand the JV, then serious financial impact is needful not only to the JV but also the parent firms. operational competencies and capability need to be assessed; also the product that is being provided needs to have vibrancy with the new market.\r\nHence extensive look rather than internet based explore needs to be conducted at prove zero. Are the firms ready for an IJV, or are there skills gaps that need filling? 5. 0 Recommendations The recommendations are, but not limited to: 1. orchestrate a thorough PESTEL analysis on the DRTL situation. 2. Conduct a SWOT analysis of the JV in DRTL. 3. Agree on the percentage level of profit/loss sharing for an integrated JV. 4. Agree the JVs Objectives, decisiveness Making Protocols. 5. Review competencies and capabilities of senior heed and assemble the correct team. . Implement a CSR policy. 7. Network with DRTL decision makers and appoint a local partner or advisor. 8. interlock with the community. Once the above has been achieved then the JV can start prospecting for work. (2020 †24 Citations = 1996 words) Page 6 of 8 AR50126 Assignment Name: Mizanur Rahman Bibliography Aditjondro, G. J. (2001). tocopherol Timorese becoming guests in their own land [online]. Indonesia: Jakarta Post. operable from: http://members. canb. auug. org. au/~wildwood/febguests. htm [Accessed 27 September 2011].\ r\nAnsoff, H. I. (1965). integrated Strategy:An Anylytical approach to business policy for growth & expansion. New York: McGraw-Hill. Beamish, P. W. (2008). Joint venturing. Charlotte, NC: discipline Age Publishing. Berry, C. H. (1975). Corporate Growth and Diversification. Princeton, NJ: Princeton University Press. Bettis, R. A. , Hall W. K. (1982). Diversification Strategy, accounting situated risk, and accounting determined return, Academy of heed diary, 25, pp. 254-264. Carpar, N. , Kotabe, M. (2003).\r\nThe relationship between international diversification and performance in service firms, Journal of internationalist backup Studies. 34, pp. 45-355. Cartwright, S. , Cooper, C. (1996). Managing Mergers, acquisitions and strategic alliances: integrating people and cultures. second ed. Oxford: Butterworth-Heinemann. Haendel, D. (1979). Foreign investments and the management of political risk. Colorado: West bring in Press. Hill, W. L. (2005). International Business: C ompeting in the Global Marketplace. International ed. New York: McGraw-Hill. Kirmani, S. S. 1988). The Construction assiduity In Development: Issues And Options, Discussion Paper, Report INU 10, February, World Bank. Moghe, C. G. (2001) A framework for East Timors economic planning [online]. Indonesia: Jakarta Post. Available from: http://www. thejakartapost. com/news/2001/02/22/a-frameworkeast-timor039s-economic-planning. hypertext mark-up language [Accessed 27 September 2011]. Pearce, R. J. (1997). Toward understanding joint venture performance and survival: A bargain and influence approach to transaction cost theory. Academy of Management Review, 22(1), pp. 03â€225. Phatak, A. V. (1989), International dimensions of management, 2nd ed. Boston: PWS Kent Publishing Company. Porter, M. (1985). referred to in autograph M. R. (2008) â€Å"Strategy in Construction” (ICM mental faculty 6 work file. p. 2. 6, University of Bath. Ronen, S. (1986). Comparative and transnational Management, 4th ed. New York: John Wiley & Sons Inc. Rumelt, R. P. (1982). Diversification Strategy and Profitability, Strategic Management Journal, 3, pp. 359-369. Page 7 of 8 AR50126 Assignment Name: Mizanur Rahman Scullion, H. 1992), Strategic recruitment and development of the ‘International Manager’: Some European Considerations, homosexual Resource Management Journal, 3, pp. 57-69 UN (2010). East Timor hoidenish Brief [online]. Australia. Available from: http://www. dfat. gov. au/geo/east_timor/east_timor_brief. html [Accessed 25 September 2011]. Wild, J. J. , Wild, K. L. & Han, J. C. Y. (2000). International Business: an Integrated Approach. New Jersey: Prentice-Hall. World Bank (1984). The construction Industry: Issues and Strategies in developing Countries, Washington D. C. : World Bank. Page 8 of 8\r\n'