Companies International Alliance: International Joint Venture Essay

Companies International Alliance: International Joint Venture Essay

Length: 813 words (2.3 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

Introduction
In the past two decades, international alliances have become a central part of companies’ competitive and growth strategies (Kale and Singh, 2009). However, alliance termination rates are reportedly over 50% (Lunnan and Haugland, 2008). This paper aims to critically examine the reasoning behind the low success rates of International Joint Ventures (IJVs).

Definition
Glaister, Husan and Buckley (2004, p.1) define the IJV as “two or more legally distinct organisations (the parents), each of which invests in the venture (the child) and actively participates in the decision-making activities of the jointly owned entity”. The authors contend that the entity is international when operating in a country distinct from at least one of the parents.

Why International Joint Ventures Fail
Learning and Risk
Statistically, the failure rate of alliances is significantly higher than that of the single firm (Bleeke and Ernst, 1991; Das and Teng, 2000). Whilst there are multiple reasons, one key difference between single-firm strategies and strategic alliances is the uncertainty among partners. When firms pursue market opportunities alone, their focus is market transactions, so there is little concern for other firms’ opportunistic behaviour. Conversely alliances involve many risks such as the risk of partner non-cooperation in good faith (relational risk), in addition to the risk of unsatisfactory business performance (performance risk).
There is therefore a need to consider primarily why a firm enters into alliances of this nature:

For the purpose of this section the most important “benefit” to consider is that of organisational learning. Through the shared execution of alliances, activities and outcomes, firms can learn with and f...


... middle of paper ...


...ocus here is on the process rather than on the outcome (Das and Teng, 2001). However, the lack of trust, often due to the fear of losing brand reputation, leads to a struggle for greater control. At the inter-firm level, researchers believe that trust is a key element in co-operative relationships (Ring and Van de Ven, 1992; Sydow, 1998). IJVs however remain most vulnerable to failure due to the loss of trust between partners, resulting in a struggle for control and ultimately termination. Das and Teng (2001) set out measures they believe build trust, few of which are implemented in practice:

Whilst it has inherent and economic benefits, the challenges posed by IJVs are often undermined by the firms. With regard to global strategies, there is a growing need to embrace and develop IJVs through increased awareness of their internal challenges to improve success rates.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Joint Research and Development Project Essay

- Joint R&D projects in their development and organization are supported within a network structure, that is, in a set of partners connected by a set of ties (Borgatti and Halgin, 2011). The partners can be firms and institutions of at least four different countries national or international firms and institutions, and the ties that connect partners serve as the “pipes” through which information flows (Podolny, 2001). Joint R&D projects, therefore, constitute a network structure in which each partner is considered a node of the network, and network ties represent the relationship of collaboration in the development of the joint project....   [tags: joint r&d, network project, diversity]

Better Essays
796 words (2.3 pages)

International Marketing Essays

- INTERNATIONAL MARKETING 92% of the world’s consumers live outside the U.S. Thus, international marketing is very important. When selling to foreign markets, one must realize that there are major differences between other countries & the U.S. Aside from political and legal differences, there are economic, technological, social (family, religion, education, health ...) & cultural differences. Each 1 billion in trade deficit yields a loss of 25,000 jobs. [See text for how international trade is measured and protectionism vs....   [tags: essays research papers]

Better Essays
489 words (1.4 pages)

Global Partnerships : The World Markets Today Are Full Of International Partnerships

- Global Partnerships The world markets today are full of international partnerships. Notably, businesses need an overseas partner to help navigate foreign policies, business, and customs. Moreover, cross-cultural partnerships succeed because human resources (HR) have a hand in providing relative information to corporate management in candidate selection. All in all, organizations must analyze the factors that drive companies to international alliances, HR contributes sound advice to the executive management team before joining with potential partners, and HR is making a move toward decision-making process in partner collaboration....   [tags: Management, Corporation, Partnership]

Better Essays
1160 words (3.3 pages)

Understanding and critically Evaluating Entry Modes of Businesses in International Market

- ... This model was mainly reliable for manufacturing industries; a paper with contrary arguments was published in 2008, providing two variables; environment-related and service specific, to question whether Uppsala model can be used for service firms. (Jorge Carneiro, da Rocha and da Silva, 2008) Psychic distance and uncertainty in environment, need for quality, face-to-face contact with clients in service delivery, capital intensity are some of the arguments that contradicts Uppsala Model. The results from this study stated that services mainly would choose a mode to internationalize that has higher control like licensing....   [tags: Nike, Microsoft, Sony, Shell Group]

Better Essays
1942 words (5.5 pages)

Understand and Critically Evaluating Entry Modes of Businesses in International Market

- ... Uppsala Model considers two types of knowledge objective and experience based knowledge. (UPPSALA MODEL) After first entrance firms understands how to work in foreign country, and later they step by step increase level of internationalization to physically distant countries. Can Uppsala model be applied to services. This model was mainly reliable for manufacturing industries; a paper with contrary arguments was published by BRAZIL providing two variables; environment-related and service specific, to question whether Uppsala model can be used for service firms....   [tags: trading, business outside the country]

Better Essays
1133 words (3.2 pages)

International Joint Ventures (IJVs) Essay

- INTRODUCTION: In today’s global world, multinational corporations (MNCs) need to find new markets to stay competitive. A way in which they can do this is through IJVs. Hyder and Ghauri (2000) estimate the growth of IJVs to be 25% annually. As defined by Geringer (1988), a joint venture (JV) is when two or more distinct companies come together and form a new entity. Geringer and Hebert (1991) extend this definition to include IJVs and stated that if the headquarters of one of the partners is outside the country where the JV is set-up or if it has operations in multiple countries, it is an IJV....   [tags: Strategic Alliances]

Better Essays
2462 words (7 pages)

What's Strategic Alliance Essay example

- Strategy Composition Deborah believes that the current research is narrow-minded and she would like to understand the different ways her company can expand their brand in the global market. In order to expand her brand, Deborah must create and follow strategies that will help her company gain a competitive advantage, in their given market. Having a competitive advantage is important because it enables a company, to perform at a higher level than competitors (Grant, 2013). The other strategies that will benefit John and Deborah’s company profile are joint venture, acquisition, partnership with a local firm or strategic alliance....   [tags: companies, global market, joint venture]

Better Essays
1083 words (3.1 pages)

The Idea Of Global Business Essay

- Choi Yei Eun (Jade) Ms. Anita Paul BMO1102 3 April 2015 The idea of global business started fairly long time ago. When one speaks of Global Business, the simple term would be the buying and selling of goods and services by people from other countries. Goods can be manufactured in another country but can be purchased elsewhere. In this way, products are easily available for the consumer. All the necessary taxes or duties have been included in the price making it a straightforward transaction. On the other hand, there is more than sending goods to another country to sell, in order for this to take place without problems, companies have trade rules and trade agreements to follow (Williams McWi...   [tags: Corporation, Globalization, International trade]

Better Essays
1165 words (3.3 pages)

Essay on How Galanz Group Could Further Internationalize Its Business

- 1. Introduction: The Current Internationalization Efforts of Galanz Recent years have witnessed the surging of Chinese manufacturers as China has become the “world’s local factory”. Galanz Group, the Guangdong based home appliances manufacturer, has also evolved globally with China’s international growth. Since its inception in 1987 as a textile company , Galanz has been developing constantly and rapidly taping into the global market. The company quickly gained significant domestic market share as it started to focus on its areas of expertise in the microwave business sector on 1992....   [tags: International Business]

Free Essays
1144 words (3.3 pages)

The Alliance Between Honda And Rover Essay

- Introduction The alliance between Honda and Rover from 1981 to 1994 was thought to be a successful case at that moment. However, four years after the end of the relationship, Rover still just had all those old models in its product portfolio. On the other hand, it was said that because of the end of the relationship, Honda was put back by four years (Button 2005). This report is divided into two parts. In the first part, the Honda-Rover case is discussed in terms of their capacity and incentive to deliver in the alliance, what they wanted from each other, and what was the outcome of the alliance and why it brought limited benefit to Honda and Rover....   [tags: Auto Industry Joint Ventures]

Free Essays
2434 words (7 pages)