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.
For example, Sony Corporation and Ericsson set-up Sony Ericsson Mobile Communications with its headquarters in UK. Sony Corporation’s headquarter is in Japan while Ericsson’s headquarters is in Sweden (Sigurdson 2004).
An IJV has a high level of interaction and cooperation between the parties involved (Condon 2011). This increases the complexity involved which leads IJVs to have a 30-70% chance of not meeting their objectives, (Bamford et al. 2004) while 50% of IJVs get terminated early (Lunnan 2008).
The following essay explores the reasons why companies enter into IJVs, in spite of their high failure rate. It also provides recommendations to companies to enable them to increase the likelihood of success. REASONS FOR ENTERING INTO AN IJV:
Firms can grow internally or externally. However, not all firms have adequate resources and capabilities and thus look for partners. Studies showed that more than two-third companies depended on external growth (Hewitt 2005).
There are five economic theories that explain the motives for companies to opt for IJVs.
Transaction Cost Economics:
Companies form an IJV to ove...
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Partnership – “A legal entity formed by two or more co-owners to operate a business for profit.” (Longenecker, Petty, Palich, Hoy, Pg. 202) In a partnership, the advantage for the owners is the capability to reduce the workload and the financial burden, especially if each partner has management skills that enhances the business. The disadvantages of a partnership such as personal conflicts and leadership expectations, therefore this organizational form should only be chosen once all other options have been considered.
The evaluation of the strategic alliance from a TCE perspective has identified bounded rationality and opportunism as sources of potential economic hazards that could create inefficiencies in the vertical chain. Further investigation would be required to identify the extent of these efficiencies.
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Furthermore, the determined employee will reap precious experience and confidence to autonomously pursue their ideas and develop the business in the future. To conclude, the author feels intrapreneurship is beneficial to progressive business organisations as it uses their employees’ knowledge and ideas for new developments or solutions to a problem. However, there may be drawbacks for the employees. For example, they receive compensation for their creation, but the profits from their ideas go to the business and not the individual. This can mean they are missing out on a lot of capital.
Cell phone manufacturers and service providers are at the core of the cell phone industry. These corporations are integral from their research and development endeavors to interactions with the consumer and the marketing of new products. The companies that control such factors of cellular phones are very numerous, so it is difficult to address all the cell phone manufacturers and service providers. However, we have focused largely on only the most significant cellular companies namely in the U.S. marketplace, although many have global ties. Collectively, companies around the world have the same goals in mind – to create desirable cutting-edge technology and to increase consumer satisfaction with hopes of generating sales, and thus profits.
1. Every organisation in both the public and private sector is in varying degrees dependent on materials and services supplied by other organizations (Johnson and Flynn, 2015:36-37). In your view, what role can supply play in determining an organization's strategic growth?
With a near total saturation of the consumer electronics market, companies need to look beyond their boundaries and add value to their offerings, and sometimes it means total reinvention of the company.
Under the circumstance that the mobile phone industry entered the 3rd generation, Nokia faced competition from both macro level and industry level. For the macro level, the government encouraged competition among the operators and handset manufacturers by giving digital licenses to new entrants. As a result, the mobile phones became more sophisticated, for example, the cameras and the games in the mobile phone. For the industry level, which can be analyzed by the Porter’s Five Forces, (lecture )Nokia was facing threat of new entrants, competitive rivalry and the bargaining power of buyers is increasing as well. As the government encourage completion between the handset manufacturers, there are several new entrants from different countries enter this industry, such as Apple from USA, Samsung from Korea. These new entrants compete with Nokia in both smartphone segment and basic phone segment. Some of them even constructed “ecosystems”, which they could integrate the services and applications quickly, in order to produce the phone in just two days. For the bargaining power of buyers’ aspect, they do not need to rely on the only operating system Symbian. They can choose Windows mobile launched by Microsoft, Android launched by Google and Ios launched by Apple, in addition, basically all of them are better than Symbian (Amiya, 2010). The buyers could choose any
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The progression and evolution of international business has played an integral role in the overall development and progress of the world economy, culture, and politics. The multinational corporation was an essential part of this process and has roots as far back as the 15th and 16th centuries in Western Europe, specifically in the nations of England and Holland, during a period known as mercantilism. This was a time of unprecedented global exploration, colonization, and other imperialist ventures. Organizations such as the British East India Trading Company, promoted both global trade and the acquisition of natural resources, primarily for their home countries in areas including Africa, East Asia, and the Americas. Global trade was the primary factor in the growth of the world economy during this time. However the modern MNC, as it is known today, did not appear until the 19th century. These new entities provided a new level of inter-firm connectedness, a wider division of labor, and a higher level of product integration across countries in which MNCs are growing. Studies have shown that modern MNCs are characterized by a high degree of complexity, and have not followed a linear pattern in their development. In addition, it is crucial to understand the geographical context in which these MNCs were founded. This paper will analyze the development of the multinational corporation (MNC) from the 1870s to the modern day and examine it what ways, and to what degree it has changed over time.
ESSAY TOPIC (1) :A joint venture is affected by the cultural distance between two partners. In what ways are joint ventures and types of international collaboration affected by cultural differences?