Mohit Yadav (096)Jayeeta (101)Pallavi Chopra(103)Monika Kataria(112)Prerna Joshi (130)

IntroductionIntroduction

A joint venture(JV) is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and then they share in the revenues, expenses, and control of the enterprise.

Reason for Joint Reason for Joint VenturesVentures

JV provides a lower risk option of entering into a new country. .example- MOTOROLA entered INDIA in JV with blue star company, a brand with repute and vast distribution network.

It also provides an opportunity for both the partners to leverage their core strengths and increase the profits.

It also provides a learning opportunity for both the partners.

Other ReasonsOther Reasons…..…..

Sharing Capabilities, Expertise and Liabilities Parties to a JV may have complementary skills or resources to contribute to the JV; or parties may have experience in different industries which it is hoped will produce synergistic benefits. The basic tenet of a JV is the sharing of capabilities, expertise and liabilities of both the partners on mutually agreed terms. Such sharing grants a competitive advantage to the JV partners over other players in the market.Technology.

Types of Joint VenturesTypes of Joint Ventures

1. Equity or Corporate.

2. Contractual .

Need for setting up a Need for setting up a Joint Venture(JV)Joint Venture(JV)

INTERNAL REASONS COMPETITIVE GOALS

STRATEGIC GOALS

Internal ReasonsInternal Reasons

1) Building on company's strength.

2) Spreading costs and risks.

3) Improving access to financial resources.

4) Economies of scale and advantages of size.

5) Access to new technologies and customers.

6) Access to innovative managerial practices.

Competitive GoalsCompetitive Goals

1) Influencing structural evolution of the industry. 2) Pre-empting competition. 3) Defensive response to blurring industry

boundaries. 4) Creation of stronger competitive units. 5) Speed to market. 6) Improved agility.

Strategic GoalsStrategic Goals

1) Synergies.

2) Transfer of technology/skills.

3) Diversification.

Before Entering a Joint Before Entering a Joint Venture(JV)Venture(JV)

• Both partners should appreciate the need for the joint venture.

• The partners should clearly agree on the way the joint venture will be managed.

• Take measures to be sure that the partner has a compatible work culture.

• Be sure about the organizational behavior of the partner to ensure synergies.

Before Entering a Joint Before Entering a Joint Venture(JV)Venture(JV)

It is important that both partners work towards a system based on trust and transparency.To make for the long term success of the joint venture, it is also important that both partners are equally able to service its growing need for capital as the business expands.Need to have a clear long term goal and set the terms and conditions of the JV.Clearly define the role and responsibility of each partner.

Successful Joint Successful Joint Venture RequireVenture RequireEach participant has something of value to bring to the

venture. The participants should engage in careful preplanning. The agreement or contract should provide for flexibility in the future. There should be provision in the agreement for termination including buyout by one of the participants. Key executives must be assigned to implement the joint ventures. A distinct unit be created in the organizational structure which has the authority for negotiating and making decisions

Maruti Suzuki India Ltd (formerly Maruti Udyog Ltd) is India's largest passenger car company, accounting for over 50 per cent of the domestic car market. MUL Maruti Udyog Limited was established in February 1981, although the actual production started in 1983 with the Maruti 800 and the first car was rolled out on 14 December. Maruti Udyog Limited (MUL) had a joint venture signed with Suzuki Motor Corporation (SMC) on October 2nd 1982.The company offers full range of cars from entry level Maruti 800 & Alto to stylish hatchback Ritz, A-star, Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara and MUV Ertiga. The company exports more than 50,000 cars annually and has an extremely large domestic market in India selling over 730,000 cars annually.

Bharati WalmartBharati Walmart

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Wal-Mart Stores, Inc. operates Wal-Mart discount stores, Super centers, Neighborhood Markets and Sam’s Club locations in the United States, while Bharti Enterprises is one of India’s leading business groups with interests in telecom, agribusiness, insurance and retail. The two have now joined hands to establish a joint-venture for a cash and carry and wholesale retail chain in India. Both retail groups will hold a 50-50 stake in their joint-venture, which will be called Bharti Wal-Mart Private Ltd

The combined operations of the two retail giants will make available for small retailers and business owners a wide range of quality products at competitive wholesale prices, which will further enhance their businesses and profitability. Those that will be served by this joint-venture include kirana stores, fruit and vegetable resellers, restaurants and other business owners.

Tata StarbucksTata Starbucks

About Starbucks Since 1971, Starbucks Coffee Company has been committed to

ethically sourcing and roasting the highest-quality arabicacoffee in the world. Today, with more than 17,000 stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world.

About Tata Global Beverages and Tata Coffee Tata Global Beverages is a part of the global Tata Group. Tata Global Beverages is a global beverage business and the world’s second largest tea company. The group’s annual turnover is US $1.5 bn and it employs

around 3000 people worldwide.

Contd….Contd….

Contd….Contd….Tata Coffee is a subsidiary of Tata Global Beverages. Tata Global Beverages Limited and Starbucks Coffee Company announced a joint venture between the iconic international coffee brand and the 2nd largest branded tea company in the world. The 50/50 joint venture, named TATA Starbucks Limited, will own and operate Starbucks cafés which will be branded as Starbucks Coffee “A Tata Alliance.”

This agreement paves the way for consumers in India to enjoy the premium Starbucks Experience, while further discovering the unique taste of high-quality Indian arabica coffee worldwide. TATA Starbucks Limited brings together two companies with a rich heritage in and passion for coffee, tea and innovative beverages. Together, the JV will enable an expanded range of beverage offerings for Indian consumers.

Volvo Eicher MotorsVolvo Eicher Motors

Volvo Eicher MotorsVolvo Eicher Motors

The Swedish truck maker is investing $375 Million for a joint venture with Eicher Motors, the third-largest commercial vehicle manufacturer in India.

Volvo will contribute $275 million in cash and $75 million by transferring its Indian truck dealer and service

network to Eicher. The Gothenburg, Sweden-based firm said it also plans to buy 8.1% of Eicher, giving it 50% of the venture through direct and indirect holdingsThe joint venture will provide [a] platform for all future truck projects for Volvo in India, for necessary infusion of funds and technology. We believe this will drive Eicher’s future growth in the domestic market, and market share expansion,” Merrill Lynch said in a research note.

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Eicher will transfer its entire truck and bus operations and their business and engineering services to the joint venture. Its motorcycle-making division will not be part of the venture, which will employ 2,300 and focus production at Eicher's current plant in Pithampur, in the central Indian state of Madhya Pradesh.

Reasons for failure of a Reasons for failure of a Joint Venture(JV)Joint Venture(JV)

Inadequate preplanning for the joint venture. The hoped-for technology never developed. Agreements could not be reached on alternative approaches to solving the basic objectives of the joint venture. People with expertise in one company refused to share knowledge with their counterparts in the joint venture. Parent companies are unable to share control or compromise on difficult issues

Kinetic HondaKinetic Honda

Kinetic Honda was a joint venture between Kinetic Engineering Limited, India and Honda Motor Company, Japan. The JV operated during 1984 - 1998, manufacturing 2-stroke scooters in India. In 1998, the joint venture was

terminated after which Kinetic Engineering continued to sell the models under the brand name Kinetic until 2008 when the interests were sold to Mahindra.

While sales grew slowly, compared to its competitors, its operating margin was the lowest in the industry because of the high import content of raw materials.

Hero BMWHero BMW

Hero India based two wheeler manufacturer and BMW German automobile manufacturer joined hands and come in joint venture in 1995 for Hero BMW F650 but the deal fail in 1996 because of poor consumer response.

Hero BMWHero BMW

Future of Joint VentureFuture of Joint Venture

The number of joint ventures will continue to increase in the near futureMore and more companies are adopting the JV approach as a part of their growth strategies.Foreign companies can benefit mutually by combining their technological and monetary resources and taking advantage of respective market conditions.