JOINT VENTURE & STRATEGIC ALLIANCE

WHAT IS JOINT VENTURE??

• A JOINT VENTURE (JV) IS A BUSINESS AGREEMENT IN WHICH THE PARTIES COME TOGETHER TO TAKE ON ONE PROJECT BY EQUALLY INVESTING IN THE PROJECT IN TERMS OF MONEY, TIME, AND EFFORTS.

• THEY EXERCISE CONTROL OVER THE ENTERPRISE AND CONSEQUENTLY SHARE REVENUES, EXPENSES AND ASSETS.

• WITH INDIVIDUALS FORM A TEMPORARY PARTNERSHIP SUCH PARTNERSHIP CAN ALSO BE CALLED A JOINT VENTURE WHERE THE PARTIES ARE "CO-VENTURERS".

INPUT

MONEY

TIME

EFFORTS

OUTPUTREVENUE

EXPENSES

EQUALLY SHARED BETWEEN THE COMPANIES

A joint venture (JV) is a business agreement in which the parties come together to take on one project by equally investing in the project in terms of money,

time, and efforts.

STEPS TO A SUCCESSFUL JOINT

VENTURE-

Lack of co-ordination- Removed Research and Development departments- thus, they couldn't make innovative products according to customer needs.

There R & D was slow as compared to other mobile phone manufacturers.

Critical Factors for the Success of a Joint Venture-

1.Good communication, cooperation & coordination.2.Common goals & shared vision among partners.3.Dedication towards the success & sustainability of the JV.4.Proper sharing of profits & benefits.5.Proper planning & research prior to the incorporation of the JV.6.JV should work towards the benefit of all partners

WHAT IS STRATEGIC ALLIANCE?

• A STRATEGIC ALLIANCE IS AN AGREEMENT BETWEEN TWO OR MORE PARTIES TO PURSUE A SET OF AGREED UPON OBJECTIVES NEEDED WHILE REMAINING INDEPENDENT ORGANIZATIONS.

• THE ALLIANCE IS A COLLABORATION WHERE EACH PARTNER HOPES THAT THE BENEFITS FROM THE ALLIANCE WILL BE GREATER THAN THOSE FROM INDIVIDUAL EFFORTS.

• IT DOES NOT CREATE A NEW LEGAL ENTITY, I.E. A NEW COMPANY.

TYPES OF STRATEGIC ALLIANCES-

STRATEGIC ALLIANCES TODAY-

Strategic alliances are critical to organizations for a number of key reasons:1. Organic growth alone is insufficient for meeting most organizations’ required rate of growth.2. Speed to market is of the essence, and partnerships greatly reduce speed to market.3. Complexity is increasing, and no one organization has the required total expertise to best serve the customer.4.Partnerships can defray rising research and development costs.5. Alliances facilitate access to global markets.

1. February 2001: a. The Coca-Cola Company and Procter &

Gamble - $4.2-billion joint venture.b. To use Coca-Cola’s huge distribution system to

increase reach for the P&G products- Pringles and Sunny Delight.

2. Star Alliance - largest partnership in the airline industry.

a. Scandinavian Airlines, Thai Airways International, Air Canada, Lufthansa, and United Airlines came together to launch Star Alliance.b. Its reach extends to 130 countries and more than 815 destinations.c. Collective revenue for the partnership at more than $63 billion.

3. Hewlett-Packard and NTT DoCoMo created a partnership .a.To conduct joint research on technology for fourth-generation mobile phones.b.To bring together HP’s network infrastructure and computer servers with DoCoMo’s wireless broadband technology.

THE STRATEGIC ALLIANCE PROCESS

The Strategic Alliance Process involves planning, implementation and evaluation. An alliance has a

five-stage “life cycle,” and a structured methodology is applied to preparation and negotiations at each

stage.

Setting alliance strategy-1.Creating a successful alliance is to develop a well-thought-out alliance strategy. 2.An alliance strategy emerges out of business strategy. Once a business does decide that a partnership is desirable, it must develop an alliance strategy. 3.Strategy includes the needs to address the vision for the partnership, market analysis and a competitive assessment.4.Also required is an honest self-assessment to know organizational strengths and weaknesses, as well as the organizational culture.

Selecting a partner-This is based on the criteria identified in the strategy session.1.Once the partner is selected, the key is to determine if both organizations are strategically aligned and culturally compatible.2.It also becomes clear whether all parties have similar ambitions . 3.Identify any strategic gaps and previously unanticipated opportunities. 4.Thought needs to be given to the structures for management and the board.

Structuring the alliance-

1.It is during this stage that the deal is financially and legally structured and negotiated. 2.A negotiating strategy is critical and must begin at the alliance-strategy stage. 3.Negotiations begins the first time you meet the partner. 4.Every alliance agreement should include an exit strategy. This does not imply a pessimistic view of the relationship, but rather recognizes that all alliances have a natural life.5.The average lifespan of an alliance is seven years.

Managing the alliance-

“Once the ink is dry, the hard work begins.”

1.Making the relationship work on an ongoing basis is a challenge. 2.In a well-structured alliance, a full launch strategy needs to have been jointly developed before the deal is announced.3.Specific action plans, and the resources assigned to the alliance, must be known.4.A conflict-management process and periodic checks is critical to ensure smooth alignment of the alliance.

Re-evaluating the alliance-

Measuring the results of an alliance is critical. Its important to determine if the alliance is achieving its objectives.Where possible, deep relationships are always more desirable. For example, by reconfiguring and reinventing their relationship, Fuji and Xerox have remained partners for close to 40 years, well above the seven-year average.It is necessary to evaluate and further develop the alliance at each stage of the life cycle..

STRATEGIC ALLIANCE VS. JOINT VENTURE