Partner Selection for International Joint Ventures (IJV)

Partner Selection for outside(a) go Ventures (IJV)INTERNATIONAL JOINT VENTURESPartner selection is recognized as being very important to the winner of whatever collaboration. Taking into realizeation the lessons from the Collaboration Exercise, the course material and both publicly available information available to you, critically discuss the relevant issues pertain with first mate selection for collaboration, specifically in the context of an foreign Joint Venture come with. The questions provided below provide some guidance on the issues you could coverWhat be the main characteristics to look for in a good collaborative associate? What would your selection criteria include? Consider also the st markgic, political and tactical implications of your choice (30%)What factors ar important in determining whether or not you and your partner be a good match, i.e., compatibility of culture? Again, what would your selection criteria include? (30%)What could you and your partne r do to bring forth good hold ins for a partnership? (40%)LengthAll scripts ar subject to a maximum volume count of 4000 +/- 10%, excluding references, tables of contents and appendices. The final word count should be included at the end of the script.COMPLETION DATETo be submitted electronically using the appropriate web-form available from http//www2.warwick.ac.uk/fac/sci/wmg/ftmsc/postmodulework/submissions/ and following the guidelines provided in your vade mecum BEFORE 0900 on 17/01/11PLEASE NOTEPMW authentic aft(prenominal) 0900 will be stamped as having arrived on the next work day. tar pull back Module Work which does not r all(prenominal) WMG by the due date will be considered to be late. Penalties for lateness may be applied at the rate of 3 percentage points per University working day after the due date, up to a maximum of 14 days late. aft(prenominal) this period the work may be counted as a non-submission.Complete your assignment from here (heading styles bea r been set up to assist you in this work) (Delete the instructions in this font in the show judgment of conviction you save and submit your work)MODULE TITLETable of ContentsInternational Join Venture 2Environmental characteristics 3Partner Compatibility Evaluation 5Creating good condition for partnership 13Conclusion 16References 17Enter a page break here and among each questionPartner selection is recognized as being very important to the success of any collaboration. Taking into consideration the lessons from the Collaboration Exercise, the course material and any publicly available information available to you, critically discuss the relevant issues concerned with partner selection for collaboration, specifically in the context of an International Joint Venture union. The questions provided below provide some guidance on the issues you could coverWhat argon the main characteristics to look for in a good collaborative partner? What would your selection criteria include? Consid er also the strategical, political and tactical implications of your choice (30%)What factors atomic number 18 important in determining whether or not you and your partner are a good match, i.e., compatibility of culture? Again, what would your selection criteria include? (30%)What could you and your partner do to grow good conditions for a partnership? (40%)International Join VentureInternational join fortuity between two or more companies has public assistances of more resources and knowledge share as well as reward and risk share. Reasons that companies propose up reciprocal danger could be initiated by new product development, opportunity to opening wider marketing or expanding the company with at least one company headquartered outside country of operation (host country).The immediate benefits of colligation ventures partnerships are access to a wider range of resources with complimentary set of skillsets and expertise, access to extensive market surface area and ability to utilise a broader range of technologies.International joint venture partnership is one of the integral factors to grow and develop scotchs and the about honest approach is by engaging with and utilising local crinkle with strong market connections and live established business networks.Environmental characteristicsGovernment and PoliticsOne of the most important criteria in choosing an international joint venture partner is the purlieu where joint venture will operate in, as this can deplete involve effect on the performance of both parties.Host countrys political atmosphere and government policies are recognize factors to consider when verifying the suitability of the environment any pressure could directly or indirectly restrict the foreign partners involvement and activities (Blodgett, 1991). fit to Ozorhon et al. (2007) host governments unstable policies and regulations, regular changes in laws and restrictions on repatriations and imports, jeopardise the st rength of joint venture partnership.In roots feeling host countrys political procedures that disable effective IJV partnership claims to be identified prior to any tone-beginning to start a joint venture. An example of a political issue effecting IJV is political mismatch and disagreements between foreign partners government and the host partners government. This will hugely impact business agreements from taking place even if partners skillsets, organizational policies and objectives match and work very well together.Stable economic post, government policies and political kinships are crucial to a successful business partnership the foreign partner needs to find an adequate environment before deciding on decision a matching partner, evaluating economic, political and financial aspects of the environment.Case studyThis case study will look at current situation of Irans International joint ventures and influence of Western countries political relationship with Iran on busines s partnership with other countries.The Current UN and European sanctions on Iran over claims that Iran is twist nuclear weapons have affected new joint ventures as well as the ones that have been in place for many years.One example is Rhum North sea fumble field in Scotland owned by BP (50%) and the Iranian Oil Company (50%), the joint venture started since 1970s. New European sanctions have forced BP to suspend this competitiveness and stop production in Rhum North Sea (BP, 2010).This demonstrates politics contention between countries, affecting joint ventures and ending related agreements with immediate effect, causing financial loss for both partners.Other countries that are in agreement with the United Nations regulations and countries with good political and economic relation and dependencies with the USA and the West could also consider limiting and ending their joint ventures with Iranian companies. This is to avoid any breaking the United Nation regulation as well as avoi dance to jeopardising their relationship and dependency to western countries.A stable host government causes a suitable environment for IJV partners this has long term positive impact on the courtiers economic and immediate positive effect on the partner companies, allowing the parties to concentrate on the inside organisational progress and improvements.Economic EnvironmentA partners country economic situation can affect the business environment and performance, having stable economic elements provides the foreign partner a constant and secure investment climate (Ozorhon et al. (2007).In authors judging economic climate could affect IJV partnership viability, economic fluctuation, foreign exchange rates and inflation, with direct impact on the partner selection process.Businesses start joint ventures in other countries considering economic perspectives that fit their needs. The host countrys currency compared to foreign countrys currency, proves an opportunity to investors from foreign countries to benefit from cheap investments (Low cost of capitals) and increased wealth position. property appreciation makes higher material and manufacturing cost in foreign country hence foreign partner moves the production to host country to benefit from get down costs and gain more opportunity to compete and be a leader in the related market.Market PowerThe market office staff is centre on how businesses can get stronger and develop their market domain through international partnership (Child Faulkner, 1998).In authors opinion, successful companies with high position in the existing local market could take advantages of other countries market, enter international sale and extend their marketplace by starting partnership with other successful company in distinguishable countries. Also companies with advanced technologies and skillsets could start a joint venture partnership with small companies in other developing country to benefit from the raw market and extend t heir domain. Dominant market network, using partnership advantageous creates an International joint venture with mutual benefits to partners, increases growth opportunities and market power for both parties.Business market power is an essential deciding factor in selecting a partner. It is also critical to review the business and economic story of the environment, current climate and future predictions. The regional and national business performance, quality of life and people expenditure on similar product and services protagonist to indicate the partners economic environment suitability.Development and anxiety of international joint ventures in different environments creates their own challenges, above all cultural discrepancys between two partners from different nations adds additional complexity. Other related issues and challenges are language barriers and consequence communication issues, management relationship combats, unclear objectives, different objectives, incompati ble expertise / facilities, miss of partner support and involvement.Partner Compatibility EvaluationBefore making any decision on selecting a joint venture partner, extensive research and dilate study are undeniable to be carried out to chance upon the partners business prospects, objectives and the environmental and organisational characteristics.SWOT (strengths, weaknesses, opportunities and threats) analysis is very beneficial and could be utilised to identify the potential partners weaknesses and strength and how they match the companys requirements. This would help to establish if two businesses co-occurrence each other (Barnes, 2010).During the International join venture module and the group exercises, author gathered a list of important criteria that are crucial in the partner selection processPast reputation and positive track move into of collaboration, good brand, culture (national and corporate culture), Organisation size, mutual benefit potentials, compatibility o f CEOs and the ranking(prenominal) management team, ability to work together in operation levels, government laws and regulations, strategic clarity and compatibility, management style, subject matter knowledge and skills, experience in the related market and assets (Barnes, 2010).In this assignment author is going to analyse and research Cultural differences between partners and matched management style.CultureWhy culture is an important factor?There should be a cultural fit between companies, for example it is tricky to match a bureaucratic culture to non-bureaucratic culture, as resources are not used to obey rigid rules (e.g. managers stamp or mite to process tasks).International joint venture partnership cannot avoid cultural differences there will always be a case of hybrid structures.According to Swierczek (1994) majority of joint ventures partnership tribulations are caused by cultural related issues and mismatches. A study of 110 joint ventures between America and As ia shows 50% of failure is mostly affected by non- antonymous cultures and incompatibilities.Partners culture influences commonly known assumptions, unrecorded rules and regulations and common understandings. It is important to evaluate the potential impact of the partnerships effects on the world-wide skills, quality, resources and the company systems and organisational structure. Due to the cultural differences and the need of cooperation, there would be a need to compromise however the effect of this needs to be analysed and the impact carefully evaluated (Swierczek, 1994).One important factor that determines the success rate of an international joint venture partnership is culture compatibility without this partners cannot work together and conflict can occur. Compatible cultures can create kindred understanding and harmony between the partners.To understand cultures and the factors that could impact the possibility of their compatibility, author has evaluated different angle s and viewpoints of culture.According to Hofstede (1984) core aspects of culture areHigh power distance Communication with higher positioned members and senior managers has formal process with hierarchy organisational system.Low power distance Members feel equal, included in decision-makings and communication with senior members and environment is more relaxed and informal.Individualism Contributor is focused on self-success, own benefits and objectives.Collectivism Contributor has more interest in team success and group interestHigh uncertainty avoidance Keeping away from risk and getting out of conflictsLow uncertainty avoidance homely with approaching risks and dealing with disagreementFemininity In Feminine cultures set and approaches are modest, emotional and considerate.Masculinity This culture is oriented by Competiveness, assertiveness and achievementsIn authors opinion it is evident that cultures with different values can face conflicts and disagreements, different nation s can have different understandings and interpretations and culture as a foundation affects the conflict management style. In multicultural joint ventures, partners communication style will differ and could clash with each other this could be very frustrating and create unsuccessful results. Different culture means different languages, different outlook, beliefs and problem work out approaches.According to Swierczek (1994) Asiatic culture generally avoids conflicts and when it occurs they seek help from senior members to suggest solutions but in European cultures there is less respect for hierarchy and when confrontation occurs, the negatives would be pointed out directly.In authors personal experience from Asian and European cultures, people with different cultures have dissimilar attitudes in business, partly because of the educational and discipline methods, that differs in cultural backgrounds.Partnership between two firms could be successful if cultural differences are realis ed and analysed in archeozoic stages. This would be by identifying the potential problems and conflicts with proposed solutions enabling partners to benefit from constructive aspects of multicultural approach.According to Swierczek (1994) building a correct and effective organisational culture and considering the mired cultures could reduce the possible conflicts. To make conflict management more effective two methods are introduced1. via media styleTo prevent any win-lose topic, participants would negotiate and agree to give up their benefits partly so their partner would gain mutual benefits as well. Also when same objectives cannot be reached or more than one agreement is on the table, compromising needs to take place.2. Collaborative styleAll the participants need to get involved and identify roots of conflicts and assess the possible outcomes and damages then introduce solutions agreed by everyone (Swierczek, 1994)According to Al-Khalifa and Peterson (1999) in many failed i nternational joint venture (IJV) cases, manufacturing process doesnt last very long and this is caused by the lack of understanding of the local cultural, political and economic environment.Cultures need to fit between the organisations, a mete out of international joint ventures collapse because of cultural misunderstanding and differences it is useful to research the local market first before entering the collaboration.An example of cultural difference is looked at by Lynn (2002) between Japanese and American companies, where Americans had the impression that Japanese are efficient and hardworking but were disappointed when saw different results after starting the international joint venture in America.In Japaneses view deadlines werent as important as it was for Americans, Japanese were more concentrated on what they requirement to achieve regardless of time but Americans aimed to finish the work by the deadline however possible. This was a big problem for Americans when they u sed one of Japanese suppliers and received the order six months late.In authors opinion the definition of hardworking and efficiency in different cultures differs where Japanese seem to be aiming for the best result and modify the quality and less concerned about the deadlines. This could be very frustrating to opposite partner with different attitude.It is important that companies find a partner that are compatible and have the same perspective and understanding. Culture awareness and a full initial analysis phase, to gather the required information, helps partners to evaluate the possibility of working together successfully and provide the bases so that parties design a framework and set a realistic jut out that would work for both cultures.Partner complementary skillAccording to Zahra and Elhagrasey, (1994) majority of International joint venture failures are caused by selecting a wrong partner. Partner selection by their brand popularity or reputation is not enough and further research is needed to determine if the partners are compatibleIf Partners skills and strength matches or compliments the business requirements, the partnership objectives could be successfully met these requirements could be market, skills or resource access related.The range of skills that each partner can contribute to a partnership varies. A purpose of a partnership would be to fulfill the business requirements where the necessary skillsets such as technical skills, market knowledge skills, production skills, management skills or resource access skills are not at a sufficient level.This could also be due to the associated costs or time limitations challenges with producing these skills locally / internally.When two partners skill sets complement each other, partnership can work well together, however if two partners have similar or identical skill, disagreements and competition could occur.Organisations can often attain from the skills and experiences offered by the partner in an international joint venture to enhance their offerings and abilities. This could reduce the needs of future partnerships.Management StyleIt is challenging to manage International joint venture (IJV) companies that have been created by two or more parent companies. These companies have different structures, goals, management style and organisational cultures.People management conflicts go bad evident when partners discuss how the organisation will be managed and who will be in charge.According to Matthews (1999) the problems with international joint venture that require control and organise management areDifferent background and culturesBusiness geographical locationsInevitable IJV short lifetimeJoint business political issuesThe opportunities where management style could have a critical impact includeCombination of technical and business skillsAccess to IJV parents staffOrganizational learningAccording to Matthews (1999), developing ethnocentric mental capacity in organisation s tends to concentrate on parent companys management methods, be narrow-minded and inflexible. Traditional IJVs used to concentrate on parent companys management procedures and problem solving process which mostly ended up unsuccessful but some chose to approach global mindset and try to understand different cultures, agree to diversity and apply different management approaches where needed.Multiple IJVs management styleWithin multiple IJVs it is gathered that decentralised approach is more successful than centralised approach. After forming IJVs in different locations and put up the operations successfully each overseas IJV would plan and react to local market demand. This would improve efficiency and make them able to respond to local customers immediately.According to (Yan and Duan, 2004) matching partners need to have compatible management culture and strategy, consensus on strategies, control and operations management.In authors opinion compatible management style is about ma nagers with efficient communication and skills in creating a balanced relationship between partners.Management control and strategy is the key to be agreed by both parties to prevent any conflicts during the IJV and management control to prevent problems such as rush growth, ineffective use of resources and autonomous goals.Within this process partners need to have a structured management system and build an independent organisational culture.According to Gil and Butler (2003) it is easier to work with an international partner when managers have international business experience and cultural knowledge, this awareness enables them to adapt to environment, have positive attitude, respect multicultural environment and identify business partners capabilities thereof having multicultural market knowledge can create an opportunity for both partners to understand and respect cultures, agreeing on what is best for joint partnership.According to Gil and Butler (2003) the constancy of the r elationship depends on affirm, conflict and dependenceinfluenced by management skills affecting IJV performance.Some of the important skills in managing IJV areNegotiation skills Compromise, exchange ideas and make decisions at different levels e.g. Engineers and StakeholdersManagement Political skills Negotiate and communicate with government members involved in IJVDiplomacy Dealing with conflicts and resistance within the partner relationshipInter-partner skills Managing partnership, communication, expectations and setting objectivesInfluential skills Influence and motivate team membersManaging ambiguity Bringing objectives and vision as close as possible.In authors opinion in hybrid IJV organisations, it is difficult to avoid conflicts and control system with openness management style.First steps in IJV early stages areTo identify problems and related solutions agreed by everyoneTo plan and ensure that the management strategy matches the IJV environmentFlexible management approa ch to adopt as changes happenBalanced relationship creates harmony and trust, successfulmanagementof an international joint venture mainly depends on a balanced partnership which is based on trust and shared ownership, where parties communicate effectively and all the way to help efficient move towards common goals and clear objectives.At the same time extra cautious needs to be taken when dealing with crankyculturalandregionalissues, witha certaindegreeofdiplomacy, people andlanguageskills.Creating good condition for partnershipPrior to start of any engagement when forming a joint venture partnership, it is essential for both parties to setup an agreement clearly defining expectations and scope. This will form a clear understanding between partners and helps with forcefulness of communications between parties (Barnes, 2010).In authors opinion to increase the chances of relationship survivor it is important to be open about every aspect of the business from beginning in particula rly about financial matters to gain the partners trust.Agreements on goals, responsibilities and performance measurements (KPI) in early stages could indicate any problems and warnings, which could be resolved and prevented in early stages.In the meantime flexible relationship and atmosphere is essential to allow freedom of speech and involvement in suggesting improvements or even change of professional objectives. Any partnership would encounter problems and disagreements, however looking at problems positively and promoting an attitude to create situations where win-win approach (Barnes, 2010) is applied is the key for creating a good condition for a successful partnership.There are a number of elements that would significantly impact the condition of an international joint venture experience and environmentsInvest time and effort to get to know the partnerIn an international joint venture partnership it is important for the parties to take the time to get to know each others orga nisational structure, cultural habits and methods of work.Clear objectivesSetting clear objectives and goals prior to any engagements is essential to prevent any ambiguity and conflicts.Management styleIJV complex environment could create conflict and ambiguity between partners, compatible management skills could create balanced relationship.Roles and responsibility definition and assignmentIn a complex joint venture partnership with a large number of unknowns and a mixture of cultures, habits, structures and skillsets, roles and responsibilities ought to be defined clearly to avoid disappointment and ensure effective partnership condition. prospect managementOpen and honest communications from start of the business to the end is essential, people involved need to understand what will be achieved and when this will be achieved. Everyone needs to understand the objectives and progress of them. Misunderstood or unrealistic expectations can make a successful process ending as a failure . score TrustWhen an environment is stabilised and partners have agreed on compatible goals with set mutual benefits, both parties need to work on gaining each others trust to enable smooth process avoiding unnecessary red tapes to maximise efficiency and workforce effectiveness.Risk forecast, evaluation and preventionIt is important for companies in a joint venture partnership, to identify and evaluate the risks related to the partnership program and the associated impacts.Identifying problems and risk evaluation in early stages would prevent any unexpected surprises during the process. Also this would give an opportunity toanalyse issues and find solutions.Following are examples of potential risks with IJV partnershipLanguage barriersMultinational partnership involves different languages a solution needs to be applied to overcome language barriers. Full reliance on interpreters and translators could introduce additional risks where individuals do not have the required technical an d related business experiences. It is highly advantageous if the employee involved with the business strategy, have related knowledge, background as well as being bilingual.CultureDifferent cultures represent unknowns and risks. Respecting multicultural environment and having awareness could prevent future conflicts, create opportunities to utilise multinational benefits and minimize the level of disagreements between parties.PoliticsGovernment laws and regulations vary in different countries. Time need to be invested to fully understand the local policies where the venture is based.Organisational strategiesOrganisational strategies mismatch between companies could directly or indirectly affect the objectives. These inconsistencies are required to be identified and highlighted to be considered during the planning phase to avoid potential future issues.Geographic considerationLocal and related market condition as well as work ethic should be considered and matching business environme nt appropriately applied.CommunicationClear communication is crucial in IJV environment where a lot of conflicts and confusion could occur because of cultural differences. Setting an open networks and freedom where employees can approach management levels easily could create an opportunity for everyone to get involved.ConclusionFor countries to develop, create new technologies, use new facilities market and products, joint venture is very beneficial. Joint venture is an opportunity to boost businesses and continues to occur in more countries. Every international joint venture starts with different cultures and because of its multicultural nature it is indispensable to experience disagreements.Creating mutual benefits and harmonious environments with common objectives and agreed values can overcome the cultural differences and create common culture which benefits partners and uses the positive side of multicultural partnership.It might be more effective to invest in countries that h ave similar cultures because it would be easier to understand the business networks, market needs and to resolve problems.With countries developing to be multicultural and expanded communication network grasp further distances, it is getting easier to approach new opportunities. People are interested to know other cultures and learn about others. The challenges and complexity in different cultures is unavoidable but nations awareness is very high hence their approach to each other is very positive and relaxed.While achieving strategic fit is more fundemental to the viability of a partnership,a good cultural fit optimises the potential of the partnership and helps to avoid the threats to its continuation which arise from misunderstanding and antipathy.While it is important for partners in an IJV to establish a strategic fit to help improve feasibility of a partnership, an effective cultural match between the companies creates opportunities for a stronger relationship. This helps to avoid misunderstanding, risks and potential issues that could cause damage the partnership.Partners need to establish trust, honesty and priorities to understand elements of successful IJV, structuring relative management style, which is independent from parents company strategy and assigning partners management responsibilities according to their expertise promises positive outcome at the end of the partnership.Partners require creating a relationship based on honesty trust. It is vital for the parties to invest time and resource to understand fundamentals of a successful IJV partnership. Reforming and creating a relative management strategy, which is independent from partner companies are key to a successful joint venture partnership.