group 7 joint venture

Joint Ventures as Business Strategy

Group 7

SUCCESSEFUL JOINT VENTURES are like marriages: Made in Heaven, materialized on earth

Brahmos: India 50.5%, Russia 49.5% • Named after Brahmaputra and Moskva

river• Built to counter the US Tomahawk and

Harpoon Missiles• Land launched, Land attack variant

To produce 2000 Brahmos missiles, • Indian Army and Navy and Russian

Navy have already inducted Brahmos

• Export to friendly countries initiated, Malaysia is the first customer.

50:50 JV formed in 2001 after 10 yrs of cooperation• Leveraging strength of both

partners – Products of Nestle in Tea segment and Distribution capabilities of Coca Cola

• Employees drawn from both parent companies.

• Brings experience and diversity

Presence in 60+ countries• More than 10% YoY growth and • The products – Nestea and YuanYe

are leaders in their segments• Detailed agreement allows

competition in coffee segment and cooperation in tea segment

Maruti(India) & Suzuki(Japan): 1981• Maruti(Govt. of India) – 74%• Suzuki – 26%• Major Competitors:

• Hindustan Ambassador• Premier Padmini

1992: Suzuki’s share 50%• Effective marketing• No.1 in after sales service: Maruti

True Value• Car for common man• Met Indian mindset• 2010 market share: 55%• 2010: Govt: 0% & Suzuki: 54%

26% Each : Hero Honda Motors in 1984• Honda to provide technology, set

up manufacturing facility, support R&D

• Honda wanted entry in Indian market

2009: JV has 57% market share in India • World’s largest two wheeler

manufacturer since 2001• Sold 3.7 mn bike & grew 12% YoY in

2009

TAGIC: Jan’2001• TATA– 74%, AIG – 26%• TATA’s leadership in Indian market• AIG’s global expertise

2010 profit: INR 15mn• Revenue 2010: INR 5.8 bn • Complete range of general

insurance products for automobile, home & personal accident

• Expanded to 372 offices all over India

FAILED JOINT VENTURES:BUT all marriages are not made in Heaven…

Pandesic founded in 1997• Aim : E-Commerce Services • Packaged SAP S/W & intel H/W• Website Support & management

Lasted till 2001: Burned $200 mn• Who owns Strategy execution • Lack of clarity in roles &

responsibilities• No clear plan for venture

profitability• Unscalable system disabling ability

to gain economies of scale• High set up cost & fees as

percentage of client’s revenue

TVS (India) & Suzuki (Japan) : 1983• Suzuki: Technology contributor• TVS: Provided access to Indian

market

2001: Joint venture called off• 1989-1991: posted losses• 1991: Company shuts due to labor

issues• Technology, Capital &

manufacturing Independence• TVS lobbied for increasing stake in

JV & Suzuki’s share shrunk• Suzuki entered in agreement with

Kawasaki in 2001• Confident about business without

collaboration

Global One: 1996• To respond to customers and

market place with unprecedented service

• Combined & extended businesses of parent companies

• One global network• Started with 2500 employees &

1200 points of presence in 50 countries

Lasted for 3 years• Disagreements over target

customers• Cultural differences in German &

French• Now run by France Telecom

Dabhol power Corporation• formed by GE, Bechtel and Enron• Project started in 1992• GE – Technology• Bechtel – Manufacturing facilities• Enron – Operational management

Enron bankruptcy 2001 & Govt backs out plan in 1996• Wrong technology of using Naptha

instead of LNG or coal• Financial irregularities and Kick

backs by Enron surfaced• Power generated is double the cost

and half the capacity• Now run by Ratnagiri Gas and

Power plant in 2005

1984: GM Daewoo – 50:50 Joint venture• GM to provide technology &

process knowledge• Daewoo to provide cheap labor &

manufacturing facility

2008: $775 mn losses, never profited• South Korea: democracy & lost cost

advantages• Conflict of interest: Daewoo’s

expansion in US market• Blame game: Marketing or Quality