ijv ppt

8/3/2019 IJV PPT

1/29

INTERNATIONAL JOINTVENTURES IN INDIA

INDIAN FOREIGN TRADE

8/3/2019 IJV PPT

2/29

INTRODUCTION

11 January 2012 2Class Presentation

A joint venture 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

8/3/2019 IJV PPT

3/29

REASON FOR IJVs

JV provides a lower risk option of entering

into a new country. .example- motorola enterred

india in JV with blue star company, a brand withrepute 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.

12 January 2012 3Class Presentation

8/3/2019 IJV PPT

4/29

Others Reasons

Technology.

Lower Risk of Geographical

Location.

Government Regulations.

Access to Capital.

12 January 2012 Class Presentation 4

8/3/2019 IJV PPT

5/29

Types Of IJVs

1. Jointly controlled operations.

2. Jointly controlled assets.

3. Jointly controlled entities.


8/3/2019 IJV PPT

6/29

Pre-Liberalization Scenario

Indian industry was unaware and

unconscious about the danger of

International Business. Most businesses did not have economies

of scale by global standards.

Control on collaborations restricted the

choice of technology and manufacturing

methods.


8/3/2019 IJV PPT

7/29

Post-Liberalization Scenario

International players become major threats

because of their limitless resources.

Indian players has an option either toincrease production or entering into JV

with Global players.

Foreign players saw India as a land of

opportunity to take advantage of low cost

of production.


8/3/2019 IJV PPT

8/29

Need for setting up a Joint Venture


INTERNAL REASONS COMPETITIVE GOALS

STRATEGIC GOALS

8/3/2019 IJV PPT

9/29

INTERNAL 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.


8/3/2019 IJV PPT

10/29

COMPETITIVE 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.


8/3/2019 IJV PPT

11/29

STRATEGIC GOALS

1) Synergies.

2) Transfer of technology/skills.

3) Diversification.


8/3/2019 IJV PPT

12/29

Problems of IJVs

1. Valuation Problems.

2. Transparency.

3. Conflict Resolution.4. Division of management responsibility

and degree of management

independence5. Changes in ownership shares.


8/3/2019 IJV PPT

13/29

6. Dividend Policy.

7. Marketing and Staffing Issue.

8. Cultural Problems.

9. Multinationality problems.


8/3/2019 IJV PPT

14/29

Before entering a Joint Venture..

Both partners should appreciate the need for the

joint venture.

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

Take measures to be sure that the partner has a

compatible work culture.

Be sure about the organisational behaviour of the

partner to ensure synergies.

8/3/2019 IJV PPT

15/29

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 partnersare 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. Clarly define the role and responsibility of each

partner.


Before entering a Joint Venture..

8/3/2019 IJV PPT

16/29

Indian Joint Ventures Abroad

India, is one of the largest sources of private investments inthe Third World.

The maximum Indian equity that a IJV could have was fixed at49 per cent.

IJVs were sought to be promoted as instruments of promotingIndian private interests abroad in term of

(i) acquiring larger assets in the host countries;

(ii) export markets; and

(iii) rich and high profit bearing investments.

this process India instituted export subsidies, export credit,

finance, through bilateral agreements for IJV. first case of an IJV abroad was the textile mill established by

the Birlas in Ethiopia commenced operation in 1964.

8/3/2019 IJV PPT

17/29

The applications for International joint

ventures are approved by the: Inter-ministerial Committee under the Ministry of

Commerce.

IJVs is covered by the Foreign Exchange Regulation Act,1973 (FERA).

To facilitate and encourage IJVs, the Government of India hasestablished economic divisions in the

Ministries of Commerce,

External Affairs,

Industry, and Indian Embassies outside,

Indian Investment Centre (IIC) The Federation of Indian Chamber of Commerce and Industry

(FICCI) is also active in promoting the idea of joint ventureswith other developing countries.

8/3/2019 IJV PPT

18/29

Successful joint venture require:

Each participant has something of value to bring to theventure.

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


8/3/2019 IJV PPT

19/29

Example :-

Virgin Group and Tata Tele Services

Maruti and Suzuki Tyson Foods and Godrej Agrovet

Marks & Spencer and Reliance Retail of

India


8/3/2019 IJV PPT

20/29


8/3/2019 IJV PPT

21/29

Concerns of doing a JV

Change of strategy of either of the partners

creats rift in certain JVs

The JV between Hotline group(india) and Haier(china)

missed at that point. Haier planned to increase its share to 49% to introduce

wide ranges of products including washing machines,

multi-split A?Ss etc.

Haier wanted to focus in imports. Hotline disagreed to theses, the JV broke off before the

operations started

Haier re-entered indian market with a 100% susidiary in

2003.12 January 2012 Class Presentation 21

8/3/2019 IJV PPT

22/29

In some cases accecss to technology or

capital provides sufficient confidence in

the partners to go alone, making the JV

redundant

For example- JV between TVS group

(INDIA) and Suzuki(japan) formed in 1983

was called off in 2001.


Concerns of doing a JV

8/3/2019 IJV PPT

23/29

AT times either of the partners are

accused of breaching the terms of the JV

ijv ppt

Documents