SAPNA KUMARI 1625127

ASSIGNMENT # 1

1.Why did the companies go in for IJVs instead of other market entry methods?

In this case the IJV took place to take advantage of the key factors of both the
firms, Ericsson reputation and technology were the factors of attraction from one
side where as Indias local telecommunication distribution system and connection
with Defense Department lead to this venture.
HCL was already Indias largest computer conglomerate, where as HP wanted to
enter Indian market merely through IJV because it required less investment as
compared to other entry mode preferably direct export in this case of high end
product, which could add up the cost of investment, setup, hiring and marketing.
Therefore Joint Venture was the most reliable source of entering the market for
increasing sales and revenues.
In the case JV took place to benefit from local expert which helped Kanthal to
evaluate local market prospects which is not possible in indirect exporting
because of lack of direct interaction and direct export could have been more
costly to examine the local mark
P&G formed this venture to enter the Vietnamese market by buying 70% shares
in the Vietnamese soap company. The reason for choosing this entry mode could
have been easy access of local market and cost effective because market research
was not needed since the venture was made with the local company who would
have been aware of local culture and consumer buying behavior.

2. What problems did these IJVs have? What caused them?

There were prominent conflicts occurring due to different cultural backgrounds of

Swedish and India, which lead to informal communication and trust issues. The
expatriates were not entertained and production was solely locals responsibility.
This could have been a barrier of technology and knowledge transfer as a con of
Joint venture.

Due to the Government regulations Ericsson had to change the share ration from
74-26 to 41-49 ratio, which was regulated due to JV policy and may have not
benefited Ericsson because of equal distribution of profits, which were merely
higher before the regulations.
This case also enlightens the cultural conflicts between the two partners,
which lead to dissatisfaction and dissolved the partnership. Also the legal
limitations reduced the market share of Kanthal to 42%, which was not
acceptable as he retained 52 % shares in his second venture, which is evident
that Kanthal did not enjoy the lesser market share with local Indian engineer.

In the case of HP and HCL, the Indian market faced a rapid change with tariffs
reducing from 110 to 32 percent giving an opportunity to competitors to
enter the market. HCL with its expanded expertise team was able to produce
low cost PCs where as the profits margin gained from HP were much low.
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Therefore the conflicts occurred in the management team, which ended up

the venture between the two.
The reason of its failure was miscommunication and lack of responsibility showed
by the local partner. They were aware of initial plans yet they believed P&G to
perform similarly as Unilever. There was a lack of understanding between the two
partners and P&G was bound to bear the larger percentage of losses because of
highest shareholder.

3. Prepare a list of dos and donts for IJVs based on these illustrations.

Dont:

Allow a JV company to use your IP without an appropriate license so that

your company retains ownership of it at all times.
Be put off doing business in India by businesses that express interest and
enthusiasm but does not show up at the time of need or doesnt work for the
welfare of the company. Finding a suitable partner can take time.
Enter into a JV with a company where there is a wide disparity between
funding capabilities. This can cause problems as the JV Company looks to
expand.
Allow the Indian partner to fully control the JV Company. Have a
representative on the ground or visit regularity and ensure the decisions
requiring the consent of both parties in the JV agreement are well defined
and sufficiently protect your interests.
Do:
Research, picking the r partner is crucial. You need to ensure that the partner
has the same ambitions, vision and working culture to make it a successful
relationship. The partner does not necessarily have to be in the same sector
as your business to make it succeed but must have the things you do not have
i.e. an network, distribution chain, business reputation and contacts.
Financial, legal, commercial and reputation due diligence is key.
Visit your potential partner and get an understanding of their business. Make
sure you are familiar with the JV partners business and get to know their key
promoters. Ensure that you are dealing with the decision makers at all stages
in the process.
Ensure that you have a well-drafted dispute resolution provision in the JV
agreement.
Have an exit strategy in case things go wrong or if you want to go it alone
again.