Launching a world‐class joint venture
James Bamford, David Ernst, David Fubini The article is written by 3 Consultant partners form Mckinsey. It has a very clear structure and it’s based on their research. At the beginning, they provide some general information about joint venture. Joint ventures are successful. A 5‐year period before the article was written, 5000 joint venture had been launched worldwide. The largest 100 joint ventures represent more than 350 billion dollars in combined annual revenues. Joint ventures and alliance (compared to M&A) can be ideal for managing risk in uncertain markets, sharing the cost of large‐scale capital investments and injecting newfound entrepreneurial spirit into maturing business. In reality there are still a lot of problems exist in joint ventures. In the authors’ assessment 1991, only 51% joint ventures were successful. In the 2001 assessment, the number is 53%.Based on their research, the problem of joint ventures is because the launch phase is usually not managed closely enough. This lack of attention can result in strategic conflicts between the allied companies, governance gridlock, and missed operational synergies. Then they come to the major part of the article, which are the Joint venture challenges and solutions. The challenges are fall into four categories: strategy, governance, economics and organizations. Strategy Parent companies may hold different strategic interest, which may affect the nature and degree of integration. So it will be a challenge to build and maintain strategic alignment across the separate corporate entities. Solution: Align the parents; interest around the joint venture’s objectives up front Develop a quality business plan Specify first‐year goals for the Joint venture Act quickly to manage inevitable setbacks Governance ...
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