A PROPOSED JV IN MALAYSIA (Revised)
R. Azimah Ainuddin prepared this case under the supervision of Professor Paul Beamish solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
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Version: (A) 2006-09-07
On Monday, July 15, 2003 Zainal Hashim, vice-chairman of Nora Holdings Sdn Bhd1 (Nora), arrived at his office about an hour earlier than usual. As he looked out the window at the city spreading below, he thought about the Friday evening reception which he had hosted at his home in Kuala Lumpur (KL), Malaysia, for a team of negotiators from Sakari Oy2 (Sakari) of Finland. Nora was a leading supplier of telecommunications (telecom) equipment in Malaysia while Sakari, a Finnish conglomerate, was a leader in the manufacture of cellular phone sets and switching systems. The seven-member team from Sakari was in KL to negotiate with Nora the formation of a joint-venture (JV) between the two telecom companies.
This was the final negotiation which would determine whether a JV agreement would materialize. The negotiation had ended late Friday afternoon, having lasted for five consecutive days. The JV Company, if established, would be set up in Malaysia to manufacture and commission digital switching exchanges to meet the needs of the telecom industry in Malaysia and in neighbouring countries, particularly Indonesia and Thailand. While Nora would benefit from the JV in terms of technology transfer, the venture would pave the way for Sakari to acquire knowledge and gain access to the markets of South-east Asia. 1
Sdn Bhd is an abbreviation for Sendirian Berhad, which means private limited company in Malaysia. Oy is an abbreviation for Osakeyhtiot, which means private limited company in Finland.
Purchased by SUNG JIN CHOI (email@example.com) on June 19, 2012
The Nora management was impressed by the Finnish capability in using high technology to enable Finland, a small country of only five million people, to have a fast-growing economy. Most successful Finnish companies were in the high-tech industries. For example, Kone was one of the world’s three largest manufacturers of lifts, Vaisala was the world’s major supplier of meteorological equipment, and Sakari was one of the leading telecom companies in Europe. It would be an invaluable opportunity for Nora to learn from the Finnish experience and emulate their success for Malaysia.
The opportunity emerged two and half years earlier when Peter Mattsson, president of Sakari’s Asian regional office in Singapore, approached Zainal3 to explore the possibility of forming a cooperative venture between Nora and Sakari. Mattsson said:
While growth in the mobile telecommunications network is
expected to be about 40 per cent a year in Asia in the next five years, growth in fixed networks would not be as fast, but the projects are much larger. A typical mobile network project amounts to a maximum of €50 million, but fixed network projects can be estimated in hundreds of millions. In Malaysia and Thailand, such latter projects are currently approaching contract stage. Thus it is imperative that Sakari establish its presence in this region to capture a share in the fixed...