1. Nora- Sakari: A Proposed JV in Malaysia (Revised)
This case presents the perspective of a Malaysian company, Nora Bhd, which was in the process of trying to establish a telecommunications joint venture with a Finnish firm, Sakari Oy. Telecom Malaysia Bhd (TMB), the national telecom company, was given authority by the Malaysian government to develop the country’s telecom infrastructure. In October 2002, TBM called for tenders to bid on a five-year project worth RM2 billion for installing digital switching exchanges in various parts of the country. The project also involves replacing analog circuit switches with digital switches. Nora Bhd was the one of the leading companies in the telecom industry in Malaysia. Then Nora was interested in securing a share of the RM 2 billion contract from TMB and more importantly, in acquiring the knowledge in switching technology from its partnership with a telecom multi- national corporations. During the initial stages, Nora considered Sakari as a serious potential partner because Sakari was prepared to work out customized products according to Nora’s needs. Sakari was Finland’s largest publicly-traded industrial company and derived the majority of its total sales from exports and overseas operations. One of Sakari’s strategies was to form Joint Ventures to enter new foreign markets. Nora and Sakari has discussed the potential of forming JV company in Malaysia for more than two years. In January 2003, Nora submitted its bid for TMB’s RM2 billion contract to supply digital switching exchanges supporting four million telephone lines. Assuming the Nora-Sakari JV would materialize, Nora based its bid on supplying Sakari’s digital switching technology and Nora placed a competitive bid for the TMB project and was in dire need of a partner to fulfill its contract. 2.A. Why have the negotiations so far failed to result in an agreement? Is the formation of the JV between Nora and Sakari the best option for both companies to achieve their respective objectives? A joint venture between Sakari and Nora would be the best option for either of the companies is difficult to assess. However, there are certain benefits, which are mentioned in the case, that clearly outline the initial motivation for forming the joint venture. From the Sakari side, the motivation came in the form of a new market in Asia-Pacific region and that the JV company in Malaysia was seen as a hub to enter this market, while Nora was motivated by Sakari’s technology and the possibility of acquiring it in the future. The forming of the joint venture would benefit both companies if the terms of the agreement were favorable for both parties. It is also noted in the case that Sakari had another option of expanding its operations into the United Kingdom, which could be used as a hub to penetrate the European Union (EU) market in turn split the corporation into two “camps” – one for the joint venture with Nora and one for became bidding recently-announced tender for a major telecom contract in the United Kingdom. With the stage set, we now turn to analyzing the negotiations that Sakari and Nora held and why these two companies could not find common ground to form a joint venture. A possible repercussion of that was noted in the case that while Nora’s executive had the power to make contractual decisions on the spot, while Nora could agree on certain matters after consulting Zainal, the Sakari team, representing a large private company, had to refer contentious items to the company board before it could make any decision that went beyond the limits authorized by the board. The next dimension that the companies differed on was the uncertainty avoidance. While in this dimension the two sides differed least, Nora was more inclined to take risks involved with the creation of the joint venture. They were responsible for the establishment of the factory as well as managerial offices, while negotiating contracts with TMB and keeping the...
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