Nora Sakari case analysis
1. 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?
Ans. Part 1: Negotiations to date between Nora and Sakari have failed mainly due to a mutual ignorance of one another's cultural norms. One of the key reasons for failed to result in an agreement is that there is huge gap between what Nora and Sakari can sacrifice to successfully negotiate the contract with each other. Following are some example proving how far they are from the real contract.
Sakari proposed an equity split in the Joint Venture (JV) Company of 49 percent for Sakari and 51 percent for Nora. Whereas, Nora proposed a 30 percent Sakari and 70 percent Nora Split.
Sakari proposed to provide the JV Company with the basic structure of the digital switch where by the JV Company would assemble the switching exchanges at the JV plant and subsequently install the exchanges in designated locations identified by TMB. On the other hand, Nora proposed that the basic structure of the switch be developed at the JV Company in order to access the root of the switching technology.
Sakari proposed a royalty payment of five percent of the JV gross sales while Nora Proposed a payment of two percent of net sales.
Besides this, there is a huge gap in the Sakari’s expected salaries and perks from the JV Company and what Nora willing to provide. And finally both Nora and Sakari disagreed on the location for the dispute resolution. In addition to this, lack of preparation and lack of understanding on the differences due to national culture is another factor for failed negotiations. Ans. Part 2: While talking about the Nora’s point of view, to ensure compliance with the terms of the TMB contract, joint venture negotiations with Sakari must be successfully concluded. Nora is looking to secure a partner that will enable them to comply with the TMB contract, as well as to learn from Sakari's success and replicate that model in the Malaysian market.JV Company would be the best objective because if they are able to reach the negotiations, Nora would benefit from the JV in terms of technology transfer. Sakari was one of the leading telecom companies in Europe. It would be an invaluable opportunities for Nora to learn from the Finnish experience and emulate their success for Malaysia. Although, Sakari was a relatively a small player in fixed networks, these networks were easily adaptable, and could cater to large exchanges in the urban areas as well as small ones for rural needs. Apparently, Sakari’s smaller size, compared to that of some of the other MNC’s, was an added strengths because Sakari was prepared to work out customized products according to Nora’s needs. Large telecom companies were alleged to be less willing to provide custom-made products. Instead, they tended to offer standard products that, in some aspects, were not consistent with the needs of the customers. Therefore, Sakari is the best option for Nora as Sakari can provide what Nora really need and they also know each other as they already involved in the negotiations contract. If Nora strated negotiations with any other possible parties then that will be costly and consumes too much time that way Nora will lose its reputation in the market due to its inability to provide what it had previously promise with TMB. Finally, Sakari has experience in the exporting market and they have modular based open standard technology which would be another key advantage Nora would be benefited from its Finnish counterparts. On the other hand, Sakari would also be benefited from the JV Company contract between Nora and Sakari because the venture would pave the way for Sakari to acquire knowledge and gain access to the market of south-east Asia. Sakari's main objective is to acquire knowledge of, and...
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