Why Do Japanese Companies Go for Joint Ventures in India
:: Secret to success of Indian partnership
Why do Japanese companies go for joint ventures in India?
IMM Jeong-Seong
Senior business analyst at the POSCO Research Institute
W development. hen it comes to technology, capital, management expertise, and global business experience, Japanese companies do not lag behind Korean ones. Still, they often seek partnerships with local firms when entering
the Indian market. Why? The president of Wipro, one of India’s largest information technology service companies, said, “If you want to make it in India, what you need is a
local partner.” It is difficult for a foreign company to take care of everything on its own, from market research, land purchase and logistics to market The consensus among Japanese firms is that a joint venture with an Indian partner is a must for a foreign business, given the difficulty of negotiating with an Indian government riddled with bureaucracy and corruption, pioneering a local market, and getting payment from Indian
073
Spring 2011� POSRI Chindia Quarterly
clients. It has also been observed that spotting a good partner through thorough research is a shortcut to success since forging partnerships with local conglomerates is absolutely vital in India.
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Risk aversion is the national character
Japanese companies’ preference for joint ventures stems from their tendency to avoid risk. Geert Hofstede’s uncertainty avoidance index for Japan is 92, much higher than Korea’s 85 and the US’ 46. Most Japanese companies chose to form joint ventures when they went to Southeast Asia and the US in the 1970s and 1980s. Japanese industries with strong general trading companies have done their research on the Indian market but have been waiting for an improvement in market conditions and business environment. Japanese firms have maintained high efficiency and cost competitiveness based on well-built transportation infrastructure and power grids, and trusted relationships with partners
Why do Japanese companies go for joint ventures in India?
IMM Jeong-Seong
Senior business analyst at the POSCO Research Institute
W development. hen it comes to technology, capital, management expertise, and global business experience, Japanese companies do not lag behind Korean ones. Still, they often seek partnerships with local firms when entering
the Indian market. Why? The president of Wipro, one of India’s largest information technology service companies, said, “If you want to make it in India, what you need is a
local partner.” It is difficult for a foreign company to take care of everything on its own, from market research, land purchase and logistics to market The consensus among Japanese firms is that a joint venture with an Indian partner is a must for a foreign business, given the difficulty of negotiating with an Indian government riddled with bureaucracy and corruption, pioneering a local market, and getting payment from Indian
073
Spring 2011� POSRI Chindia Quarterly
clients. It has also been observed that spotting a good partner through thorough research is a shortcut to success since forging partnerships with local conglomerates is absolutely vital in India.
○●
Risk aversion is the national character
Japanese companies’ preference for joint ventures stems from their tendency to avoid risk. Geert Hofstede’s uncertainty avoidance index for Japan is 92, much higher than Korea’s 85 and the US’ 46. Most Japanese companies chose to form joint ventures when they went to Southeast Asia and the US in the 1970s and 1980s. Japanese industries with strong general trading companies have done their research on the Indian market but have been waiting for an improvement in market conditions and business environment. Japanese firms have maintained high efficiency and cost competitiveness based on well-built transportation infrastructure and power grids, and trusted relationships with partners