A Review of Literature on How to Manage International Joint Venture Successfully

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A Review of Literature on how to manage International Joint Venture successfully. By Samaila Umar

There is serious increase in the number of organisations seeking to operate in today’s highly competitive global markets with sustainable competitive advantage. (Taylor, 2004; Ernst & Halevy, 2004). In order to achieve this international expansion, companies use different market entry strategies. Earlier study on IJVs reveals that international joint ventures are the most common means of internationalization (Ernst & Halevy, 2004). This paper shall present a review solution on how to achieve successful IJV alliance In general, international joint venture (IJV) is an equity sharing arrangement between a local firm and a foreign cooperation (government or private) coming together by putting all necessary resources together, sharing risk and operational controls to operate as one independent business entity to accelerate profit and growth or in order to achieve some strategic goals. (Craig C. Julian. 2000). In most IJVs, two companies merge together for the matter of ease and convenience, the two companies involve become the parent of the organization that surface from the merger (Geringer & Hebert, 1989). But there are situations where more than two companies form IJV, this is true in cases where already merged companies try to merge with other bigger companies to establish a single organisation “T0o compete in an international business environment, firms are forming joint ventures as a mechanism for the enhancement of global competitiveness.” (Cyr, 1995)” IJV can aid an organisation in achieving their business objectives in hostile and uncertain markets (Miller et al., 2007). Clayton-Smith (2012). Suggest that IJV “offer a great opportunity for multinational businesses to facilitate growth, to gain skill, capabilities, market access, etc.” (For example businesses can cut cost and boost growth by using the same human resources, deliver services with the same computing facilities and even share office infrastructures). IJV comes with many benefits, Kumar &Pavan (2012) describe benefits of IJV to an extent, that is, when companies partner together, they provide themselves strength, capacity and expertise to conquer new geographical markets, expand their product portfolio and also for diversification. There are few success stories associated with IJV, (Xerox &Fuji) decade of stormy partnership has survived well, with both companies praising their success on IJV alliance IJV alliances over the past decade have shown a promising future (Kumar&Pavan, 2012). Earlier research on IJV growth and risks by KPMG supports Kumar &Pavan (2012) claims. In (2005), A KPMG finding showed that 64% of US companies will opt for IJV alliances, and Also 52% decided to create a new alliance within two years. Various studies on IJV partnership showed a very optimistic future. Vast majority of executive’s reports show that their IJV alliance has generated about 40% in their annual revenue, Most times, IJVs are created so as to gain access into hostile and uncertain markets (Abroad), which might not be possible otherwise. Definitely two heads working together are better than one, in the same philosophy; two companies would work better than one. Obviously, there will be more resources available when you have two or more companies merged together This optimism of IJVs comes with huge risk, IJVs suffer from several draw backs, these draw backs are the primary reason behind the failure of a large number of IJV partnerships. Research by Kalmbach & Roussel (1999) reveals that 80% of IJVs have failed and only 20% were successful. Another similar study by Neal R. Goodman (2011) estimated 50 to 70 percent failure in International Joint Venture. Matthews (2001). produced a great piece of literature on the reasons behind the failure of IJVs, Matthews (2001) stated the following as defining characteristics of IJVs, “IJVs need...
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