Subcontinental Telecommunications Solutions Case Summary

I. Problem Identification
World Wide Telecommunications (WWT) entered into a joint venture with an Indian company, Subcontinental Solutions, Pvt. Ltd. (SSS), to form Subcontinental Telecommunications Solutions, Pvt. Ltd. (the JV). The issues that have surfaced since the JV was finalized, such as equipment problems and sexual harassment, are results of a dysfunctional partnership. The main problem for WWT is that the joint venture agreement is structured inefficiently with inadequate due diligence. This has led to a lack of communication and poor decision-making by the JV. The structure of the JV agreement needs to be clear and detailed in order to create a functional environment for the partnership to take advantage of the opportunities presented
WWT considered two other alternatives to develop the software for ICC: double the current capacity of its software division to develop the software in-house or contract out the development of the software. The decision to enter a software joint venture with SSS created much potential for gain and risk. The strengths highlighted include lower labor cost, recent relaxation of government regulation and SSS’s experience writing telecommunications software. Labor costs are significantly lower in India than in the United States and the quality of the work is comparable. Lower labor costs can help increase WWT’s profit margin. The Indian government remains interested in software, which has made it easier for foreign firms to get government approval required to invest in a joint venture and to obtain favorable import tariffs for equipment. WWT speculates it will be able to import software equipment at a 15% tariff, which is 45% lower than other industries. In addition to these benefits, there are some external opportunities that exist from engaging in a joint venture located in India. India is a huge potential market for WWT and therefore it is important for them to learn about the Indian business environment. WWT can take advantage of the opportunity of having the JV located in India by learning
The first solution is to have the board terminate the joint venture. WWT is in an unfamiliar environment and the JV may have taken on more expense than it should have. WWT can still properly develop the software to fulfill its obligations under contract with ICC either in-house or by outsourcing. This solution would greatly increase WWT’s production costs, but it would also eliminate the issues of having to navigate through the business environment in India and allow WWT to attack a market it is more familiar with. It is difficult to ensure that WWT has realized as much value as possible from its investment in the JV. By terminating the JV, WWT would be cutting its losses and starting over. The potential gains from the JV are unknown, but with an inefficient system in place the future viability of the JV is in danger. The second solution is to clarify the terms of the partnership. To accomplish this, the JV must clearly define the terms and implications of share ownership. SSS and WWT will be liable for the amount proportionate to each company’s pro rata share holdings. This will help avoid future budgeting issues and establish each company’s liability in lawsuits. In addition, the board of directors will have exclusive authority over appointing key employees after proper due diligence, which will improve