Motivations and Suitability of International Joint Ventures in Global Expansion

Individual Academic
Report

CONTENTS
Introduction................................................................................2
Literature review........................................................................2
1. Demonstrate an understanding of the motivations behind the formation of International joint
ventures and in the internationalisation/globalisation process 2
2. Analyse the decision-making criteria that determines the suitability of the use of
international joint ventures.....................................................3
3. Demonstrate an understanding of the suitability of international joint ventures in
international/global expansion................................................4
4. A critical assessment of the benefits and challenges of the use of international joint ventures
in foreign market entry........................................................5
Discussion and analysis.............................................................6
1. Demonstrate an understanding of the motivations behind the formation of International joint
ventures and in the internationalisation/globalisation process6
2. Analyse the decision-making criteria that determines the suitability of the use of
international joint ventures.....................................................7
3. Demonstrate an understanding of the suitability of international joint ventures in
international/global expansion................................................8
4. A critical assessment of the benefits and challenges of the use of international joint ventures
in foreign market entry...........................................................8
Conclusion.................................................................................9
References................................................................................11

INTRODUCTION
International business is the purchasing and selling of goods and services across national
borders of a country (van Hoorn and Maseland, 2016). In this businesses expands their selling
and manufacturing activities in other countries with the help of analysing the needs of other
countries. It involves exploration of business opportunities in other countries such as access of
cheap labour, raw material, infrastructure and other factors of production. It helps in expanding
business activities for earning more profits in other countries. It occurs due to presence of
various factors such as saturation of market opportunities in home country, exploitation of
market opportunities in foreign countries, lower tax rates, rules and regulation for conducting
business and other factors etc. International business is one of the vital strategy for expanding
and diversifying business areas in other countries. This helps in exploring business opportunities
outside national boundaries of a company. It helps business to understand international market
with analysing needs of consumers and identifying target audience in new markets. Thus,
international business is important for increasing market share and expanding market reach or
customer base of a company. Cafe pod is a retail coffee brand in London with large variety of
drinks. In this report it includes international business practices with respect to various macro
factors in the market and its impact on company. It involves analysis of international market
patterns and methods for minimising risk in international market.
LITERATURE REVIEW
1. Demonstrate an understanding of the motivations behind the formation of International joint
ventures and in the internationalisation/globalisation process
Forming International Joint Venture for the companies many times proves a better option
for the internationalisation of the business but this doesn't happen without any motivation. Going
global is a big task and this needs a big motivation (Collinson, Narula and Rugman, 2016). If a
company goes for the joint venture, then it can achieve the economies of scale to compete
internationally and can bring more customers for the company.
Various motivations behind the formation of International Joint Venture are under:

 Reduction in cost: A company going for joint venture with another established firm can
share various costs incurred in the activity such as transportation cost, advertisement cost,
distribution cost, etc.
 Synergy effect: Companies can gain synergy effect by going through joint venture. They
can enjoy either financial synergy or operational synergy or can both, which will bring
more efficiency in the product which could not be present without joint venture.
 Less Competition: Every company wishes to have a less competition in the market and if
any company can get an opportunity to reduce one in the list from the competitors via
joint venturing then there would not be any other motivation for the company. Firm can
reduce its competitors if it gets into the process of joint venture, by this company can
gain competitive advantage and can cater more customers.
 Diversification: Diversification for a small company is necessary in order to grow and to
work on a large scale. Through this, a firm can either do horizontal diversification or can
do vertical or can also go for the conglomerate diversification.
2. Analyse the decision-making criteria that determines the suitability of the use of international
joint ventures
Making a correct and profitable decision for the suitability of the International Joint
Venture is very crucial and a matter of concern for the business entity (Bullough, Moore and
Kalafatoglu, 2017). A right decision can lead organization to the heights of success whereas one
wrong decision can lead company to shut the activity and suffer huge losses. Therefore, taking a
decision for the use of International Joint Venture is supported by various criteria out of which
few are discussed below:
 Company's Culture: Company's culture and behaviour speaks more about it. It is better
for the business entity to understand and get familiar with the culture of the host country.
By knowing about its culture the company can analyse whether the host company is
suitable for the joint venture or not. If the culture of the firm is understandable and is
favourable, then both the companies can work with mutual concerns and thoughts but if it
is not then there may arise the chances of clashes which will create a problem in near
future. So analysing about the culture before taking any decision will present an idea
about the suitability of the International Joint Venture.