Joint Venture as a Market Entry and Expansion Tool in Global Business Environment

This report discusses the use of joint ventures as a market entry and expansion tool in the global business environment. It explores the motivations behind forming international joint ventures, the decision-making criteria for their suitability, and their role in foreign market entry. The report also examines the benefits and challenges of using joint ventures in international business operations.

International Business

EXECUTIVE SUMMARY
During development of globalisation there were several concerns regarding its advantages.
However, it has brought important changes in all segments of human life and International
business is one area within it involved and contributed mainly. Organisations across the globe
are presently framing their business plan majorly after including the trends in global market
instead of domestic market. Regarding expansion and global operation, the venture considers
market entry method like joint venture. The core of these tools is to develop the business growth
option in several nations as much as possible. The whole discussion is about joint venture as a
market entry and expansion tool in global business environment.

Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
LITERATURE REVIEW................................................................................................................1
ANALYSIS AND DISCUSSION...................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................8

INTRODUCTION
International business is generally trade carried on across or beyond the geographical
boundary of the nation. When an establishment make expansion and carry on trade in diverse
nations or even more than one nation, it is involved in global business. It can be either opening
their own branch in the other nation or by the means of mergers and acquisitions. Carrying on
global business is not an easier job and it suffers numerous complexities as the culture of the
countries are differ and they way they are operating business also make differentiation on the
base of beliefs and customs so in case of global mergers and acquisitions these factor come in
force where an establishment plans to obtain an enterprise in another nation (Bhattarai and
Kucheryavyy, 2020). Also, the business enterprises consider different market strategies or
methods like partnership, merger, joint venture etc. in term of running their business in at
international scale. Joint venture is crucial tools which support organisations in perform their
business operations and actions with less risk. This written report will explain about the business
practices and how they outlined by macro environment forces as well as elements of
international environment. Further, it will discuss about international trade pattern, market
selection tool, market entry methods, method of risk minimisation and the framework to
workplace experience. Moreover, it will briefly describe the joint venture as a tool of market
entry and business expansion with its suitability, pros and challenges.
LITERATURE REVIEW
The motivations behind the formation of International joint ventures and in the
internationalisation/globalisation process
A joint venture is collaboration between a home and International organisation. Both
collaborators invest capital, share rights, and share handling of organisation. Basically the
international collaborator maintains professionalism about the new business, its contacts and
system, and entry to other in-country components of work like real-estate and regulatory
violation. Joint ventures need a huge responsibility from enterprises than other techniques,
because they are dangerous, and less workable (Dangi and et. al., 2018). Joint ventures may
bear tax benefits in many nations, especially where international businesses are taxed at higher
rates than local businesses. Few nations demand all business ventures to be at least fractionally
owned by local business collaborators. Joint ventures may also extend to various nations.
1

According to D’Alimonte D. (2014), when organisations work together on a project, they
interchange skills which are not for sale. Commonly, one partner takes over technological skill
and the capacity to retain abreast of fast moving technological evolution. Each partner therefore
gives the other with crucial assets and utilises the cooperation to expand its expertise set into new
regions.
Forming economies of scale- Collaboration can lead to a financial system of scale that will
authorise the involved organisation to gather an extended set of resources and attain the serious
stack required for global success (Carr and et. al, 2019). Organisations with compatible expertise
can depend on each other’s proven skill rather than expending time and resources to separately
evolve what has already been attained.
Increasing competition- Various foreign business projects need skill from multiple
areas. Traditionally, organisations have proved to create or keep all the needed expertise in-
house. But, as technological and administrative problems expand, organisations are studying that
they can’t do everything by itself. As a consequence, the most pushing organisations are
accepting a planning of keeping their core proficiency only. Gaps in the expertise bases are then
filled by collaborators with an organisation that has the absent expertises. This planning keeps
away the requirements to spend assets and run the uncertainty related to evolving the expertise
in-house.
Splitting global business risks- Risk sharing through collaborators is rarely seen in investigation
and development regions. Investigation and evolution prices are always growing and the rate of
revolution means that commodities rapidly get outworn and the uncertainty of investing in
evolving new commodities are high.
Entering new international markets- Planned international business associations are successful
ways of entering new international markets (Gaur and Kumar, 2018). Collaborator can give
traditional marketing and administration systems, as well as understanding of the markets they
work for, securing that commodity come to market quickly and purchasing chances are high.
The decision-making criteria that determines the suitability of the use of international joint
ventures
A frequently determined selection or decision making criterion dealing with joint ventures is
the business suitability of the parties involved. Joint venture partners with homogenous vision,
mission, plans, strategies and aims can cooperate more efficiently as well as set up a harmonious
2

working relation. In term of operating business through joint venture, the management of
business establishment make focus in several selection and decision criteria such as
complementary technical skills and resources, build a healthy level of mutual dependency,
financial capability of partners, operating policies, relative size of partners, communication
barriers and many more. According to Linhart F. (2014), the basic and primary selection
criterion should be partner’s capability to offer the technical abilities and assets that complement
those of a company seeking the partner. Technical complementarily is analysed by determining
the key success aspects, those few areas strongly impacting rivalry position ad execution,
tackling the suggested joint venture (De Massis and et. al., 2018). By technical able and with
effective resources partner firm, the other organisation can make joint venture in term of
operating its business in global business environment. Along with this management team also
play an effective role in the success of joint venture. If an establishment have good management
team then the people of the firm can perform their duties in effective and systematic manner.
With these kinds of companies, business origination can make joint venture because this assists
in running the business operation of establishment in effective manner.
For example, in many cultures, designing a personal rapport is the important first thing in
business before concurring on anything. Joint venture with companies in different nations like
Japan, China, Asia and other firm of close personal relationship is customarily prerequisite to
concluding business negotiations. It may appear unfortunate for a western administrator that joint
venture’s are so highly based on personal relation when attrition between main administrators
can hinder company and maintenance of close relationships between partner’s administrators. To
minimise prospects for such complexities, organisations should for constant between the critical
personnel with a partner’s team.
The suitability of international joint ventures in international/global expansion
A joint venture is a cooperative business establishment incorporated by two or more firms.
Before to commence operations, partners basically assign assets, consign threats and possible
remunerations and delegate operational accountabilities to each people of the company when
protecting autonomy (Kumar and et. al., 2018). At the completion of the project, the joint venture
is basically disbanded. As per the view of Manzella J. (1996), a global joint venture assists the
company to set up a marketing or producing presence abroad with the help of a local foreign
partner. The partner company may offer knowledge of government working, rules, laws, internal
3

markets and distribution acknowledgement. The information may be significant to company in
unfamiliar and unknown territory. Joint venture can be suitable for the company in term of global
expansion as with the help of this market tool, the firm can make development in the profitability
and productivity (Anglin and et. al, 2018). Because when the organisations will operate their
business at international scale by considering this particular market entry tool then they produces
commodities and services as per needs and demands of specific nation which will assist in
increasing consumer base as well as sales of the firm. It will also assist in improving economic
and financial condition of the establishments.
Also, joint venture is more sustainable because it is less risky than outright acquisition; the
capital investment is typically half or less. It also offers flexibility if local situations change or if
the marketplace or relationship proves unpleasant. On the contrary, the market may prove to be
so attractive that more investment makes sense. Also, this tool is more suitable because if a
company will consider it then it can get entry in to new market as well as build an effective and
developed position with the particular business sector.
The benefits and challenges of the use of international joint ventures in foreign market entry
As per the view of Rooyen W. V. (2020), Global joint ventures plan for a much speedy
and less expensive approach to international marketplace than can be attained by purchasing an
existing organisation in the administration or begin a new enterprise. IJVs give fast approach to
channels of allocation, and they give permission for the non-native companion to proficiency and
know-about the local market, that significantly increases the possibility for enterprises success.
The native collaborator also often has existing connections with main providers and consumers,
and skills in the native speech and duties. These advantages can be mostly deprecatory to a micro
or mini-sized business which does not have the money, assets or skill mandatory to hunt the
chance unless it is able to share the insecurity and the price by an association such as a foreign
joint venture (Quigley and Dhuse, International Business Machines Corp, 2019). IJVs authorise
the collaboration to move rapidly, cost effectively and with credibility in the domestic market.
The parties to an IJV can also grasp benefits of harmonising lines of business and synergies
which may exist between the two organisations.
A global joint venture can outcome in a frustrating skill and eventually an incompetent if it
deficient enough planning and procedure. Elements such as market evolution, technology
problems, regulatory unreliability and financial downturns can be hard to expect and can have an
4

impairing collision on IJVs. By their nature, benefits obtained from an IJV are weaker because
they are shared. Administration problems can arise, in spite of having appropriate
implementations in place to settle arguments, because of various administrations thinking of the
collaborator (Alberti and et. al, 2018) . The collaborators also may find that they do not measure
assumptions and are not variable enough to convert and assist the developing requirement of the
business. Joint ventures are often complicated to finance as an object, especially in regard to
bills, since they are limited in their time and hence deficiency endurance. Unless an IJV is
adequately funded, its debt financing, if obtainable at all, may have to be promised, in entire or
in part, by the joint venture collaborator, that can enhance their level of uncertainty in the
venture. Another potential drawback of an IJV is the chance of the design of a player or a
prospective competitor in the shape of one’s personal joint venture collaborator. This can, as
later considered, be marked by non-competition, non-solicitation and confidentiality provisions
in the decisive joint venture agreement.
ANALYSIS AND DISCUSSION
The international business environment is multidimensional considering the political risks,
cultural differences, and exchange risk, legal and taxation issues. Basically these all aspects and
elements can be considered as the factors of PESTEL analysis. These elements create a great
impact on the business activities global organisation like Establishment. Political environment
indicates to the sort of the government, the government relation with a business and the political
risk in the nation. In UK, due to constant financial instability in the globe, the national authority
encourages retailers to create jobs for domestic population. The respective venture plays its role
in generating employment options, it also, in turn, maximises the demand for its commodities
and diversifies its employees. Along with this, economic factor also affect the business such as
due to Brexit inflation occur as well as current COVID 19 crisis also affect the business
economic system (Yang and Meyer, 2019). Likewise, social element affect in term of cultural
differences because the company operate its business global level so there are number of people
make their contribution in running the venture of corporation and they belong form different
cultures and regions. The organisation use effective technology in running its business at global
level which positively influence it. Along with this, there are several kind of changes are made
by the government, in this COVID situation regarding trade, taxation and may more related to
business operation which affect the business of particular firm.
5

Trade is the exchange of commodities and services among nations. Goods bought into a
nation are called imports and those sold to another nation are acknowledged as exports. There are
mainly two base of trade like internal or Home or domestic trade and external or foreign or
international trade. At global level there are several kinds of changes or trends are occurred in
term of international trade and investment. Transfer of Technology is the key trends which arise
in global trade and investment (Resch, Khadiwala and Dhuse, 2018.). It is the activity through
which commercial technology is distributed. It will take the form of a technology transfer
transaction that may or may not be a legally binding contract, but which will consider the
communication, by the transferor of the reliable knowledge to the recipient. The growth of
emerging markets is another trend which plays an effective role in global trading and investment.
It has simultaneously maximised the possible size an worth of current major global trade while
also make easy the emergence of a whole new generation of innovative organisations. It can also
be analysed that in term of trading in to different nations as well as global business environment,
the organizations should consider joint venture strategy which is essential to a firm in entering in
to a new business environment and make expansion in its business.
There several methods and strategies which can be considered by the global business
venture in term of managing and mitigating risks which can be faced by it during operating
business through joint venture option. Hire experienced local talent, develop a business model
for particular market and have contingency plans are some method which can be used and
implemented by the international organisation like Establishment. By hiring local knowledgeable
individual, the firm can execute its business activities and operation in easier manner. Because
they will familiar with the purchasing power of consumers and easily provide them commodities
as per their requirements (Sadeghi and Biancone, 2018). This will assist in managing the risk of
less customer base and low sales. Additionally, by developing a business model for particular
market, the firm can operate the business in systematic manner and provide a structure to
employees for working so that the risk of ineffectiveness of business can be reduced and
managed. Along with this, having contingency plan also support the business in the situation of
harm and risk. With this, firm can sustain properly in global business environment.
Joint venture method is effective for a company in term of making expansion and get
entry in global business atmospheres because it offer several benefits. Selected wisely, the
partner of the company offers it an instant base of local consumer, allocation abilities to reach
6

them and knowledgeable as well as experienced local workers. The partner firm might also offer
new production capacity or commodities. This strategy and tool is less risky than other kind of
merger because the fund and financial investment is typically half or less. It provides flexibility
if local circumstances change, or if the market or relationship proves distasteful. Along with this,
it can be monitored that there are several issues and problems with joint venture that when a
company make joint venture with other firm then the communication among partners is not great
and the level of expertise and investment is not equally contested (Herrin, Maling and Stamper,
2018). Partnering with other business can be tough as it consumes time and effectiveness to
make effective and appropriate business relation and even then, it can be hard or complex to
completely evade all the issues. Success and development based on careful planning and
communication. A clear agreement is an important segment of making or creating good
partnership relations. After the joint venture, there are several workplace related issues are also
faced by the company in term of operating at international scale regarding production, employees
and many more.
There are numerous conceptions and theoretical frameworks are considered by the
management of global venture which assist in managing the workplace experiences, systematic
business operation and motivate the employees as well as analyse that how best to develop
operational processes. Classical management theory, behavioural theory and many more
concepts are crucial for the effective administration of workplace. Classical management
framework is the oldest administration concept which concentrates on operations and the
creation of standards to maximise production output. The administrator of respective firm can
consider this concept in order to develop output and remunerating high performing workers by
wages on bonuses. Also, behavioural theory can be followed by international firm in order to rise
to more human interests in the working environment. Management theories began to consider
more people oriented methods (Andersson, Cuervo-Cazurra and Nielsen, 2020). Human
demeanour and fulfilling the interpersonal demands of workers became more central to
administration. The manager of international firm, practicing behavioural management theory
might encourage group work by fostering a collaborative environment.
Joint venture can be a great way to make a new business faster when a company lacks the
abilities to do so its own. It also assists the business access foreign markets or minimise the risk
or a new establishment. Generally, this option can be adopt by a company with the purpose
7

entering foreign market and even new or emerging market, minimise the threat aspect for heavy
investment, make effective use of assets and gain economies of scale.
CONCLUSION
It has been summarised form the defined information that international business is an
activity and process of running and operating as well as performing the business action of a firm
in global business environment so that it can make development in its profitability margin,
consumer base, sales and productivity as well. By considering joint venture market entry method,
the firm can expand in more developed manner as well as less risk and threat. At international
scale, business is influenced by several external business environmental components in diverse
manner. If a venture operates through IJV then it can establish an effective position and brand
image in particular business industry.
8

REFERENCES
Books & Journals
Bhattarai, S. and Kucheryavyy, K., 2020. A unified model of international business cycles and
trade.
Dangi, M.R.M. and et. al., 2018. SME’s Internationalization Initiatives: Business & Growth
Strategy ICT and Technology. Int. J. Accounting, Financ. Bus, 3(12), pp.63-75.
Carr, J.M. and et. al, 2019. Cursor-based character input interface. U.S. Patent 10,372,327.
Gaur, A. and Kumar, M., 2018. A systematic approach to conducting review studies: An
assessment of content analysis in 25 years of IB research. Journal of World
Business, 53(2), pp.280-289.
De Massis, A. and et. al., 2018. Family firms in the global economy: Toward a deeper
understanding of internationalization determinants, processes, and outcomes. Global
Strategy Journal, 8(1), pp.3-21.
Kumar, V. and et. al., 2018. Co-evolution of MNCs and local competitors in emerging
markets. International Business Review.
Anglin, M.J. and et. al, 2018. Replication of data objects from a source server to a target server.
U.S. Patent 9,904,717.
Quigley, J. and Dhuse, G., International Business Machines Corp, 2019. Distributed storage
processing module. U.S. Patent 10,230,692.
Alberti, E. and et. al, 2018. Sharing of snapshots among multiple computing machines. U.S.
Patent 9,934,226.
Yang, W. and Meyer, K.E., 2019. How does ownership influence business growth? A
competitive dynamics perspective. International Business Review, 28(5), p.101482.
Resch, J.K., Khadiwala, R. and Dhuse, G., International Business Machines Corp,
2018. Accessing storage units of a dispersed storage network. U.S. Patent 9,900,316.
Sadeghi, V.J. and Biancone, P.P., 2018. How micro, small and medium-sized enterprises are
driven outward the superior international trade performance? A multidimensional study
on Italian food sector. Research in International Business and Finance, 45, pp.597-606.
Herrin, R.T., Maling, J.C. and Stamper, A.K., International Business Machines Corp,
2018. Planar cavity MEMS and related structures, methods of manufacture and design
structures. U.S. Patent 9,862,598.
9

Andersson, U., Cuervo-Cazurra, A. and Nielsen, B.B., 2020. Explaining interaction effects
within and across levels of analysis. In Research Methods in International Business (pp.
331-349). Palgrave Macmillan, Cham.
Online
Linhart F. 2014. Key Criteria for Selecting a Joint Venture Partner on Emerging Markets.
[Online]. Available Through: < https://www.grin.com/document/289007>.
Manzella J. 1996. Is International Expansion Through a Joint Venture Right for the company?.
[Online]. Available Through: <
http://www.manzellareport.com/index.php/strategies-section/310-is-international-expansion-
through-a-joint-venture-or-foreign-acquisition-right-for-your-company>.
D’Alimonte D. 2014. Reasons for forming strategic global business alliances.
[Online]. Available Through: < http://www.tradeready.ca/2014/fittskills-
refresher/8-reasons-forming-strategic-global-business-alliances/>.
Rooyen W. V. 2020. ADVANTAGES AND DISADVANTAGES OF JOINT VENTURES.
[Online]. Available Through: <
https://www.sa-tenders.co.za/content/hints-tips-and-news/advantages-and-disadvantages-joint-
ventures>.
10