Motivations and Challenges of International Joint Ventures in Foreign Market Entry

This article explores the motivations and challenges of using international joint ventures in foreign market entry. It discusses the benefits and challenges of joint ventures, criteria for foreign market selection, and the suitability of international strategic alliances in global expansion.

INTERNATIONAL
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LITERATURE REVIEW................................................................................................................1
Motivations behind the formation of International joint ventures in the internationalization.....1
Decision-making criteria that determine the suitability of the use of international joint ventures
.....................................................................................................................................................2
Evaluation of foreign market entry strategy options...................................................................3
Benefits and challenges of the use of international joint ventures in foreign market entry........4
ANALYSIS AND DISCUSSION...................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
International business refers to trading of goods, products, services, capital, technology across
national borders at global level. International business open opportunities for organization to
serve international customers (Burlacu, Gutu and Matei, 2018). Globalization has increased
opportunities for organizations to move business at international scale. There are various kinds of
factors that motivate organizations to move business to international scale. Internationalization
has increased competition for companies at both domestic and international level (Larimo, Le
Nguyen and Ali, 2016). Due to this increasing competition, it has become important for
organizations to focus upon developing more innovative products and services by using
appropriate and effective use of resources. In order to sustain within this competitive market
environment, it has become important for organizations to analyse current market trends and
develop products and services accordingly (Schmieder, 2020). In order to successfully enter into
international market it is important for organizations to adopt appropriate market entry options so
that they can sustain within international market (Alcácer, Cantwel and Piscitello, 2016). This
assessment will focus upon understanding of the motivations behind the formation of
International joint ventures in globalization business, criteria that is utilised by firms in foreign
market selection process, decision-making criteria that determine the suitability of the use of
international joint ventures, evaluation of foreign market entry strategy options suitability of
international strategic alliances in global expansion, benefits and challenges of the use of
international joint ventures in foreign market entry.
LITERATURE REVIEW
Motivations behind the formation of International joint ventures in the internationalization
According to Goncalves and Smith (2019) the motivation behind the formulation of international
joint venture in the global marketplace. Business can do apply various kind of strategies that will
support for emerging the business and formulate towards international joint venture. Greater
motivation has made to systematically manner which define the inspiration of business in global
marketplace (Ferencikova and Hluskova, 2017). Growing international marketing is one of the
most important norms in this time. It help for inspiring or motivating the enterprise to increase
production and sales in global marketplace. This can possible with the international partners
where both organizations are merged and gain the more competitive advantage in global
marketplace.
1

Bingöl and Begeç (2020) said that companies are establishing a coordination with different
shareholders to deal with the various kind of cooperative agreement with joint venture.
Sometimes, it is to be considered as risk, wasting a lot of time as well as money (Loehde and et.
al., 2020). But at certain point, It become consider as great motivation to expand their business
within international marketplace. Through this way, it gained more competitive advantage,
benefits.
Welch and Piekkari (2017) Organizations are entering in the international market by
identifying suitable alliance which help them to establish a strong position in marketplace.
Knowledge, skill and expertise are also supporting or motivating the enterprise to gain more
marketing advantage.
Criteria that is utilised by firms in foreign market selection process
As Per Pishchulov and et.al. (2019) foreign market selection process is consider as
crucial role at international level. It is completely based on the evaluation of various markets
with reference to certain well-defined criteria. In this way, organizations have been utilised the
all essential resources to make a plan of market section process. Basically, organizations are
considered the suitable criteria’s as follows:
International marketing objective- it is one of the important step of selection process
whereas identifying ascertain export of overall business goal. Sometimes, it has been selecting
the international marketing objective to define the perception of consumers in foreign
marketplace.
Dhochak and Doliya (2020) Preliminary screening is another important aspect of
selection process where it will be eliminating the market which become obviously do not meet
consideration but it would be identified all essential resources, gaining more relevant information
regarding the business. Sometimes, it has been conducted the market research to find out the
preference of existing client. So as it become easier to fulfil all their need or requirement.
Child and et.al. (2017)Testing and commercial production- initially, enterprise has been
tested on small level and then launching a business or their item within international level.
Through this, it gained feedback from producer side about the market condition. At similar time,
it help them to enterprise whereas assessing overall positive response towards marketplace.
2

Decision-making criteria that determine the suitability of the use of international joint ventures
As per Akbar and et.al. (2019) identifying the suitability of use of international joint
ventures that needs to be considered the partners with compatible skills, knowledge. This will
help for business to make a better decision-making related growth and development within
foreign marketplace (Park and Vertinsky, 2016). Basically, it would be consider criteria of
technical skill, resources. These are essentially primary selection criteria that should able to
identify technical skills. in this way, organization seeking the partner and formation of suitable
strategy in term of business expansion. Technical complementary is analysed the different
success factors which are strongly influencing the competitive position and maintain the
performance.
Tetteh and Chan (2019) Another important criteria of decision making which relates with
strategic complimentary that help for long term success. Although a major focused on the size of
tends which are considering an important factors. Sometimes, it support for creating or
developing objectives to manage or control the risk of dissatisfaction and resolve any kind of
problem. Strategic approach is one of the most important aspect that can help for organization
and their employees to identify need, want and preferences of consumers. Afterwards, it help for
making better decision regarding business success.
Evaluation of foreign market entry strategy options
According to Dhochak and Doliya (2020) evaluation of foreign market entry strategies are
depending on the multiple research but still become consider as contemporary use. Each and
every aspect of selection relates with the entry strategy involved the long term growth and
objective (Nielsen and Raswant, 2018). it depend on the corporate objective that can identify
overall marketing programmes and come with process to maintain the position of enterprise in
the international marketplace. Entry strategy or model within international market which become
consider as best selection of organization. It may support for expand the overseas foreign market
and arranging the product as well as service in global world.
Qi Chan and Li (2020) there are different kinds of option when enter into foreign marketplace.
Exporting is common option where directly selling the good and service in another nation. It can
possibly well-known approach of entering within marketplace. there will be low risk, threat and
also become cost effectiveness. Tenzer, Terjesen and Harzing (2017) Another option of
licensing, it allows for enterprise to target the particular country and also using property.
3

Sometimes, it arise the biggest question when handling trade mark, production technique and
other patents. On the other hand, Joint venture is consist of different enterprise and then
establishing owned business. this is most commonly used enter strategy option that provide the
better facilities and services.
Understanding of the suitability of international strategic alliances in international/global
expansion
Wettstein, Giuliani and Stahl (2019 )There are various kinds of methods of international
market entry and development that can be used by organizations. Basically, organizations are
alternatively select the other kind of alliance which help them to increase speed up their
international process (Park and Cave, 2018). Sometimes, companies are implementing two
different forms such as engaging the multicounty, in order to gain the more popularity while
accessing different kind of foreign markets. Sometimes, process related to the international can
identify on the basis of strategic alliance which help to handle distribution of network and then
invest joint venture with different countries.
According to Schmieder (2020) companies are gaining more benefits suitable strategic
approach or alliance in term of reduction of price or cost, having access to new modern
technologies and reduction or high risk, threat. These are enhancing the ability to reach its
critical resources and afterwards, it allow them to improve position of business in the
international marketplace.
Although global alliances are
especially
useful for ®rms with a low degree
of internationalization that
face the challenge of global
competition, there is a lack of
empirical research dealing with
how these ®rms can achieve
4

a fast internationalization through
global alliances
Although global alliances are
especially
useful for ®rms with a low degree
of internationalization that
face the challenge of global
competition, there is a lack of
empirical research dealing with
how these ®rms can achieve
a fast internationalization through
global alliances
Although global alliances are
especially
useful for ®rms with a low degree
of internationalization that
face the challenge of global
competition, there is a lack of
empirical research dealing with
how these ®rms can achieve
5

a fast internationalization through
global alliances
Dhochak and Doliya (2020) Although international strategic alliance are becoming useful
for enterprise with low level of internationalization whereas facing high competition in
marketplace. Sometimes, lack of research is dealing with firm to improve overall performance
and efficiency of organization in proper manner.
Benefits and challenges of the use of international joint ventures in foreign market entry
According to Ott, Williams, Saker and Staley, (2019) There are various kinds of benefits
and challenges that international joint venture use in foreign market provide. Some of the main
benefits are: it helps in providing easy accessibility to distribution network of foreign market. It
helps in providing easy accessibility to customer database of joint venture partner which helps in
increasing success chances of product and service introduced in new market. International joint
venture helps in increasing overall capacity of organization. international joint ventures in
foreign market entry directly help organizations to share their risk and benefits with partner joint
venture and makes access to new knowledge and expertise much easier (Gordon, Kayseas and
Moroz, 2017). Accessibility to greater resources increases like finance, technology and many
more. Challenges of using international joint venture in foreign market entry are as follows: one
of the major challenges is to define a clear objective which is required to be achieved by joint
venture so that they can successfully enter and sustain within new foreign market in an
appropriate manner. Another challenge is to establish a proper and effective communication
between partners for running joint venture smoothly. Another challenge is to distribute work and
resources within joint venture equally. Bout one of the most important challenge is to maintain
and manage different culture and management styles as this challenge can create barrier for joint
venture co-operation and can make it difficult for organizations to sustain within new foreign
market.
ANALYSIS AND DISCUSSION
From the above literature review it has been analysed that global business environment has
helped organizations in entering into foreign market and expanding business globally in a much
appropriate manner. There are various kinds of factors that either motivate joint ventures to
expand globally or internationally or can either work as main barriers that can impact global
6

expansion of organizations (Kavishe and Chileshe, 2017). From the above literature review it has
been analysed that there are various kinds of motivational factors that can motivate a joint
venture to expand though internationalization or though globalization process. Some of the main
motivational factors behind formation of International joint ventures in the
internationalisation/globalisation process are economic, financial, socio-cultural and political
forces (Malyarets and et.al., 2017). These factors directly influence international business
practises of organizations that motivates then to form joint venture as it can help them in
enhancing their important export, important resections can get reduced and import duties can
also get reduced (Aguir and Misra, 2017). Political factors motivate formation of joint venture in
global process because many countries have developed their policies and legislation in such a
manner that they allow only organizations who have joint venture with local organizations or are
doing business in partnership with a local organization (Nuhoff-Isakhanyan, Wubben and Omta,
2016). Due this it becomes much easier for organizations to enter into a new foreign market and
expand internationally easily by forming a joint venture with a local organization of chosen
foreign market. There are many other factors like socio-cultural factors that influence formation
of joint venture in global process because many times chosen foreign market is best and most
appropriate for organizations for sales of their products and services and enhancing their overall
profitability only if they enter into that chosen foreign market though joint venture or partnership
with a local organization.
Literature review has clearly helped in analysing in order to enter into a foreign market it
is important for organizations to identify main key elements of international environment that are
required to be focused upon so that criteria for foreign market selection process can be
developed. Foreign market selection criteria directly help organization analyse or evaluate
international business environment main elements that can directly impact success or failure of
organizations in chosen global market (Nuhoff-Isakhanyan, Wubben and Omta, 2016). Main
international business elements that are required to be evaluated for choosing appropriate global
market are: resource availability, market situation, nature of competition, government policies,
availability of substitute products and many more (Parameswar, Dhir and Ongsakul, 2018).
Analysis of these elements are done on the basis of pre-defined set criteria of market selection
per capita income, economy structure, political conditions, feasibility and cost benefit. It helps in
identifying or testing whether the current market is suitable for the company to expand and will
7

help the organization to grow successfully and sustain within global market or not (Nuhoff-
Isakhanyan, Wubben and Omta, 2016). It helps in setting and evaluating major criteria of
selecting foreign market which is growth potential of the chosen market that helps in
understanding whether the chosen market has the potential to support company to enhance their
overall revenue and profitability by simply investing and expanding in the chosen market or not
(Cano-Kollmann and et.al., 2016).
It has further been analysed that due to advancement in technology and increasing competition
global investment and trading pattern is changing continuously. Before forming a joint venture, it
is important for organization to check whether international joint venture will be suitable for
entering into foreign market or not (Collinson, Narula and Rugman, 2016). For this it is
important for companies to take suitable and effective decision by analysing international
investment and trading recent patterns or changing within current trading and investment pattern
so that on the basis of this analysis firms can check and evaluate whether it is suitable for then to
form joint venture with selected firm or not (Nuhoff-Isakhanyan, Wubben and Omta, 2016).
According to recent trading and investment pattern it is important for organizations to first of
check expenses and profitability of chosen company because joint ventures share both profit and
loss so if profit percentage of organizations is high then it help them in analysing that it is a
suitable firm to form a joint venture with. Another current pattern is to check duration of the
chosen company because if the firm chosen has been formed recently then it helps in
understanding that the chosen business do not have experience of completing series of project on
time which makes it unsuitable for joint venture. These are some of the main current investment
and trading patterns that can influence decision making of determining suitability of international
joint venture.
Literature review has further helped in evaluating that there are many different types of foreign
market entry options or methods that can be used by organizations for entering into a chosen
global market. There are various kinds of ways though which a firm can enter into a selected
foreign market for selling their products and services internationally in another global market
(Nuhoff-Isakhanyan, Wubben and Omta, 2016). Has been analysed that it is extremely
important for a company to choose an appropriate and accurate foreign market entry strategy as
it directly impacts overall success or failure of a firm in new global market. Some of the most
commonly used strategies that can be used for entering into new foreign market for enhancement
8

of overall revenue, sales and profitability are: exporting, licencing, franchising, joint venture,
foreign direct investment, wholly owned subsidiary, piggybacking. It is important to evaluate
suitability of each of these strategies and all of these methods can provide different profitability
and suitability to organizations in an appropriate and accurate manner (Cantwell, 2017 ). Out of
all of these methods joint venture, direct exporting, franchising and foreign direct investment are
most commonly used methods that are most commonly used by organizations for entering into a
new foreign market.
Literature review has further helped in analysing that it is important for organization to
focus upon these market entry methods, analyse suitability of formation of joint venture and
evaluate foreign market chosen for expansion because it helps them it developing effective
strategies that can be used by company to enter into a new market and develop appropriate and
suitable strategic alliance so that chances of successfully entering into foreign market can
enhance and chances of failure or challenges associated with international joint venture can be
reduced (Nuhoff-Isakhanyan, Wubben and Omta, 2016). This discussion clearly helps in
understanding globalization has directly impacted international organizations in many different
ways. it has increased chances of firms to expand globally and sell their products and services
internationally but it has further increased complications in entering into new global market. Due
to this it becomes important for organization to evaluate ways in which they can expand
successfully by forming successful joint venture so that failure chances can be reduced.
CONCLUSION
From the above assignment it has been summarized that globalization has directly
impacted overall business operations of organizations in both positive and negative manner. Due
to globalization competition for organizations in both domestic and international market has
increased and in order to achieve success and expand business, it has become important for
organizations to focus upon entering and expanding business in new foreign market by
collaborating or though joint venture so that they can not only sustain within the new market but
enhance their overall customer base as well. It has been analysed that there are carious kinds of
motivational factors such as economy of a country, political factors etc. that motivate an
organization to expand their business globally and enter into a new foreign market in a proper
and appropriate manner. It has also been analysed that there are various kinds of international
strategic alliances that can be used by organizations for expand globally though joint ventures or
9

any other market entry model. These strategic alliances help organizations in expanding their
business in global foreign market and sustain within the market as well as gain competitive
advantage. It has further been analysed that it is important for organizations to adopt a suitable
decision- making criteria that can be used by them for identifying suitability of joint venture for
expanding in global market successfully.
10

REFERENCES
Books and Journals
Aguir, I. and Misra, L., 2017. Ownership level choice and value creation in international joint
ventures: The role of investor protection. International Review of Economics &
Finance. 49. pp.515-535.
Akbar, M.A. and et.al., 2019. Success factors influencing requirements change management
process in global software development. Journal of Computer Languages. 51. pp.112-
130.
Alcácer, J., Cantwell, J. and Piscitello, L., 2016. Internationalization in the information age: A
new era for places, firms, and international business networks?.
Bingöl, D. and Begeç, S., 2020. Managing International Alliances: Joint Ventures: A Case
Study. Open Journal of Social Sciences. 8(04). p.538.
Burlacu, S., Gutu, C. and Matei, F.O., 2018. Globalization–pros and cons. Calitatea. 19(S1).
pp.122-125.
Cano-Kollmann, M. and et.al., 2016. Knowledge connectivity: An agenda for innovation
research in international business.
Cantwell, J., 2017. Innovation and international business. Industry and Innovation. 24(1). pp.41-
60.
Child, J. and e.al., 2017. SME international business models: The role of context and
experience. Journal of World Business. 52(5). pp.664-679.
Collinson, S., Narula, R. and Rugman, A.M., 2016. International business. Pearson.
Dhochak, M. and Doliya, P., Application of fuzzy analytic hierarchy process in multi-criteria
decision-making of venture capitalists.
Ferencikova, S. and Hluskova, T., 2017. Role, Motivation, and Performance of International
Joint Ventures in Slovakia. In Value Creation in International Business (pp. 75-108).
Palgrave Macmillan, Cham.
Goncalves, M. and Smith, E.C., 2019. Lusophone-African SME internationalization: A case for
born global and international joint ventures. Journal of Transnational
Management, 24(3), pp.231-258.
Gordon, M.E., Kayseas, B. and Moroz, P.W., 2017. New venture creation and opportunity
structure constraints: Indigenous-controlled development through joint ventures in the
Canadian potash industry. Small Enterprise Research. 24(1). pp.1-22.
Kavishe, N. and Chileshe, N., 2017, September. Joint venture housing projects in Dar Es Salaam
City: An analysis of challenges and effectiveness. In Proceeding of the 33rd Annual
ARCOM Conference, 4th-6th September (pp. 144-153).
Larimo, J., Le Nguyen, H. and Ali, T., 2016. Performance measurement choices in international
joint ventures: What factors drive them?. Journal of Business Research. 69(2). pp.877-
887.
Loehde, A.S.K., and et. al., 2020. Joint (Ad) ventures—Family firms' international entry mode
choices for emerging markets. International Journal of Entrepreneurial Behavior &
Research.
Malyarets, L. and et.al., 2017. Theory and practice of controlling at enterprises in international
business. Економiчний часопис-XXI. 165(5-6). pp.90-96.
11

Nielsen, B.B. and Raswant, A., 2018. The selection, use, and reporting of control variables in
international business research: A review and recommendations. Journal of World
Business. 53(6). pp.958-968.
Nuhoff-Isakhanyan, G., Wubben, E.F. and Omta, S.W.F., 2016. Sustainability benefits and
challenges of inter-organizational collaboration in Bio-Based business: A systematic
literature review. Sustainability. 8(4). p.307.
Ott, U.F., Williams, D., Saker, J. and Staley, L., 2019. A configurational analysis of the
termination scenarios of international joint ventures: All is well that ends well. Journal
of Innovation & Knowledge. 4(3). pp.202-210.
Parameswar, N., Dhir, S. and Ongsakul, V., 2018. Purpose of international joint venture and
interaction post termination. Journal for Global Business Advancement. 11(6). pp.687-
705.
Park, B.I. and Cave, A.H., 2018. Corporate social responsibility in international joint ventures:
Empirical examinations in South Korea. International Business Review. 27(6). pp.1213-
1228.
Park, C. and Vertinsky, I., 2016. Reverse and conventional knowledge transfers in international
joint ventures. Journal of Business Research. 69(8). pp.2821-2829.
Pishchulov, G. and et.al., 2019. The Voting Analytic Hierarchy Process revisited: A revised
method with application to sustainable supplier selection. International Journal of
Production Economics. 211. pp.166-179.
Qi, X., Chan, J.H., Hu, J. and Li, Y., 2020. Motivations for selecting cross-border e-commerce as
a foreign market entry mode. Industrial Marketing Management.
Schmieder, J., 2020. Entry strategy for a Finnish IT start-up entering the German hospital
market.
Tenzer, H., Terjesen, S. and Harzing, A.W., 2017. Language in international business: A review
and agenda for future research. Management International Review. 57(6). pp.815-854.
Tetteh, M.O. and Chan, A.P., 2019. Review of concepts and trends in international construction
joint ventures research. Journal of Construction Engineering and Management.
145(10). p.04019057.
Welch, C. and Piekkari, R., 2017. How should we (not) judge the ‘quality’of qualitative
research? A re-assessment of current evaluative criteria in International
Business. Journal of World Business. 52(5). pp.714-725.
Wettstein, F., Giuliani, E. and Stahl, G.K., 2019. International business and human rights: A
research agenda. Journal of World Business. 54(1). pp.54-65.
12