Motivations and Suitability of International Joint Ventures in Global Business

International Business

Contents
INTRODUCTION...........................................................................................................................1
LITERATURE REVIEW................................................................................................................1
The motivations behind the formation of International joint ventures and in the
internationalisation/globalisation process....................................................................................1
The decision-making criteria that determines the suitability of the use of international joint
ventures........................................................................................................................................2
The benefits and issues of the use of international joint ventures in foreign market entry.........4
ANALYSIS AND DISCUSSION...................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
International business encompasses all commercial actions that take place to promote the
transfer of products, services, individual, assets, thoughts and technologies crosswise the
boundaries. It considers not only the international movements of goods and facilities, but also of
capital, personnel, technology and intellectual property such as patents, trademarks, copyrights
and many more. International business would execute both business and commercial transactions
among nations (Al Qur’an, 2020). There are several aspects that would have a great influence on
international business. There consist social, political and legal components. The key objective of
global business is to enhance and maximise sales large consumer base, obtain assets and
diversify sources of nation. There are several business ventures that have stretched their wings in
diverse nations and come under global business doing firms. International business will have
great impact on other markets considering stocks, products and currencies. Development of
international business is due to assessment of technology. It has maximised cross country
relations and needs of consumers. Global business has a myriad of options to do business in
countries such as exporting commodities and facilities and approving license to the nations to
produce products. This assessment will discuss about the motivation or purpose of running
business through joint venture at global scale and decision making criteria that determines the
suitability of the utilisation of international joint venture. Moreover, it will explain about
suitability of IJV in global expansion and advantages and drawbacks of IJV in foreign market
entry.
LITERATURE REVIEW
The motivations behind the formation of International joint ventures and in the
internationalisation/globalisation process
The developing international marketing is becoming the norm in this and these partnerships
are leveraging the development by alliances with global partners where the both establishments
merge and earn the rivalry benefits. They do it by licensing agreements, cross shareholder deals,
cooperative arrangement and joint ventures. As per the view of D’Alimonte D. (2014), The
motivation of making the international strategy varies from one nation to another country. The
main focus of the joint venture of the organisations is to represent the firms in the diverse
nations. But as the days passed the definition has modified due to the actions which become
1

more reliable. Because the international market the alliance can impart to the organisation in a
relative benefit in size or by the size that makes the process to go faster or in other words it offers
compliments to the areas that they are lacking.
The motive behind maximising the international joint venture is not only gaining profit.
Along with this, there are some other motives like competition between the rivals, the rapid
changing market place and business industry convergence. For example, an IJV among Sony and
Ericson both large organisations planned to get a benefit in production and development that will
prove their marketing skills. So once, the joint venture is completed with a legitimate way it is
equal in nature to a partial acquisition in consideration for shares (Al-Khasawneh, 2020). Due to
this, combination has made the transaction, combining the relative benefits of both establishment
and ties their future together. They stopped producing their own phones and began to deliver
their expertise and they have a research & development teams in US, Sweden, China, Japan, UK
and many more nations. Along with this, the organisations also devised effective strategic plan to
maintain their future development. So, large ventures do joint venture to earn competitive
benefits but it is not always be a risk to the other firms that are already operating. It mainly based
in the plan and strategy which is adopted and followed by the establishment.
The decision-making criteria that determines the suitability of the use of international joint
ventures
Joint ventures have allowed an entity in order to obtain fastest accessibility within
marketplace at international level by distribution channels which incorporate manufacturing cost,
obtaining new skills and many more. According to Denis . (2015), This provides possibilities for
firm to enhance profitability margins, low monetary risk, overcome from legal issues as well as
trade barriers which is helpful in enhancing economic development. Rather than this, the
effectiveness is enhanced upon global joint venture. Respective firm needs to utilise some of the
aspects into the procedures of decision making that are as follows:
Complementary resources and abilities: Within respective step, the firm needs to used
resource as well as materials that enhance their production effectively. Moreover, for selecting
the efficient partners they have to undertake appropriate qualification criteria which develop
entity in order to opt those ventures that are competent to manage international marketplace.
Unique competencies: As essential criteria for obtaining as well as sustaining competitive
advantages is having an innovative resource. As respective firms have to seek for efficient
2