Motivations and Suitability of International Joint Ventures in Global Business

This article discusses the motivations behind the formation of international joint ventures and their suitability in global business expansion. It explores the decision-making criteria for using joint ventures and the benefits and issues associated with their use in foreign market entry.

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
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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
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partners with innovative skills which may be leveraged into alliances to develop huge
economical value. When assessing an abilities of partners and managers. Innovative skills are
capabilities or competencies possessed through partners but not through entity (Cherunilam,
2020).
Goal compatibility: Every partner who have come to develop joint venture have to assure
that common objectives is been attained through them. Moreover, it described that when venture
is developed among two firms must have to accomplished common objectives. In addition to
this, it aids respective entity to accomplish compatibility upon international marketplace.
Monetary resources: It plays vital role in developing entity to sustain within international
marketplace. Whole finances is categorised into firm which have together develop ventures and
also helpful in undertaking backup for producing emergency resources (Dang, Jasovska and
Rammal, 2020). Moreover, this impacts their decision making in favourable manner at
worldwide level for respective firm in order to produce funds with assistance of other firms.
Human capital: Before forming joint venture, respective firm have to analyse skills as well
as experiences of that individuals which have to manage alliances from partner’s side. In
addition to this, it aids both entities to gain knowledge as well as develop together through
specialising abilities into them. Also, this allows them to obtain effective place at worldwide
marketplace.
The suitability of international joint venture in global expansion
An International joint venture is a collaboration foundation handled by more than one.
Before starting work, collaborators provide benefits, wages and provide responsibility among
employees to protect self-rule. After the project, Ventures dispersed. International joint venture
is suitable as it helps organisations to set up a business and production with an international
partner . Joint ventures can be helpful for organisation in terms of international expansion, the
firm can increase benefits and productivity. When companies will handle their business at global
scale with this specific market tool, they provide products and services as per nation’s
requirement, which results in increment in customer and sale. This also improves the economical
condition of the company (Draijer, 2020). Also, joint venture is suitable because it is good for
foreign investment; investment is probably half or less. It also offers flexibility in situations
change, connection proves unpleasant. Opposite side, the market may be attractive which results
in more investment and this tool is more suitable in term if a company will review it, get entered
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to a new marketplace, build a successful and progressive place with the specific business
area. The IJV is suitable for organisations in term of global expansion. As there are several
example which consider this strategy as a tool of expand their business at international scale. For
example, Shanghai Automotive Industrial Company entered in to joint venture with Volkswagen
in 1984 to set up Shanghai Volkswagen (Evaluation of Joint Ventures as a Mode of Entry into
the Chinese Market. 2015). Here, IJV was suitable for organisations as they benefited from low
production and labour cost in its foreign market which contributed for great saving. The sale sof
ventures have increased and they gained more profitability.
The benefits and issues of the use of international joint ventures in foreign market entry
International joint ventures provide quick and economical entry to global markets than an
existing company or established a new venture in the global market. It provides entry to domestic
brand, distribution passage, market, and understanding of the domestic market, domestic
production services or government contracts. According to Nagel D. (2017), It is an actual
platform to share knowledge, like technical knowledge or admiring theoretical property
resources among the companies. These venture bounds price and chances related to business in a
global marketplace, especially for mini and micro business. These are better than investment in
the global marketplace – it is flexible during change in domestic conditions, and
when marketplace and connections are displeasing. Specially, in unfavorable conditions these
can be sold to the domestic collaborator (Hartati, Bajari and Juwita, 2020). These can reduce
risks related with the political, lawful and regulatory atmosphere in the domestic marketplace.
However, legal agreements are needed to generate and support international joint ventures, in
order to generate a prosperous, actual, existing and evolving connection among partner
organizations.
Joint ventures are fragile- Encounters in corporate cultivation and arguments regarding
power and working resolutions are normal. Balancing is hard. Little failure shows lack of
direction, or loss of organisation’s reputation. There are more failure or guidance results in
irritation, and costs loss rather than improvement. Due to these disputes, JVs are frequently less
existing, and hence, providing for the limit is therefore also critical. The technology and know-
how division with the native collaborator can result in a strong player when the JV decomposes,
especially in nations with poor conceptual wealth preservation. Also, good lawful advice
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required to make cross-border JV agreements because various critical occupations, tax issues,
economical, and compliance issues to be considered.
A joint venture is useful if individual observed developing market and helping collaborator,
or on domestic market requirement, individual actually worked in foreign business, as J.V.’s are
quite good for starters, collaborate efficiently with loss and command and can fulfil the required
money, inside and outside assets as well as Individual are looking less-risk, albeit slower, way to
make domestic investment (Möller, Nenonen and Storbacka, 2020).
ANALYSIS AND DISCUSSION
The global business environment is undertaken as the multidimensional that incorporates
political risks, legal issues, cultural differences and many others. Mainly, these whole aspects as
well as components may be considered as PESTEL analysis factor. Moreover, these components
develop a huge affects upon business practices at international firm such as development. in
addition to this, political surroundings highlights to the government types, government
relationship with business as well as political risk within countries. Into United Kingdom,
because of consistent monetary instability into worldwide, the authority of nation motivates
retailers for developing jobs for domestic populations. Along with this, respective business plays
their role in producing options of employment; this also enhances the demand for their
commodities as well as diversifies their staff. Additionally, the economic factor also impacts
business like inflation occurs due to Brexit and at present the crisis of COVID-19 also impact the
economical system of business. Similarly, the societal aspects in terms of cultural differences as
firm performs their business internationally so there are various individuals develops its
contribution in performing the business as well as they belongs from several regions. Beside this,
entity utilises effectual technology to run their business at international level that influences it in
favourable way. Also, there are various changes that are developed by government within
respective situations related to trading; taxations and many others associated with business
activities that impacts the particular firm business.
Trade is also considered as commodities exchange as well as services with countries.
Moreover, the products bought within nation are known as imports as well as that sold to other
countries are undertaken as exports. In addition to this, there are basically two trades base such
as domestic or international. Additionally, the technology transfer is undertaken as the main
trends that rise into worldwide trade as well as investment. This is the practices by which
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commercial technology get distributed. In addition to this, it would undertake the kinds of
technology that transfer transaction which might or might not bind contract legally but that
would undertakes the communication through transferor of relevant understanding to recipient.
Instead of this, the development o emergent marketplace is other trends that plays effectual role
into international investment as well as trading. Along with this, this have enhanced the possible
size as a value of present major international trade while also make emergent of overall new
generation innovative entity. It may also be analysed that during term of trading in to distinct
countries in addition to global enterprise surroundings, the companies should recall joint project
method that's essential to a company in coming into in to a new enterprise environment and make
enlargement in its enterprise.
There several techniques and techniques which can be considered by using the worldwide
business project in time period of managing and mitigating dangers which can be faced by it in
the course of working commercial enterprise via joint mission option. hire experienced nearby
talent, expand a business model for specific market and feature contingency plans are some
method which can be used and implemented via the global organization like established order.
with the aid of hiring neighbourhood knowledgeable individual, the firm can execute its business
activities and operation in simpler manner. because they were familiar with the purchasing
strength of purchasers and effortlessly provide them commodities as per their requirements
(Sadeghi and Biancone, 2020). This will assist in managing the chance of less purchaser base
and low sales. Additionally, via developing a commercial enterprise model for specific
marketplace, the company can operate the enterprise in systematic way and provide a shape to
personnel for running so that the danger of ineffectiveness of business may be reduced and
controlled. along with this, having contingency plan also assist the commercial enterprise inside
the situation of harm and chance. With this, firm can maintain nicely in global business
environment.
Joint task method is powerful for a employer in time period of making growth and get
entry in worldwide enterprise atmospheres as it provide several blessings. selected wisely, the
associate of the organisation offers it an on the spot base of nearby patron, allocation skills to
attain them and knowledgeable as well as experienced nearby employees. The companion firm
may offer new manufacturing potential or commodities. This strategy and device is much less
risky than other form of merger because the fund and monetary funding is typically half of or
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less. It presents flexibility if nearby circumstances trade, or if the market or relationship proves
distasteful. Along with this, it may be monitored that there are numerous troubles and issues with
joint assignment that when a company make joint mission with other company then the verbal
exchange among partners isn't always extremely good and the extent of understanding and
funding is not equally contested. Partnering with different commercial enterprise can be tough
because it consumes time and effectiveness to make powerful and suitable business relation or
even then, it can be difficult or complex to completely avoid all of the problems. Success and
improvement based totally on careful making plans and conversation. A clear settlement is an
important phase of making or creating correct partnership members of the family. After the joint
task, there are several administrative centre associated problems are also confronted by way of
the business enterprise in time period of operating at international scale concerning production,
employees and plenty of more.
There are various conceptions and theoretical frameworks are considered by means of the
management of worldwide mission which assist in coping with the administrative center reviews,
systematic enterprise operation and encourage the personnel in addition to examine that how
pleasant to expand operational tactics. Classical management concept, behavioural theory and
many greater ideas are vital for the effective administration of administrative center. Classical
management framework is the oldest administration concept which concentrates on operations
and the creation of requirements to maximize production output. The administrator of respective
firm can remember this idea that allows you to expand output and remunerating high appearing
workers through wages on bonuses. Additionally, behavioural idea may be followed by using
international firm to be able to upward push to more human pursuits inside the working
environment. control theories started to recall more humans orientated techniques. Human
behaviour and fulfilling the interpersonal needs of workers have become greater imperative to
administration. The manager of worldwide company, practising behavioural management idea
may inspire institution paintings by fostering collaborative surroundings.
Joint task can be a notable manner to make a new commercial enterprise faster when a
agency lacks the abilities to accomplish that its very own. It also assists the enterprise get right of
entry to foreign markets or minimise the hazard or a new establishment. usually, this selection
may be undertake by using a employer with the motive entering foreign market or even new or
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emerging marketplace, minimise the danger thing for heavy funding, make effective use of
property and gain economies of scale.
CONCLUSION
From the defined information, it has been summarised that international business is a
procedure of running a business at global scale by offering commodities, services and many
more to across the nations in order to make development in the business as well as with the
purpose of global reach. The international joint venture is one of the most followed strategies and
tools in the global competitive market. Additionally, it is one of the mostly ordinarily utilised
plans that have an effect in the market to boom up the economy of a nation. It has created the
bond among the geographical territories. Where they can deliver their rivalry benefits and carry
out new policies and commodities for the customer and maximise the job market in the global.
The benefits for international joint venture is more than the drawbacks of it because the main
motive f it is to make easy collaboration and varying degrees of integration among ventures
without necessitating a merger or partnership, though it can often lead to a merger or acquisition.
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REFERENCES
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Competitive Advantage in a Digital Economy Environment. International Journal of
Economics and Finance, 12(1), pp.1-70.
Cherunilam, F., 2020. International business. PHI Learning Pvt. Ltd..
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The risk management strategies of MNEs in emerging economies. Journal of World
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Draijer, C., 2020. Best practices of business simulation with SAP R/3. Journal of Information
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Promotion Perspective in Industry 4.0. In 2nd International Media Conference 2019
(IMC 2019) (pp. 424-436). Atlantis Press.
Möller, K., Nenonen, S. and Storbacka, K., 2020. Networks, ecosystems, fields, market systems?
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Shao, J.J. and Ariss, A.A., 2020. Knowledge transfer between self-initiated expatriates and their
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Yuliani, Y., 2020 Moderating effect of business environment to working capital and profitability
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Zhang, X., 2020. The micro-foundations of strategic ambidexterity: Chinese cross-border
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Online
Nagel D. 2017. The Pros and Cons of International Joint Ventures. [Online]. Available Through:
< https://www.globaltrademag.com/pros-cons-international-joint-ventures/>.
D’Alimonte D. 2014. Reasons for forming strategic global business alliances.
[Online]. Available Through: < http://www.tradeready.ca/2014/fittskills-
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Denis. 2015. How to Choose the Right Partner for International Joint Venture. [Online]. Avilable
Through: <http://innodigest.com/how-to-choose-the-right-partner-for-international-joint-
venture/>.
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