International Joint Venture and Impact on Globalization
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Added on 2020-03-28
International Joint Venture and Impact on Globalization
Added on 2020-03-28
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Running Head: Managing Across Borders 1International Joint Venture and impact on Globalization
Managing Across Borders 2ContentsIntroduction......................................................................................................................................3Joint venture: Definition..................................................................................................................3Reason to form joint venture...........................................................................................................4Process of international joint venture..............................................................................................6Benefits of international joint venture.............................................................................................7Challenges of international joint venture.........................................................................................9Impact on globalization.................................................................................................................10Conclusion.....................................................................................................................................10References......................................................................................................................................11
Managing Across Borders 3Introduction Globalization in the current time means incorporating the economy of the country withthe economy of whole world. Sometimes, for some countries the means of globalization is toopen up the economy for the foreign direct investments by providing the opportunities to foreigncompanies to invest in various fields of country. In simple words, globalization can be describedas having the whole world as one market. It is the process of growing the economicinterdependence between the countries in all over the world (Gutterman & Brown, 2011). Theglobalization includes cross-border movements of the products and goods, technology, capital,services, information and people along with the economic activities by crossing the nationalboundaries. It is basically focused on adopting the global position in terms of marketing, humanresource management, manufacturing, lancing and other areas of business. There are variousmodes of entry by which organizations are able to invest in the foreign market such as mergerand acquisition, joint venture, strategic alliances, and restructuring etc (Simonet,2012). Thisreport focuses on the successful mode of entry i.e. joint venture and impact of this process on theglobalization. The report describes the role and advantage of joint venture in expanding thebusiness across the national boundaries. Along with this, the report discusses the reason of thejoint venture done by the organizations at the global level. Joint venture: DefinitionIt can be seen that the competition in the international market is growing continuouslyand many companies are using various alliances to enter in the new market. For this manner,they learn new skills, share risks, transfer knowledge, resources and competences with othercompanies. So, use of the joint venture is increasing dramatically in both, domestic as well asinternational market. By the process of joint venture, companies are able to enhance theircompetitive advantage by sharing the assets and resources with the local and foreign partners.For understanding the term joint venture, it is important to take a view on the various definitionsof joint venture provided by the literatures (Utzon & Hede, 2014). There are lots of scholars who have given various concepts from the different aspects.According to the Mariti and Smiley (1983), joint venture is the cooperation agreement betweentwo different companies to form a third independent company for the business operations.
Managing Across Borders 4Further, Park and Ungson (1989), the term joint venture can be described as the contractualagreement for creating the separate legal entity under which the parent company take ownershipwith the conditions and provisions by the legal document. So, joint venture among themultinational companies, the foreigner company cooperates with the local companies to form athird company. This third company is helpful to local companies in sharing the risks andimproving the competitive advantage in the market. There is the joint control of both partnercompanies on the third company as it is the combination of different culture and organizationalbackgrounds (Corri, 2012). Reason to form joint venture It is an important question why one company cooperates with other company or what arethe basic objectives behind participating in the joint venture. Generally, by the joint venture, theorganizations are able to spread risk among them. Joint venture improves the capacity of theorganizations for the capital investment and financial support. Basically, joint venture is thesource of the learning for the partners which are involved in the joint venture process. Based onthe study, there are some benefits in the joint venture i.e. competitive benefits, strategic benefitsand internal benefit. Internal benefit can be described as the internal strengths that cab generated by thecompany within the joint venture. Those internal strengths include getting managerialknowledge, risk sharing, generating profit, and achieving knowledge and learning. Other onebenefit is competitive benefit for the companies in joint venture. The process of joint venture canbe effective and powerful tool to enhance competitive strengths of the companies. Thecompetitive benefits for the companies include developing effective competition, response to theimpact of globalization and influence over the industry structure. Last benefit is the strategicbenefit. In the strategic benefit, joint venture is helpful for the companies to change their strategyat the global level. For instance, one biscuit company can be able to change its original market toproducing biscuits to producing all types of breakfast products after cooperating with thebusiness with the food manufacturing company. By this collaboration, the biscuit company canexpand its business from domestic market to international market (Jing'an, 2013).
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