International Joint Ventures

This report explores the concept of international joint ventures (IJV) and its various aspects. It discusses the benefits and challenges of IJV, provides examples of successful and unsuccessful IJVs, and offers recommendations for success. The report aims to help firms understand the process of IJV and make informed decisions.

Running head: INTERNATIONAL JOINT VENTURES
International Joint Ventures
Name of the Student:
Name of the University:
Author’s Note:

1INTERNATIONAL JOINT VENTURES
EXECUTIVE SUMMARY
This report aspires to explore the concept of international joint ventures (IJV) and its various
related aspects. The report firstly introduces the concept of international joint ventures and
the different circumstances in which the firms undertake the concerned process. More
importantly, the report also articulates the benefits as well as the challenges which are
involved with the concerned process. The report next takes the example of a successful IJV,
namely, Toshiba Corporation, Hitachi Limited and Matsushita and an unsuccessful IJV,
namely, Tiffany & Co jewellery and Swatch Group and analyses the reasons for their success
and failure. Lastly, the report offers some recommendations like outlining clear objectives at
the beginning of the venture, effective utilisation of organisational resources and formulation
of effective management and leadership styles that the firms can follow to ensure the success
of the IJVs undertaken by them.

2INTERNATIONAL JOINT VENTURES
Table of Contents
Introduction................................................................................................................................3
International Joint Ventures (IJV)..............................................................................................4
Circumstances under which firms undertake IJV......................................................................5
Benefits and Challenges of IJV..................................................................................................6
Successful IJV............................................................................................................................8
Toshiba Corporation, Hitachi Limited and Matsushita..........................................................8
Reasons for the success of the IJV.........................................................................................9
Unsuccessful IJV......................................................................................................................10
Tiffany & Co jewellery and Swatch Group.........................................................................10
Reasons for the failure of the IJV........................................................................................10
Recommendations....................................................................................................................11
Conclusion................................................................................................................................12
References................................................................................................................................13

3INTERNATIONAL JOINT VENTURES
Introduction
As opined by Reuer1, the process of international or globalisation had positively
affected the modern business world and the net result of this is that the different business
firms are increasingly looking to expand their business operations in the other nations of the
world. Westman and Thorgren2 are of the viewpoint that the one of the most important
challenges that the business firms face during the process of internationalisation is the fact
that they are not always sure regarding the kind of market entry mode they need to select for
entering into the business markets of the host nations. It is precisely here that the concept of
international joint venture becomes important becomes important within the framework of
the present-day business world. For example, it is seen that the process of international joint
venture is especially important for the firms which want to indulge in international trade and
commerce or for that matter extend their business operations to the other host nations yet do
not want to take full responsibility for the same3. However, at the same time it is seen that
there are various factors like business objectives, cultural aspects, management styles,
leadership approach and others while entering into the process of joint ventures with the firms
from other nations. The purpose of this report is to analyse the concept of international joint
ventures and its various aspects through the specific lens of one successful example and one
unsuccessful example.
1 Reuer, Jeffrey. "How real are real options? The case of international joint ventures." Creating value: Winners
in the new business environment (2017): 59-81.
2 Westman, Christoffer, and Sara Thorgren. "Partner conflicts in international joint ventures: A minority owner
perspective." Journal of international management 22, no. 2 (2016): 168-185.
3 Park, Chansoo, Ilan Vertinsky, and Manuel Becerra. "Transfers of tacit vs. explicit knowledge and
performance in international joint ventures: The role of age." International Business Review 24, no. 1 (2015):
89-101.

4INTERNATIONAL JOINT VENTURES
International Joint Ventures (IJV)
Larimo, Nguyen and Ali4 have articulated the viewpoint that the emergence as well as
the extensive popularity gained by the concept of international joint ventures can be
attributed to the urge on the part of the business firms to indulge in international trade and
commerce because of the benefits or rewards offered by the same. As opined by Khan, Yong
and Sinkovics5, international joint venture can be defined as the process through which the
business firms from different nations enter into a strategic partnership for the conduct of
business activities in a particular host nation. On the other hand, Lu, Zhou and Wang6 have
argued that international joint ventures are the process through which two or more firms
merge their resources as well as expertise for the conduct of international trade and
commerce in different nations so as to gain competitive advantage within the business
markets of the concerned nations. The most important aspect of the process of international
joint ventures is the fact that it enables the business firms to avoid the complications which
are generally associated with the process of cross border mergers and acquisitions by way of
reducing the accountability of the firm which is entering into such a business relationship
with the other foreign firms7. More importantly, recent researches have revealed the fact that
the different kinds of international joint ventures greatly facilitate the processes of strategic
alliances and also enables the concerned firms to gain competitive advantage within the
business markets of the host nations by way of effective utilisation of the organisational
4 Larimo, Jorma, Huu Le Nguyen, and Tahir Ali. "Performance measurement choices in international joint
ventures: what factors drive them?." Journal of Business Research 69, no. 2 (2016): 877-887.
5 Khan, Zaheer, Yong Kyu Lew, and Rudolf R. Sinkovics. "International joint ventures as boundary spanners:
technological knowledge transfer in an emerging economy." Global Strategy Journal 5, no. 1 (2015): 48-68.
6 Lu Jin, Jason, Kevin Zheng Zhou, and Yonggui Wang. "Exploitation and exploration in international joint
ventures: moderating effects of partner control imbalance and product similarity." Journal of International
Marketing 24, no. 4 (2016): 20-38.
7 Isidor, Rodrigo, Christian Schwens, Frank Hornung, and Ruediger Kabst. "The impact of structural and
attitudinal antecedents on the instability of international joint ventures: The mediating role of asymmetrical
changes in commitment." International Business Review 24, no. 2 (2015): 298-310.

5INTERNATIONAL JOINT VENTURES
resources, capabilities, expertise and other aspects of the firms which are involved in the
concerned process8. In addition to these, it is seen that the process of international joint
ventures is a beneficial one for the business firms trying to expand their business because of
the fact that the business firms entering into a such a process do not have to take full
responsibility for their business activities and also the risks or the losses involved in the
process are shared by all the firms which are a part of the same. Moreover, in the majority of
the cases it is seen that the investments or the financial aspects are being taken care of by the
different investors and thus the financial risks or losses that the firms involved in the process
are likely to incur is nominal.
Circumstances under which firms undertake IJV
Hollender, Florian and Schwens9 have articulated the viewpoint that one of the most
important circumstances during which the business firms undertake the process of
international joint ventures is when they are trying to extend the scope of their business to the
other host nations without undertaking full responsibility for the same. This can be explained
on the basis of the fact in such processes the firms do not have to take accountability or
responsibility for the business activities and also the profits as well as losses are being shared
in an equal manner depending on the amount of capital which is being invested by the firms
involved in the process10. In addition to this, another major circumstance which propels the
firms to indulge in such a process is the factor of cultural proximity, that is, the similarity in
the organisational culture which is being followed within the framework of the firms that are
8 Buckley, Peter J., and Pervez Ghauri, eds. International business strategy: theory and practice. Routledge,
2015.
9 Hollender, Lina, Florian B. Zapkau, and Christian Schwens. "SME foreign market entry mode choice and
foreign venture performance: The moderating effect of international experience and product
adaptation." International Business Review 26, no. 2 (2017): 250-263.
10 Chang, Jeanine, Xuan Bai, and Julie Juan Li. "The influence of institutional forces on international joint
ventures' foreign parents' opportunism and relationship extendedness." Journal of International Marketing 23,
no. 2 (2015): 73-93.

6INTERNATIONAL JOINT VENTURES
involved in the concerned process. This is important because of the fact that it facilitates
effective utilisation of the resources, capabilities, expertise and other attributes of the firms
which are involved in the concerned process. More importantly, another significant
circumstance or factor which propels the firms to enter into the process of international joint
ventures is the factor of common business objectives or goals or the vision that the firms
involved in the process share with each other11. This is important because of the fact that if
the firms which are entering into the concerned process do not share common goals or
objectives then this can adversely affect the outcomes of the entire process itself.
Furthermore, when two or more firms are looking to enter into the business market of the
same host nation it is always better to use the process of joint venture and reap the benefits
through the collaboration rather than compete against each other and thereby adversely affect
the business prospects of the concerned firms12.
Benefits and Challenges of IJV
Isidor et al.13 are of the viewpoint that one of the major factors which motivates the
business firms to undertake the process of joint ventures is the fact that it enables the firms to
gain competitive advantage within the business market of the host nations through the
effective utilisation of resources and organisational capabilities. Another important benefit of
the process of IJV is the fact that by facilitating the sharing of the profits as well as losses
between the firms which are involved in the concerned process it significantly reduces not
only the accountability but also the risks that the firms involved in the process could have
11 Yan, Aimin, and Yadong Luo. International Joint Ventures: Theory and Practice: Theory and Practice.
Routledge, 2016.
12 Park, Chansoo, Ilan Vertinsky, and Manuel Becerra. "Transfers of tacit vs. explicit knowledge and
performance in international joint ventures: The role of age." International Business Review 24, no. 1 (2015):
89-101.
13 Isidor, Rodrigo, Christian Schwens, Frank Hornung, and Ruediger Kabst. "The impact of structural and
attitudinal antecedents on the instability of international joint ventures: The mediating role of asymmetrical
changes in commitment." International Business Review 24, no. 2 (2015): 298-310.

7INTERNATIONAL JOINT VENTURES
faced had they opted to enter into the concerned business market alone14. In addition to these,
the firms have to opportunity to develop the resources as well as the competencies of their
own firm through the utilisation of the resources as well as the capabilities of the other firms
which are entering into the same collaboration15. More importantly, the firms have access
greater resources, capabilities, finance, technologies and others through the effective
utilisation of the process under discussion here. Moreover, the firms also have the
opportunity to explore new business markets and take the help of different kinds of
distribution networks which are being used by the other firms involved in the process.
The benefits offered by the process of IJV notwithstanding there are various
challenges as well that the business firms undertaking such a process often face. For example,
one of the major challenges that the business firms undertaking such a process commonly
face is the fact that the objectives with which the different business firms undertake the
process are not always the same and also the objectives are not always clearly articulated16.
Another important challenge that the business firms face can be attributed to the aspect of the
difference in the culture of the firms17. This can be explained on the basis of the fact that the
firms which are undertaking the concerned process not always have the same kind of
organisational culture and this can significantly affect the prospects of the concerned venture.
In addition to these, the differences in the management as well as the leadership styles
followed by the firms which are involved in the process is another major challenge that the
14 Khan, Zaheer, Oded Shenkar, and Yong Kyu Lew. "Knowledge transfer from international joint ventures to
local suppliers in a developing economy." Journal of International Business Studies 46, no. 6 (2015): 656-675.
15 Park, Chansoo, Ilan Vertinsky, and Manuel Becerra. "Transfers of tacit vs. explicit knowledge and
performance in international joint ventures: The role of age." International Business Review 24, no. 1 (2015):
89-101.
16 Westman, Christoffer, and Sara Thorgren. "Partner conflicts in international joint ventures: A minority owner
perspective." Journal of international management 22, no. 2 (2016): 168-185.
17 Larimo, Jorma, Huu Le Nguyen, and Tahir Ali. "Performance measurement choices in international joint
ventures: what factors drive them?." Journal of Business Research 69, no. 2 (2016): 877-887.

8INTERNATIONAL JOINT VENTURES
firms involved in the concerned process often face. Furthermore, it is also seen that the
organisational resources, expertise level, capabilities and other aspects of the firms which are
undertaking the concerned process are not always on the same level and this in turn can pose
a significant amount of challenge to the firms involved in the process18. These in short are
some of the major challenges that the firms undertaking the process of IJV commonly face
and which in turn adversely affects the prospects of the entire venture itself.
Successful IJV
Toshiba Corporation, Hitachi Limited and Matsushita
On 31st 2004 three business firms, namely, Hitachi, Ltd., Toshiba Corporation and
Matsushita Electric Industrial Co., Ltd declared the news that they were going to undertake
the process of joint venture for the manufacture as well as the sale of “LCD panels for flat-
panel TVs”19. This news was important not only from the perspective that prior to this these
firms were business rivals but at the same time because of the fact that the LCD TV sets
manufactured by them were the first of its kind within the television market. More
importantly, this joint venture was motivated by the fact that the customers at that time were
showing a higher amount of propensity towards the LCD television sets and as a matter of
fact the sale of the concerned television sets soared to more than 3 million units in the year
2003 itself20. Furthermore, as per the deal, the mass production of the concerned television
began at the Mobara facility of Hitachi Displays, Ltd and the major section (60-70 billion
yen) of the entire project fund (110 billion yen) was invested by Hitachi itself21. It is pertinent
18 Lu Jin, Jason, Kevin Zheng Zhou, and Yonggui Wang. "Exploitation and exploration in international joint
ventures: moderating effects of partner control imbalance and product similarity." Journal of International
Marketing 24, no. 4 (2016): 20-38.
19 Phys.Org. "Hitachi, Toshiba And Matsushita Join For TV LCD Panels". 2019. https://phys.org/news/2004-08-
hitachi-toshiba-matsushita-tv-lcd.html
20 Phys.Org. "Hitachi, Toshiba And Matsushita Join For TV LCD Panels". 2019. https://phys.org/news/2004-08-
hitachi-toshiba-matsushita-tv-lcd.html
21 The Japan Times. "Hitachi, Matsushita, Toshiba To Set Up 70 Billion Yen LCD Venture In January | The
Japan Times". 2019. https://www.japantimes.co.jp/news/2004/09/01/business/hitachi-matsushita-toshiba-to-set-
up-70-billion-yen-lcd-venture-in-january/#.XK7VjugzbIU

9INTERNATIONAL JOINT VENTURES
to note that the venture was a highly successful one and the firms involved in the concerned
venture were able to make more than “2.5 million 32-inch units per year” which was way
higher than the expectation that they have established for the venture22. The success of the
venture becomes apparent from the fact that Hitachi alone was being to make more than
8,632.4 billion yen ($81.4 billion) from the venture whereas Toshiba made more than $50
billion and Matsushita made $71.92 billion from the venture23.
Reasons for the success of the IJV
There are various reasons which contributed towards the success of the joint venture
under discussion. For example, it was seen that all the three firms which were involved in the
venture shared a common vision, that is, the manufacture as well as sale of high quality LCD
television sets and thereby earn a higher amount of profit from the same24. Furthermore, it
was seen that the organisational resources, capabilities, expertise level and other aspects of
the three firms which were involved in the concerned process were on the same level and thus
there was no imbalance on that front. More importantly, it was seen that all the three firms
took the help of innovative as well as continuous learning environment or culture within their
firms and this ensured that there was no clash on this front and also the leadership or the
management styles followed by these firms were almost similar in nature. These in short
were some of the factors which made the joint venture under discussion here a successful
one.
22 Phys.Org. "Hitachi, Toshiba And Matsushita Join For TV LCD Panels". 2019. https://phys.org/news/2004-08-
hitachi-toshiba-matsushita-tv-lcd.html
23 The Japan Times. "Hitachi, Matsushita, Toshiba To Set Up 70 Billion Yen LCD Venture In January | The
Japan Times". 2019. https://www.japantimes.co.jp/news/2004/09/01/business/hitachi-matsushita-toshiba-to-set-
up-70-billion-yen-lcd-venture-in-january/#.XK7VjugzbIU
24 Phys.Org. "Hitachi, Toshiba And Matsushita Join For TV LCD Panels". 2019. https://phys.org/news/2004-08-
hitachi-toshiba-matsushita-tv-lcd.html

10INTERNATIONAL JOINT VENTURES
Unsuccessful IJV
Tiffany & Co jewellery and Swatch Group
The Swatch Group is the largest watch manufacturer of the world and Tiffany & Co
jewellery specialises in the manufacture of different kinds of jewelleries25. Thus, when the
news of the joint venture that these two firms will be undertaking came out in the 2007 it was
a shock for the business world. As part of the venture, both the firms were to be involved in
the manufacture of designer watches which will combine the technical excellence of Swatch
and the artistic design of Tiffany26. However, it was seen that both the firm involved in the
concerned joint venture failed to attain the desired results that they were looking to obtain
and as a matter of fact the joint venture ended in the year 2011 when a settlement was
reached between the two firms on the basis of which Tiffany was to pay around $448m
(£274m) for the failure of the joint venture under discussion here27.
Reasons for the failure of the IJV
There are various reasons for the failure of the IJV under discussion here and one of
the primary ones in this regard is the fact that the objectives of the firms involved in the
concerned process were not clear. For example, it was seen that although both of the firms
wanted to earn a higher amount of profitability yet at the same time the manner in which they
wanted to achieve it was not clear28. Furthermore, both of the firms belonged to different
industries and thus the capabilities, resources, expertise level and other aspects of the firms
were completely different and this in turn contributed in a significant manner towards the
25 BBC News. "Tiffany & Co Ordered To Pay Swatch". 2019. https://www.bbc.com/news/business-25489721
26 Swatchgroup.Com. "End Of Partnership With Tiffany & Co. - Swatch Group". 2019.
https://www.swatchgroup.com/en/services/archive/2011/end-partnership-tiffany-co
27 Ft.Com. "Swatch In Bitter Split With Tiffany & Co | Financial Times". 2019.
https://www.ft.com/content/90672510-dd5e-11e0-9dac-00144feabdc0
28 Swatchgroup.Com. "End Of Partnership With Tiffany & Co. - Swatch Group". 2019.
https://www.swatchgroup.com/en/services/archive/2011/end-partnership-tiffany-co

11INTERNATIONAL JOINT VENTURES
failure of the venture29. Another important factor which contributed towards the failure of the
concerned venture was the fact that the management style and the leadership style followed
by the two firms were completely different from one and this in turn significantly hampered
the creation of an effective culture within the framework of the venture which was
established30. Lastly, the difference in the organisational culture followed within the
organisational framework of the two firms was another major factor which greatly
contributed towards the failure of the joint venture under discussion here.
Recommendations
There are various measures that the firms undertaking the process of IJV can use to
ensure the success of the concerned process. Some of the most important ones are listed
below-
 Outlining clear objectives: One of the major reasons because of which the majority
of the IJVs fail is the fact that the firms which are undertaking the concerned process
do not have clear objectives or the goals that they are trying to achieve. Thus, it is
advisable that the firms which are undertaking the concerned process need to outline
the objectives or goals that they are trying to achieve at the very beginning of the
venture.
 Use of effective management or leadership style: The differences in the
management or the leadership styles which are being followed within the framework
of the firms which are involved in the IJVs is another factor which contributes
towards the failure of the concerned process. Thus, it is likely that by using the kind
of management or leadership style which would be in synchronicity with the ones
29 BBC News. "Tiffany & Co Ordered To Pay Swatch". 2019. https://www.bbc.com/news/business-25489721
30 Ft.Com. "Swatch In Bitter Split With Tiffany & Co | Financial Times". 2019.
https://www.ft.com/content/90672510-dd5e-11e0-9dac-00144feabdc0

12INTERNATIONAL JOINT VENTURES
followed within the framework of the different organisations is a measure that the
firms involved in the concerned process can use to ensure the success of the process.
 Effective utilisation of resources: The firms which are undertaking the process of
IJVs often fail to effectively utilise the resources, expertise level, capabilities and
other aspects of the firms involved in thee process and this in turn significantly
contributes towards the failure of the ventures. Thus, it is likely that by promoting
effective utilisation of resources the firms would be able to ensure the success of the
joint ventures.
Conclusion
To conclude, international joint ventures have become one of the most important
processes within the fold of the modern business world and the different business firms in
order to enhance their profitability are increasingly resorting the usage of this process. More
importantly, there are various benefits that the effective usage of this process offers to the
firms like the opportunity to explore new markets, the risks involved in the process are
significantly low in comparison to cross border mergers and acquisitions or sole
proprietorships and others. However, there are various challenges involved in the concerned
process as well like the objectives of the firms undertaking the process are not always clear,
differences in the management or leadership styles followed by the firms and others. These
aspects of the process of IJVs becomes apparent from the above analysis.

13INTERNATIONAL JOINT VENTURES
References
BBC News. "Tiffany & Co Ordered To Pay Swatch". 2019.
https://www.bbc.com/news/business-25489721
Buckley, Peter J., and Pervez Ghauri, eds. International business strategy: theory and
practice. Routledge, 2015.
Chang, Jeanine, Xuan Bai, and Julie Juan Li. "The influence of institutional forces on
international joint ventures' foreign parents' opportunism and relationship
extendedness." Journal of International Marketing 23, no. 2 (2015): 73-93.
Ft.Com. "Swatch In Bitter Split With Tiffany & Co | Financial Times". 2019.
https://www.ft.com/content/90672510-dd5e-11e0-9dac-00144feabdc0
Hollender, Lina, Florian B. Zapkau, and Christian Schwens. "SME foreign market entry
mode choice and foreign venture performance: The moderating effect of international
experience and product adaptation." International Business Review 26, no. 2 (2017): 250-263.
Isidor, Rodrigo, Christian Schwens, Frank Hornung, and Ruediger Kabst. "The impact of
structural and attitudinal antecedents on the instability of international joint ventures: The
mediating role of asymmetrical changes in commitment." International Business Review 24,
no. 2 (2015): 298-310.
Khan, Zaheer, Oded Shenkar, and Yong Kyu Lew. "Knowledge transfer from international
joint ventures to local suppliers in a developing economy." Journal of International Business
Studies 46, no. 6 (2015): 656-675.
Khan, Zaheer, Yong Kyu Lew, and Rudolf R. Sinkovics. "International joint ventures as
boundary spanners: technological knowledge transfer in an emerging economy." Global
Strategy Journal 5, no. 1 (2015): 48-68.

14INTERNATIONAL JOINT VENTURES
Larimo, Jorma, Huu Le Nguyen, and Tahir Ali. "Performance measurement choices in
international joint ventures: what factors drive them?." Journal of Business Research 69, no.
2 (2016): 877-887.
Lu Jin, Jason, Kevin Zheng Zhou, and Yonggui Wang. "Exploitation and exploration in
international joint ventures: moderating effects of partner control imbalance and product
similarity." Journal of International Marketing 24, no. 4 (2016): 20-38.
Park, Chansoo, Ilan Vertinsky, and Manuel Becerra. "Transfers of tacit vs. explicit
knowledge and performance in international joint ventures: The role of age." International
Business Review 24, no. 1 (2015): 89-101.
Phys.Org. "Hitachi, Toshiba And Matsushita Join For TV LCD Panels". 2019.
https://phys.org/news/2004-08-hitachi-toshiba-matsushita-tv-lcd.html
Reuer, Jeffrey. "How real are real options? The case of international joint ventures." Creating
value: Winners in the new business environment (2017): 59-81.
Swatchgroup.Com. "End Of Partnership With Tiffany & Co. - Swatch Group". 2019.
https://www.swatchgroup.com/en/services/archive/2011/end-partnership-tiffany-co
The Japan Times. "Hitachi, Matsushita, Toshiba To Set Up 70 Billion Yen LCD Venture In
January | The Japan Times". 2019.
https://www.japantimes.co.jp/news/2004/09/01/business/hitachi-matsushita-toshiba-to-set-
up-70-billion-yen-lcd-venture-in-january/#.XK7VjugzbIU
Westman, Christoffer, and Sara Thorgren. "Partner conflicts in international joint ventures: A
minority owner perspective." Journal of international management 22, no. 2 (2016): 168-
185.

15INTERNATIONAL JOINT VENTURES
Yan, Aimin, and Yadong Luo. International Joint Ventures: Theory and Practice: Theory
and Practice. Routledge, 2016.