The concept of Joint Venture

Business strategy

Table of Contents
CHAPTER 1 Introduction................................................................................................................1
Chapter 2 Literature review.............................................................................................................2
Theme 1: To understand the concept of Joint Venture...............................................................2
Theme 2: To analyse the benefits and drawbacks that an organisation goes through while Joint
venturing at international level....................................................................................................2
Theme 3: To determine the resources that are needed by TECSO Plc while joint venturing
with China Resources Enterprise (CRE).....................................................................................3
Chapter 3 RESEARCH METHODOLOGY ...................................................................................4
Chapter 4 Results ............................................................................................................................8
Chapter 5 Conclusion and Recommendation 450..........................................................................14
Conclusion ................................................................................................................................14
Recommendation ......................................................................................................................14
Chapter 6 Reflection......................................................................................................................15
REFERENCES .............................................................................................................................16
APPENDIX ...................................................................................................................................18

CHAPTER 1 Introduction
Globalization is the process of interaction among people and companies, government at
worldwide and it is consider one of the most effective process in which a business companies are
looking to expand their current business and to get many opportunities as well. Thus, there are
different technique through which the business can enter in new or international market such as
Joint Venture, direct exporting, Franchising. Through research it has been analysed that
globalization is apparent in the growth of world trade as a proportion of output. In addition to
this, the globalization also mean that the countries liberalize their import rule and also welcome
the foreign investment into many sectors that helps in the growth of an economy. Therefore, it
results in freeing up the productive sectors t investment and the productive sectors to export
which results in win-win situation.
Therefore, the aim of the report is to describe pros and cons of Joint venture for a
company in order to enter into new and international market. This research report is also based
upon the TESCO Plc which is one of the leading retail company in UK and now it want to enter
in Asia through joint venture with China Resource Enterprise in order to become the world's
biggest food retailer company. Through this report, researcher describe the benefits and
drawback that an organisation goes through while Joint venturing at international level.
Currently, the quoted firm has only around 130 shops in China while on the other side China
Resource Enterprise has around 3000 stores, that is why TESCO Plc wants to captured the
opportunity to enter in China Market by joint venturing CRE in order to hold its own market in
Asia.
Aim:
“To evaluate the benefits and drawbacks of Joint Venture to enter international
markets.” A case on TESCO Plc.
Objectives:
 To understand the concept of Joint Venture.
 To analyse the benefits and drawbacks that an organisation goes through while Joint
venturing at international level.
 To determine the resources that are needed by TECSO Plc while joint venturing with
China Resources Enterprise (CRE).
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Chapter 2 Literature review
Theme 1: To understand the concept of Joint Venture.
According to Miller and Weinberg (2017) joint venture is the business entity that is
created by two and more parties in which both the companies has to share ownership, shared
returns and risk. Thus, joint venture is the temporary business association between two or more
person for profit without forming a permanent partnership and both the business maintain their
independence as well. It has been further analysed by the author that in order to gain a positive
synergy from their competitors, different companies expand either by introducing more capital or
through a process of joint venture.
On the other hand, Yan and Luo
(2016) stated that joint venture is engaging between the firm to expand their geographical market
participation, create the economies of scale and also help to lean new skills and technologies, this
also helps to strengthen the existing market position. The main motive of joint venture is to enter
into new foreign market and to enhance the international market power as well.
In addition to this, van der Meer-Kooistra and Kamminga (2015) stated that a joint
venture is entered between two or more parties in order to extract the qualities of each other. In
This method, one company may posses a special characteristic with other company might lack
with and similarly, the other company also has some advantages which another firm cannot be
achieve. Therefore, the two companies can enter into joint venture in order to generate synergies
between them for gain high advantages and these companies are work on the economies of large
scale in order to give the cost advantages.
In the same way, TESCO Plc also wants to enter into Asian market though joint venture
and gain high competitive advantages as well. Therefore, company mainly pursue the joint
ventures for mainly accessing a new market and particularly emerge into new market as well. In
the same way, TESCO also wants to enter into new market as it wants to sustain its brand image
in new country. And take the concern through e-mail
Theme 2: To analyse the benefits and drawbacks that an organisation goes through while Joint
venturing at international level.
As per the view of Gao (2019) as TESCO Plc uses joint venture with China Resource
Enterprise then it helps the organization to scale up with their limited capacity and also gives a
high competitive advantages to both the organization in order to generate the economies of
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measurability. Further, it has been further analysed by the author that when one organization
enters into joint venture with another organization, then it opens a vast market which further has
a potential in order to grow and develop itself. For example, when TESCO Plc of UK enters into
a joint venture of China Resource Enterprise in order to enter into Asian Market, then the
company of UK has the advantage of accessing Asian Market with different variant of
diversification of choice. But on the other side, Chen and Ross (2019) critic that the flexibility
can be restricted for TESCO Plc when it enter in new market by using Joint venture as a market
entry mode. As both the companies has to share profit and decisions are also taken by both firms
and this leads to loss of flexibility. Further, all the partners have different objectives for the joint
venture and this also brings different level of expertise, investment and assets into venture.
Helland and Sovinsky (2019) stated that joint venture gives an added advantages to
upgrading the products and services with respect to technology and even the marketing can also
be done with different innovation platform and technology up-gradation also assist in making
products and services at efficient cost. By providing the best products and services to their
customers at low rate also aim of joint venturing and in the same way, TESCO Plc also uses the
same strategy in order to make its brand image in market. On the other side, Müller and Zaby
(2019) argues that joint venture as a market entry mode takes time and efforts to build the right
relationship and partnering with another business because it may arises the problem of different
culture, management styles that result in poor integration and co-operation. Apart from this,
creating joint venture may result in more complex tax arrangement and also consider one of the
costly methods among other market entry mode. Further, as TESCO Plc wants to enter in foreign
market then it requires a lot of research and planning as it helps a firm to provide success
otherwise it leads to loss.
Therefore, as TESCO Plc uses joint venture as a market entry mode then there may be
chances that technology is an attractive reason for a firm to enter into it because using advance
technology, a firm can produce a superior quality of products and also helps to save a lot of
money and thus, joint venture also access to technology and resources as well, even all the risk
are also shared at equally and help to gain high competitive advantages as well.
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Theme 3: To determine the resources that are needed by TECSO Plc while joint venturing with
China Resources Enterprise (CRE)
As per the view of Gersch and Franz (2019) while entering into new market through joint
venture, TESCO Plc should first determine that the partner's national culture and company's
financial performance. This is so because it has been analysed that cultural values and
perspective shape the way people think and as China Resource Enterprise has its 3000 stores at
world level then it helps TESCO Plc to establish its unit at Asian market. As CRE has good and
better financial performance which shows that the TESCO Plc can establish its unit through
joint venturing. Further, the firm should also determine whether the other business has its brand
image and provide all the necessary resources at the time of establishing unit.
In addition to this, Miller and Weinberg (2017) stated that TESCO Plc should also make
proper research about that foreign country in which it will go to establish its unit. Because it
helps to determine the scope of investing in it and also identify whether the business will be
reach towards success or not. Through the market research, the quoted firm will easily determine
the external and internal environment and even take steps as well in order to cope with this.
Further, as TESCO combine with China Resource Enterprise and also uses it's brand name to
enter into new market, then fir should make sure that choice of partner is correct and it provide
all necessary resources at the time of establishment such as human resource, financial resource,
technological resource etc. If these resources are available then it will help a business to
successfully enter into new market and make foreign investment as well.
Chapter 3 RESEARCH METHODOLOGY
It is the process which is used to collect information and data for making correct
decisions in business. Therefore, it main purpose is to inform action, to prove a theory and also
contribute to developing the knowledge in a field of a study (Flick, 2015). In the same way,
using research methodology, a researcher will easily attain the aims and objectives of the study
and thus, it is as mentioned below:
Research Design:
It is the program to answer the question. Research design and methods are complex but
closely related, because effective good research design which ensures the information obtain will
aid reply research question more effectively. There are mainly three types of research design
such as exploratory, descriptive and conclusive (Gersch and Franz, 2019.). Investigator is
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