Exploring the Risks and Rewards of Joint Ventures in Global Expansion

Desklib provides past papers and solved assignments for students. This report analyzes joint venture risks and benefits for international market entry.

The risks and benefits of a joint business venture to enter
international markets
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Executive Summary
Globalisation is one of the most important aspects of business in the contemporary times. Most
of the organisations are opting for globalisation owing to the immense advantages that are
obtained from it. One of the most important forms of globalisation is joint venture. The current
report will consider the different advantages as well as the disadvantages that are related to joint
venture.
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Table of Contents
Chapter 1..........................................................................................................................................3
Chapter 2..........................................................................................................................................5
Chapter 3..........................................................................................................................................8
Chapter 4........................................................................................................................................11
Chapter 5........................................................................................................................................18
Chapter 6........................................................................................................................................22
References......................................................................................................................................23
Appendix........................................................................................................................................24
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Chapter 1
Introduction
In the contemporary times, globalisation has indeed played a significant role in helping the
business create a proper image in the contemporary market. As put forward by Giddens (2018),
the globalisation is considered as one of the most effective concepts that are used by the business
organisations to enter the international market. Globalisation is considered by many as the
merger of the local economy with the world economy.
One of the significant advantages of globalization is that, it helps in enhancing the overall trade
across the continents and the borders. It brings the whole world closer, and contributes towards
the enhancing labour migrations among the countries. It has also been identified that that there a
number of instances where the globalisation has lead to the emergence of a number of global
brands. It also contributes towards the increasing FDIs and contributes greatly to the overall
economic conditions of the country.
In the words of Beck (2018), globalisation contributes greatly towards the enhancing the
financial as well as the economic conditions of the country. In most of the cases, globalisation
contributes greatly towards promoting the cultural awareness along with the international as well
as global inter dependency among the countries. Briefly, it enhances the overall conditions of
the country is a positive manner.
However, there are indeed a number of risks as well as benefits, which are associated with it.
Along with enhanced opportunities, in most of the cases, it also destroys the natural economy of
the place. There are a number of ways, which the organisations consider while opting for
globalisation and joint venture turns out to be the most common among them. For understanding
the impacts of joint venture as well as the process through which joint venture occurs, the case
study of Cafe Sydney have been selected. The chosen organisation is one of the leading coffee
shops operating in the country. Cafe Sydney has proved to be effective in serving the customers
of UK and currently the organisation is planning to expand its business in UK (Hay and Marsh
2016).
Considering the immense advantages that are obtained from the process, the organisation has
chosen joint venture as their market entry strategy. Hence, the literature review section of the
report will concentrate on the joint ventures as well as the advantages and the disadvantages that
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are associated with the process. The research methodology is also one of the significant parts of
the report; hence, the section will also concentrate on the steps that will be adopted by the
researcher for carrying out the entire research project effectively. Proper data relevant to the
topic have also been selected and the data have been analysed and interpreted for gaining an
effective idea about the research topic. All other data relevant to the topic have also been
collected and presented in the report (Hay and Marsh 2016).
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Chapter 2
Literature Review
In the words of Steger (2017), the joint venture identifies the process through which two or more
of the organisations come together with a common aim of earning profit and enjoying the
common profits in the sector. The overall concepts of joint ventures identify the process through
which most of the organisations share the common profits and goals for achieving the common
benefits in the market. There are indeed a number of benefits as well as disadvantages, which
are obtained from the process. The current section will concentrate on the range of benefits that
are obtained from the process.
Advantages of joint ventures
There are of course a number of reasons, for which organisations opt for joint ventures. In the
words of Hay and Marsh (2016), joint venture is considered as the most effective market entry
strategy as it allows the equal sharing of the profits and most significantly the risks among the
organisations participating in the venture. One of the significant advantages of the joint ventures
is that it promotes faster growth of the business. However, there are always more to it. The
different advantages that are obtained from the process may include
Shared investment and expenses - This is exactly what joint venture is all about. It allows the
equal sharing of the investments between both the parties. In the words of Baylis et al.(2017),
this is one of the major reasons that the organisations consider joint ventures as the most
effective market entry strategy for venturing into a new market. Like the investments, the
expenses are also shared among the participating organisations. Thus, the overall costs reduce
largely.
Extensive market penetration- As put forward by Pieterse (2015), joint ventures always help the
organisation in penetrating the market more extensively and thus understanding the target
markets as well as the rules and the regulations of the current market. It opens up new market
for the organisation that is planning to enter into the market. In the words of Schmukler and
Abraham (2017), it also helps in opening up new markets for the organisation.
Equal sharing of the profits as well as risk- It is obvious that the profits as well as the risks are
shared equally between both the organisations. Hence, the chances of failure of both the
organisations are comparatively less. In the words of Li et al. (2017), this turns out to be one of
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the greatest advantages of joint ventures. As the risks are shared, hence the chances of failure
reduce extensively.
More utilisation of resources - It is quite common that resources are needed for running each
business. The resources, both tangible and intangible are extremely important for running the
entire business. It has been identified that the joint ventures often assists the effective utilisation
of resources. It decreases the unemployment rate and contributes to the overall development of
the place (Hay and Marsh 2016).
Disadvantages
It is a common saying that there are always two sides of the same coin. It is the same case with
joint ventures. Irrespective of the immense advantages, which have been discussed in the above
sections, there are also a number of disadvantages, which are obtained from the process.
The different disadvantages that are obtained from the process may include
Restricted flexibility- Though joint ventures are mostly materialised with the sole aim of
enjoying the equal profits and benefits, but in reality, this is achieved rarely. In the words of Li et
al.(2017), most of joint ventures fail due to the restricted flexibility that is associated with the
process. It is a common thing that flexibility often turns out affective in ensuring the success of
the business , but this is something that is rarely identified in case of the joint ventures .
Unequal involvement- Though the term joint venture means equal involvement of both the
organisations in the entire venture but in reality this is achieved rarely. In the words of Pieterse
(2015), there have almost been no joint ventures, which have witnessed equal participation of
both the parties. There is always one of the parties (organisations to be specific) who highlights
more dominance than the others do and thus the distribution of power as well as independence
becomes unequal.
Cultural indifferences- When the questions about the disadvantages of joint ventures are
considered, then cultural differences are something that finds its prominent position in the list. It
is obvious that when one of the organisations from Australia is planning to enter the UK market,
there will be obviously some cultural differences and clashes and this will greatly affect the
overall joint venture of the organisations.
However, since the organisation is planning to enter into a joint venture in UK, hence there are
actually a number of factors apart from the above that are to be considered. The after impacts of
the BREXIT are the most effective among them. In the words of Baylis et al.(2017), the UK exit
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from the UN have created huge drifts in the overall conditions of the country. Hence, Cafe
Sydney needs to consider all of these factors while planning to enter into a joint venture with an
organisation of the similar types in UK. The laws and the regulations of the country pertaining
to the business environment have been changed abruptly. The unemployment ratio of the country
has also increased extensively. Hence entering into a joint venture at this state may prove to be
ineffective for the organisation. Hence, it is highly recommendable that the organisation
considers all of the factors before venturing into the market (Hay and Marsh 2016).
Literature Gap
Though extensive research have been conducted for developing an effective idea about the joint
ventures as well as their disadvantages and advantages, but there are of course some of the
sections that have not been considered . For example, the advantages and the disadvantages of
Joint ventures have been discussed but the extents to which this will affect the venture of Cafe
Sydney have not been included in the sections. For gaining an effective idea about this, primary
research has been conducted. The results will be recorded, analysed for drawing an effective idea
about the topic. In the words of Hay and Marsh (2016), this will help in developing an effective
idea about the practical aspects of the study in details. This will be useful in providing a more
practical aspect of the study.
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Chapter 3
Methodology
In the words of Hughes and Sharrock (2016), the research methodology is one of the important
sections that help in laying out the entire step that should be followed while conducting the entire
of the research project. A number of steps need to be followed while conducting the entire
research project. The particular section will concentrate on the different research approach,
research philosophy, research design, data collection and techniques along with the sample size
and the types of data that will be collected for conducting the entire research project effectively.
Research philosophy
As discussed by Quinlan et al. (2019), the set of beliefs and perceptions that are followed by the
researcher during the entire research process is termed as the research philosophy. Selecting the
appropriate and the relevant research philosophy is of extreme importance as it helps the
researcher in conducting the research in the appropriate direction. It also helps in giving proper
shape to the research. The research philosophy can be distinctly categorised as interprevism,
positivism and realism. It is essential for the researcher to choose the correct philosophy as this
will help greatly in conducting the whole of the research process effectively. For this particular
research the positivism philosophy have been selected.
Research approach
The research approach is the methodology adopted by the researcher for narrowing down the
overall study towards a particular direction. It helps the researcher in understanding the topic of
study in an effective manner. The research approaches that are in common use are of two distinct
types and these are the inductive and the deductive approach. It needs to be mentioned that the
adoption of the inductive processes often makes the entire research process a tough one and
hence it has been avoided. The deductive approach has been selected for this particular research
as it helps the researcher in using the existing theories and models that are relevant to the topic of
study.
Research Design
The research design concentrates solely on the collection and the interpretation of the data that is
being collected for the research. In the words of Alvesson and Skoldberg (2017), the research
designs are broadly of three categories and these are explanatory, exploratory as well as the
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descriptive research designs. The researcher has selected the exploratory research design for this
particular research, as this will allow the researcher to concentrate on the background of the
topic.
Data collection techniques and analysis
It is obvious that the effectiveness of the research depends greatly on the type and the quality of
data that is collected for the research. In the words of Taylor et al,(2015),the data collection
techniques that are useful are mostly of two categories and these are the primary and the
secondary data collection techniques. The research will concentrate on the collection of primary
data. It is expected that the selection of this particular type will help the researcher to collect
more relevant and effective data for the process. The data that will be collected will be a
conglomeration of both quantitative as well as qualitative data. As part of the quantitative
research, a survey will be conducted for the customers working at Cafe Sydney. These people
will be considered and a proper survey will be conducted. However, as part of the qualitative
analysis, three managers of Cafe Sydney will be interviewed.
Sampling along with the data collection techniques
In the words of Taylor et al.(2015),sample means the exact number of participants who will be
participating in the survey process. The sample size needs to be selected considerably as the
whole of the research depends on this excessively. For this particular research, a sample size of
120 has been selected. The data will be collected analysed and interpreted for the results. The
sample will be selected through the random sampling technique, as this will eliminate the
chances of biasness in the entire research process.
Primary Data Collection Techniques
It has been decided by the researcher that as part of the data collection techniques, survey
methods have been selected. A survey questionnaire consisting of all the relevant questions will
be developed and given to the selected sample size. The data will be collected and will be
analysed for drawing the conclusions.
Ethical issues
The ethical issues are one of the important parts of the entire research project. In the words of
Alvesson and Skolberg (2017), ethics are something that always needs to be followed while
conducting the research process. The researcher has ensured at the beginning of the research
process, that none of the participants will be forced by any means to participate in the research
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process. The data collection act will be followed throughout the entire research project. The
confidentiality of the data should be maintained and none of the data that is collected should be
used for any other purpose apart from that of the research. There will be no commercial usage of
the data and if it is done, prior permission will be taken from the participants. The Equality Act
will also be instigated and followed and there will be no biasness based on unjustified fields such
as caste creed religion and skin colour.
Limitations of the research
Just like the ethical considerations, the limitations also form an inseparable part of the research
project. There have been limitations that have been identified in the process. The time and the
budget constraint are the most significant among them that have restricted the process to some
extent. The budget as well as the periods of the research thus had to be modified and revised
during the research process.
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Chapter 4
Results
The research revolves around making the use of the primary research method to cater to the
understanding of the research project. The researcher has made the use of the primary data
collection method. This is done along with the use of the qualitative and quantitative data
analysis. Therefore, the survey revolves around making open-ended questionnaires to the
customers working for the cafe shops and their stance on the issue of the risks and benefits of the
joint venture business and markets.
Quantitative Data Analysis
1. What is your age?
Options Number of
Respondents
Percentage of
Respondents
Total number of
respondents
20-30 50 41.67 120
35-40 65 54.16 120
45-50 5 4.17 120
Table 1: Age of the participants
41.67
54.16
4.17
Age of participants
Figure 1: Age of participants
Analysis
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