HNC Business Unit 6: Joint Venture Analysis and Recommendations

This report delves into the strategic use of joint ventures by global organizations, focusing on market entry and expansion, particularly for ASDA and Tengri. It examines the crucial elements of a successful joint venture, including the development of comprehensive project plans, SWOT and PESTEL analyses, and the selection of strategic partners. The report provides a detailed discussion of the benefits, such as shared risks, access to resources, and temporary partnerships, alongside the inherent risks like cultural imbalances and communication issues. It offers recommendations to maximize joint venture success, including the implementation of repeatable models, alignment of objectives, and intercultural management. Furthermore, the report analyzes the project plan, detailing the timeline and activities necessary for a successful joint venture, including stakeholder engagement, partner selection, and agreement development. The project plan includes activities such as researching other business organizations, internal and external environment analysis, resource and cost estimation, comparison of working methods with potential partners, stakeholder engagement, choosing the right joint venture partner, preparing business and marketing plans, preparing cash flow projections, preparing written joint venture agreements, and preparing agreements regarding the termination of joint ventures in case of rifts between the companies. The report concludes by emphasizing the importance of a well-defined agreement that outlines all terms and conditions, including legal structures, business objectives, financial arrangements, conflict resolution, and intellectual property protection. The report also includes a detailed project plan, a timeline, and a visual representation of the tasks involved in initiating a joint venture.

UNIT 6
Contents
Executive Summary............................................................. ....................................................2
Introduction..............................................................................................................................2
Discussion................................................................................................................................... 3
Recommendation...................................................................................................................... 10
Conclusion. .................................................................................................................................14
Reflection. ...................................................................................................................................15
References. .................................................................................................................................17
Global organizations mostly adopt the joint venture strategy in order to expand into
international market. In order to enter into a joint venture, organizations need to conduct
thorough analysis of the business strategy of their own organization and also of their potential
partners with whom they wish to enter in to the joint venture. Detailed analysis of the business
strategies and activities helps business organization to choose the right joint venture partner
based on the strategic fit. One of the most important element which is associated with a joint
venture is development of the joint venture agreement between both the organization which
helps in detailing all the terms and conditions for the joint venture that both the partners to
follow regarding the joint venture. There are various benefits which are associated with a joint
venture strategy such as sharing of risks, access to improved resources and technology, gaining
of new expertise and insights etc. Apart from the benefits, there are various risks involved in a
joint venture project such as lack of equal involvement of the partners, issues regarding sharing
of intellectual property, cultural imbalances, lack of clear communication etc. In order to
maximize the benefits of a joint venture and to minimize the risks of a joint venture it is
recommended to organizations for having a repeatable model of success, aligning joint venture
objectives with corporate growth strategies, focusing on intercultural management etc.
Introduction
Joint ventures are one of the most popular international market entry modes which are being
followed by numerous organizations considering the benefits which are associated with it. An

international joint venture is a separate legal organizational entity in which two partners who
are economically, geographically and legally independent of each other participate. Multiple
multinational companies have utilized the international market entry mode of joint venture in
order to enter into developing countries. International joint ventures are popular institutional
forms chosen by less developed countries in order to attract foreign direct investment and
knowledge. There are various benefits which are associated with using joint venture as a
market entry mode for international markets for both the organizations involved. However,
apart from the benefit, there are various risks which are associated with entering into
international market through joint ventures. The aim and objective of the current project is to
help in analyzing the risks and benefits for ASDA and Tengri in using joint venture, as the
preferred market entry mode. The other aim and objective of the project is also to provide
recommendation to ASDA and Tengri to ensure the success of the joint ventures project which
will help them to utilize the growth opportunities. It is very important to analyze the risk and
benefits of joint venture as a result of the increasing in joint venture project with every passing
day, so that companies remain aware of the pros and cons associated with joint venture before
entering in it.
Discussion
Project Plan
In order to ensure the success of a joint venture project plan is very necessary which details all
the activities that need to be performed in order to ensure that the joint venture project gets
completed on time. One of the most important part of the project plan is to conduct internal
and external environment analysis in the form of SWOT analysis and PESTEL analysis of ASDA
and Tengri. The next important part of the project plan is to analyze the cost of the joint
venture project and the resources which will be required for the project. It is important for
identifying the strengths and weaknesses of the business strategy of the company. It is also
important to analyze the impact of various macro-economic factors on the business strategy of
the company. The next important part of the project plan of the company is to research the
activities of business organizations in the area or market in which ASDA and Tengri plans to
enter into a joint venture. It is important for getting an idea regarding the viability of the Joint

Venture project of the company. Another important part of the project plan of the joint venture
of the company is to identify various companies in an area with whom it can enter into a joint
venture. It can be done by comparing the working methods of the organizations belonging to
that area in order to ensure strategic fit. Another most important element of the project plan
for ASDA and Tengri regarding starting a joint venture project time involves stakeholder
engagement of the organization. It is very important from the point of view of ASDA and Tengri
to engage their stakeholders for ensuring the success of the joint venture project. During the
stakeholder engagement process, ASDA and Tengri should focus on gaining view and insights
from the stakeholders of the company regarding the joint venture project of the company and
ensure their buy in regarding the joint venture project. ASDA and Tengri should also focus on
managing various changes in the organization which can be caused as a result of the joint
venture project of the company in order to ensure the success and effectiveness of the joint
venture project of the company. As stated by Chung-Jen et al. (2018) the next element of the
project plan of the company deals with selecting the ideal partner to enter into a joint venture
based on the strategic fit between ASDA and Tengri and the company and also depending on
the business potential of the company. As stated by Totten (2017) another crucial element of
the project plan of the joint venture of ASDA and Tengri and an Indian company is development
of the marketing plan and business plan of the new joint venture project based on which it will
operate. It is also important to develop the cash flow projection. It will help in detailing about
the sources of funding of the joint venture project, borrowing of funds for the joint venture
project, division of profit and losses and division of capital gains and losses. Another most
important part of the project plan of the company is development of written joint venture
agreement. It will help in detailing all the terms and conditions related to the joint venture
project such as legal structure of the joint venture, business objectives of the joint venture,
financial arrangements, resolution of conflicts and disputes, use and protection of intellectual
property and day to day strategic decision making. As stated by Kjar (2016) another important
element of the project plan of ASDA and Tengri is development an agreement which will detail
the policies and procedures to be followed in case if the joint venture needs to be terminated.
It is important for avoiding potential future disputes and length legal procedure. The last

element of the project plan of ASDA and Tengri details the distribution of business activities
between both the companies which leads to successful initiation of the joint venture
agreement.
The project plan of the joint venture between ASDA and an Indian company should consist of
the following activities in order to complete the project on time is as follows:
Task Start date End date
Researching the activities of
other business organization
in the area
1/05/2019 10/05/2019
Carrying out internal and
external environment
analysis of the company
11/05/2019 13/05/2019
Estimating cost and
resources for the joint
venture project
14/05/2019 16/05/2019
Comparing the working
method of the company with
that of the potential partners
17/05/2019 22/05/2019
Conducting stakeholder
engagement in order to gain
insights of the stakeholders
of the company regarding the
joint venture
23/05/2019 31/05/2019
Choosing the right joint
venture partner
1/06/2019 05/06/2019
Preparing business and
marketing plan for the joint
venture
06/06/2019 10/06/2019

Preparing cash flow
projections
11/06/2019 15/06/2019
Preparing written joint
venture agreement
16/06/2019 23/06/2019
Preparing agreement
regarding the termination of
joint venture in case of rifts
between the companies.
24/06/2019 27/06/2019
Distribution of business
activities
28/06/2019 30/06/2019
Initiating the joint venture 1/07/2019

Date 1st
May
5th
May
10th
May
15th
Ma
y
20th
May
25th
May
31st
May
5th
June
10th
June
15th
June
20th
Jun
e
25th
June
1st
JulyTask
Researching
the activities
of other
business
organization
in the area
Carrying out
internal and
external
environmen
t analysis of
the
company
Estimating
cost and
resources
for the joint
venture
project
Comparing
the working
method of
the
company
with that of
the

potential
partners
Conducting
stakeholder
engagement
in order to
gain insights
of the
stakeholders
of the
company
regarding
the joint
venture
Choosing
the right
joint
venture
partner
Preparing
business and
marketing
plan for the
joint
venture
Preparing
cash flow
projections
Preparing

written joint
venture
agreement
Preparing
agreement
regarding
the
termination
of joint
venture in
case of rifts
between the
companies.
Distribution
of business
activities
Initiating the
joint
venture
Joint venture
According to Vaidya (2018) a joint venture is defined as a business arrangement in which two or
more organizations agree to pool their resources for the purpose of accomplishing a specific
task which can be in the form of new projects or any other business activity. In a joint venture
each of the participating organizations is responsible for the profit, loss and costs which are
associated with the joint ventures but however the joint venture is its own entity and it is
separate from the business interests of the participating organizations.
According to Sharma and Jha (2016) the various elements of a joint venture agreement are the
involving parties in the joint venture, the scope in which the joint ventures operate,

contribution of the involving parties towards the joint venture, the structure of the joint
venture, initial contributions and ownership split of the parties involved in the joint venture,
arrangements after the completion of the deal, controlling and managing of the joint venture,
staffing of the joint venture.
In order to ensure that the aims and objectives of the project are achieved, the current project
will undertake qualitative analysis through literature review regarding benefits and risks of joint
venture and also regarding recommendation for ensuring success of joint venture.
Benefits of Joint venture projects
ASDA, one of the major retail chains of supermarkets in UK can expand the profitability and
enhance the market share of the company by expanding in to the Indian market, by entering in
to a joint venture with an Indian company. Another UK company which plans to go global is
Tengri which sells valuable Mongolian yarn in The UK. There are various benefits for ASDA and
Tengri which are associated with utilizing joint ventures in order to expand to international
market, which are as follows:
New insights and expertise- The initiation of a joint venture project in India by ASDA will help in
providing opportunity to the company regarding gaining new insights and expertise as the
market will become easier to understand for the company as a result of partnering with a
domestic company
Better Resources- According to Meschi, Norheim-hansen and Riccio (2017) the formation of a
joint venture by ASDA in India, in order to expand to the Indian market will enable the company
to gain access to better quality resources such as specialized staffs and advanced technology
and therefore all the equipment and capital which were required by the company can now be
used as a result of entering into a joint venture.
Temporary in nature- One of the major benefits which are associated with formation of joint
venture with an Indian partner by Tengri is that, the partnership will be temporary in nature
and therefore the company need not to make long term commitment regarding the company
and can remain in the joint venture till it is profitable and viable in nature and can accordingly
quit the joint venture when it is no more fruitful in nature.

Sharing of risks and costs by both the involving parties- As stated by Lo, Chiao and Yu (2016)
one of the other major benefits regarding using joint venture as an international market
expansion strategy by Tengri is that in case of joint ventures the risks and costs of the project
will be shared by both the partners and therefore in case of losses and failure, both the
participating organizations will equally bear the costs of the failure of the joint venture
agreement.
Flexibility- As opined by Lai, Chen and Chen (2014) another major advantage which is
associated with utilizing joint venture strategy in order to expand to international market is the
flexibility offered by joint venture agreements as it can have a limited lifespan and can only
cover a fraction of the activities done by the company, which will help in limiting the
commitments of the company in addition to the exposure of the company.
Availability of ways to exit the joint venture- As sated by Cannon (2016) another major benefit
which is associated with utilizing joint venture strategy to expand in to international market by
ASDA is that it can exit the joint venture at any time when it perceives that the joint venture is
no longer viable in nature. Exiting a joint venture is particularly easier than exiting from any
other modes of market entry and therefore it can be termed as a benefit of joint ventures and
moreover joint venture will allow ASDA to escape from its non-core business in a creative
manner given the prominence of divestiture and consolidation in the current competitive
business world.
Ability to sell stakes- As stated by Yang and Harrigan (2015) the setting up of joint venture will
also enable Tengri to separate their business from the rest of the organization and then later
sell it to its partners in order to earn more profit from the sale of their stakes of the joint
venture agreement.
Increased chance of successes- The setting up of joint venture in India with various domestic
companies of India, will help in ensuring that there are greater chance of successes for the
company as it will be riding with an already renowned and established brand name in the
country.
Development of relationships and network in international markets- As opined by Pentsov
(2018) another major benefit for ASDA and Tengri to use the joint ventures strategy in order to

enter international market is that the development of the joint venture agreement will help in
the development of relationships and networks in international market which can be later
utilized by the company even if it decides to exit the joint venture.
Offers limitless potential- Another major benefit which is associated with using joint venture as
internal market entry mode is that it will offer limitless potential for growth in a new market by
investing fewer resources and by capitalizing on the capabilities and resources of the partner
organization.
Reduction in operating costs- As opined by Wong et al. (2018) the other vital benefit which is
associated with using joint venture strategy as a market entry strategy in international market
is that it will help in the reduction of the operating costs of the company due to the sharing of
marketing, advertising and other costs by the other organization involved in the joint venture.
Risks of Joint venture projects
Apart from the benefits, there are various risks which have been identified regarding joint
venture organization which are as follows:
Vague objectives- One of the major risks which are associated with setting up a joint venture is
that the objectives of a joint venture in most of the cases are not fully clear and are very rarely
communicated to all the individuals involved in the venture.
Restriction of flexibility- As argued by Calegario, Houston and Bruhn (2015) another major risk
which is associated with setting up a joint venture is that flexibilities of the participating
companies are restricted as a result of the joint venture which results in the participants
focusing more on the joint venture which creates can create problems and sufferings for the
core businesses of ASDA.
Lack of equal involvement- Another major risk for Tengri regarding setting up their joint venture
is that they do not put more efforts and involvement regarding carrying out the activities and
operations for the joint venture as there is no such thing as equal involvement in joint venture
due to the difference of efforts required for each activity.
Greater imbalance-As advocated by Dinu (2016) one of the major risks for ASDA which is
associated with joint venture is greater imbalance regarding level of expertise, assets and
investment as a result of difference between the natures of both the companies.

Cultural imbalances- Another major risk for ASDA which is associated with setting up joint
venture in order to enter international markets is cultural differences and imbalances between
both the companies and the human resources of both the companies working in the joint
venture which could lead to disputes and conflicts regarding decision making.
Limited outside opportunities- As demonstrated by Gollnhofer and Turkina (2015) another
major risk for Tengri which is associated with setting up joint venture for expanding in to
international market is that it restricts outside activities of participant companies while working
on a joint venture project.
Lack of clear communication- Another major risk for ASDA which is associated with setting up
joint venture for entering international market is lack of clear communication due to the
involvement of different companies belonging to different horizons with no common goals and
objectives.
Unreliable partners- Another major risk which Tengri can encounter while setting up joint
ventures with other companies in international market is that it may come up with a joint
venture with a partner who is unreliable in nature and does not pay required attention and
focus to the joint venture project of the company.
Unrestricted use of intellectual property- As sated by Hong and Daniel (2014) one of the biggest
risk for ASDA regarding entering into a joint venture with another partner in order to expand to
international market is that it can use the more valuable intellectual property of the company in
an unrestricted manner which will lead to lesser profitability for ASDA and it will also affect the
competitive advantage of the company in the market.
Findings and Analysis
The findings of the literature review reflect that one of the main reasons regarding failures of
joint venture can be attributed to lack of planning before entering in to a joint venture. Another
reason for the failure of joint venture can be attributed to lack of clear strategic objectives of
both the parties regarding a joint venture as a result of lack of strategic fit between both the
partners. The findings of the literature review also reflects that majority of joint venture project
suffers due to cultural imbalances which creates dispute regarding the joint venture. The
findings of the literature review reflect that one of the success factors in joint venture project