jointventuresfinal-110901032416-phpapp02

7/29/2019 jointventuresfinal-110901032416-phpapp02

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JOINT VENTURESVenkat Ramachandran 2008064

Joel Johnson 2009019

Subhra Jyoti Saha 2009066

Vishnu Bhavraju 2009080


2/18

WHY JVSFORM?

Inter-firm competition is concerned with skillacquisitions

Skill discrepancies motivate joint ventures/alliances

Motivation is for either: Exploring new opportunities

Exploit existing capabilities

Terms for motivation is based on:

Expected returns Managerial cognition of the environment

Strategic Intent


3/18

WHYARE JVSINSTABLE?

Alliances can tend towards exploitation than exploration

Hence, alliances are a race to learn

Primary factor contributing to instability is a shift in partner bargaining power

Secondary factor is dependenceon the partner - for resources which the partnercontrols

Payoffs from the alliance vary as:

Private benefits

Common benefits

Relative scope

Shifts in payoff structure shifts bargaining power and dependence within the alliance

Long-term value is not substantial when compared to obtained gains, irrespective ofmagnitude of value.


4/18

JV INSTANCESIN INDIA

Automotive Hero Honda

Kawasaki Bajaj

TVS Suzuki

Mahindra Renault Toyota Kirloskar

Consumer Goods Foodworld Brittania-Danone

Bharti Walmart

Lee Cooper India Ltd.

Godrej Sara Lee

Telecommunications Tata Sky

Vodafone Essar

Uninor

Financial products Bajaj Allianz

Tata AIG

Bharti Axa

Others Modi Xerox

Godrej Boyce


5/18

REASONSFOR JV CREATIONIN INDIA

For foreign partner

Government restrictions

Indian market unlike other monolithic markets

Access to local distribution channels

For local partner

Access to new technology and processes

Opportunity for larger chunk of revenue

Pre-empt creation of JV with a rival

Proving ground for exporting to external markets


6/18

WHYDO INDIAN JVSFAIL?

Imbalance in elements of exchange Foreign partners bring in intellectual capability which is difficult to learn quickly Indian partners hand over information of local market, making it comparatively

easier to learn.

Foreign partners come in with an intent to learn and incorporate this in theirprocess.

Indian partners are very lax when it comes to learning. When they do realize,its very late.

Foreign partners, mainly MNCs, compartmentalize certain knowledge incertain regions R&D in US, manufacturing in Taiwan, etc.

Indian partners do not have this advantage.

Big Brothers hand Foreign partners initiate the JV due to government restrictions, not due to

partners capability Indian partners take advantage of this, and try to add more restrictions to

prevent the foreign partner from creating other alliances instead of learningsuccessfully.


7/18

IMPLICATIONSFORINDUSTRY

Foreign player(Brings tech, innovation)

Monetary benefits leave thecountry

Launch vicious cycle of(economies of scalerevenue) raising barriers ofentry

Capture a majority portion of thelocal industry

Local player(Brings market knowledge and

access to distribution channels)

Monetary benefits stay withincountry

Systemic knowhow is transferredwithin the region

Begins entering external markets Reuse learning across other

entered domains.

Advantages to market Increased competition Competitive product portfolios

Enhanced product evolution

Greater choice for customer


8/18

A CASEIN POINT

No More

Its

vs


9/18

ISHERO HONDAA SUCCESS?

Achievement - Worlds largest two wheelermanufacturer - 50% Market Share in India

Competition - Successfully ends the Bajaj raj

Image - Perceived as the company that put Indianmiddle class on wheels Dhak Dhak Go

Investors - $ 3.6 Billion Revenue 4700Employees. FY09 FY10: Operating Profitincreases by 28% and Net Profit by 74%

Financiers - LAAA Rating


10/18

THENISITABITTERDIVORCE?

Honda selling its stake at 50% of market valuation

Increase in Heros royalties to Honda 3% to 6%

Shares sank 9% on the day of announcement oftermination


11/18

JV FORMATION & TERMINATION

Spider Web ofcooperativeagreements

No inter firmagreements

Joint Ventures (HeroHonda, TVS Suzuki)

CooperativeAgreements

(Kawasaki Bajaj)

High Strategic Importance Low Strategic Importance

VolatileCompetitiveEnvironment

StableCompetitiveEnvironment

1980s

PostLiberalizati

on

SourceManaging for JV Success Kathryn Harrigan


12/18

WHEREDIDTHEINSTABILITYSTART

Race to Learn

New Emission Norms for 2015

Shift in Partner Bargaining PowerIndian firms growing moreconfident in R&D. Strong local supply chain.

Dependenceon the partner - Honda is well equipped withknowledge about Indian market conditions. Hero ambitious toinvest in its own R&D

Payoffsfrom the alliance vary: Private benefits Honda would like to extract higher royalties for

latest technologies Common benefitsHigher royalties would hit Hero Honda

profitability Relative Scope JV inflexibilities ceding market share to competition

and creating hurdles in grabbing new opportunities


13/18

KYON HERO

- Established distributionnetwork-Higher installed capacity- Market leader

- Growing Indian twowheeler market (bothmotor cycles andscooters)- Exports opportunities

Strengths Weaknesses

Opportunities Threats

-Relied for too long onHondas R&D- Weak exports

- New emission norms- Intensive competition- Increasing input costs


14/18

HOWIS HONDA POISED

- Strong Brand Name- R&D

- Unmet scooter demand- Growing motor cyclemarket

Strengths Weaknesses

Opportunities Threats

-Dealer network not amatch to othercompetitors- Lower installed

capacity

- Intensive competition- Increasing input costs


15/18

DISCOVERING TOGETHEROR INDIVIDUALLY?

Diversify

Discover

Build new competenciesthrough JV ( Motorcyclemanufacturing)

Defend Develop

Competencies

New

Existing

Hero Group 1984

MarketOpportunities

Existing New


16/18

DISCOVERING TOGETHEROR INDIVIDUALLY?

Diversify

Discover

Build new competenciesalone ( R&D, Exports)

Defend Develop

Competencies

New

Existing

Hero Group 2011

MarketOpportunities

Existing New


17/18

DIVERSIFYING TOGETHEROR INDIVIDUALLY?

Diversify

Explore new marketopportunities jointly

Discover

Defend Develop

Competencies

New

Existing

Honda 1984

MarketOpportunities

Existing New


18/18

DIVERSIFYING TOGETHEROR INDIVIDUALLY?

Diversify

Explore new marketopportunities alone

Discover

Defend Develop

Competencies

New

Existing

Honda 2011

MarketOpportunities

Existing New

Documents

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