Joint ventures strategic alliances partnership and relationship management

Partnerships, Joint Ventures, Strategic Alliances and Licensing | Hemenway & Barnes

joint ventures strategic alliances partnership and relationship management

The use of strategic alliances and joint ventures is rapidly becoming popular with a Partners in a strategic alliance can benefit from many aspects of a cooperative These relationships with others in the value chain may be otherwise The management structures that control cooperative efforts are varied, and they are. firms can be too strong and it may be impossible to opt out of relationships, which the management purposes in a given environment and to mobilize the “right” . strategic alliances, joint ventures, long term buyer-supplier partnerships and a . [1] Is the Client's Interest in the Venture/Alliance Primarily Strategic or Financial in Nature? [2] What . [d] Relationship Between Managing Board and Officers.

What Is the Difference Between a Joint Venture & Strategic Alliance? |

Delegated Definition of Joint Venture Joint Venture may be defined as a combination of two or more firms, which set up a separate legal entity, which indicates the capital and interests of the two parties. In finer terms, when two or more firms, invest funds for forming a jointly owned new company is known as a joint venture.

joint ventures strategic alliances partnership and relationship management

The four basic reasons for entering into such a strategic alliance is: Seeking vertical integration Shaping future industry evolution A joint venture may result in pooling of resources, massive leverage, lower risk, optimum utilisation of resources, high profits, etc.

Definition of Strategic Alliance Strategic Alliance is an arrangement between two or more firms to carry out a number of objectives agreed upon by the entities or to fulfil a critical business requirement while operating as separate organisations. In finer terms, a strategic alliance is a relation that exists amidst two firms, to do business together, which is more than a regular firm to firm dealing, but less than a merger or complete partnership.

The entities involving in the alliance may pool their resources such as products, knowledge, expertise, goodwill, capital, distribution channels and so forth. The entities may maintain their autonomy, while they achieve new opportunity.

Joint Ventures and Strategic Alliances

A year later, at the April board meeting, HP made the case that it should be allowed to sell EHPT products through its own sales organization, but Ericsson had been designated as the sole sales channel for the joint venture.

In both cases, compromises were reached.

Partnerships, Joint Ventures, Strategic Alliances and Licensing

The key was the involvement of two of the original architects, both of whom were also on the board of the joint venture. They started by posing the question, Why are we pursuing the joint venture? For HP, the answer was increased access to telecommunication operators; for Ericsson, it was to provide a standardized high-quality network-management product. Both board members worked with the joint-venture manager on a business plan that was aligned with the goals of the parent organizations.

On the flip side, sometimes a manager from the joint venture can create the inevitable crisis, as the EHPT example also illustrates. After the venture began, Hewlett-Packard appointed an alliance manager, an HP employee who was responsible for the interface between the joint venture and HP. That manager, however, became a bottleneck for information sharing. She would not allow for direct contact until she got HP management approval, a process that took nine months —during which no work on developing the product was done.

No Exit Mechanisms When conflicts escalate beyond a certain threshold, and the parties no longer feel they can work with each other, it is vital to have a formal exit mechanism in place so that costly and time-consuming litigation can be avoided.

The question was whether in the future EHPT should focus on developing the network-management platform as well as providing network-management solutions or focus only on the latter. The venture had a contractual agreement in place that dealt with such deadlock situations, so the conflict was manageable the platform business was transferred back into Ericsson.

The focus had changed, and it made sense to bring the venture to a close. Needless to say, if the venture is ending on a high note in which both parents have achieved what they wanted, the exit is not difficult to arrange. But if the venture is ending after years of poor performance, with one parent no longer able to absorb the losses, the exit negotiations are likely to be acrimonious. Swissair had no explicit exit clauses and owned This led to tough separation talks that included the French government, which did not want to let Swissair out of the venture.

In Julya French tribunal ruled against the breakup of the airline group, instead approving a takeover bid led by a former pilot from the Air France Group.

joint ventures strategic alliances partnership and relationship management

In order to avoid a similar scenario, it is important to include deadlock provisions in the original agreement that make it possible for the various partners to exercise buy-sell options at a predetermined valuation price.

EHPT had such provisions, which facilitated the smooth conclusion of that venture. Crafting exit clauses by thinking about worst-case scenarios has only recently become a commonly accepted practice. Explicitly discussing and formalizing procedures in case of escalating conflicts would be a useful extension of the ideas behind formal deadlock provisions and exit clauses.

Given the short life span of joint ventures, it is surprising that many founders of joint ventures do not seem to have paid enough attention to managing partner relations. To avoid having to exit a venture that is by one measure or another a failure, the parents need to step around the minefields. They must establish effective working relations by creating forums of joint coordination that can ensure parental alignment of strategies.

And the key is thinking through all the issues during the heady period of negotiations, not after the ink is dry and the day-to-day work has yet to begin. She can be reached at Bettina. The definition of joint-venture success has been widely debated. Writers on the subject have measured success in terms of stock market returns, the achievement of financial and strategic objectives and divestment.

Harvard Business School Press, Scholars have pointed toward issues related to partner relationship management but have not directly linked it to joint-venture success measured in terms of fulfillment of strategic objectives by the parent companies.

Praeger, ; K. Inherent in partner selection is the understanding of potential partners' goals. For one thing, a potential partner must have complementary strategic objectives.

A venture will not succeed if the objectives are in conflict, but the objectives do not need to be identical. For example, a Korean radio manufacturer has advanced technology and this technology is attractive to the largest radio manufacturer in Germany.

The German firm controls 80 percent of the German market. These firms have complementary objectives. The Korean firm will provide the German firm with the advanced technology, and the German firm will provide the Korean firm accesses into a new market. It is important that each partner understand and accept the other's objectives.

joint ventures strategic alliances partnership and relationship management

Potential partners should also possess complementary skills. Each partner must contribute more than capital to the project, bringing other competencies into the venture. One firm may bring technical skills and another may bring knowledge of the market. There are many skills that a firm can bring into the relationship: Skills are most easily meshed when partners have similar, but not identical, products.

joint ventures strategic alliances partnership and relationship management

If both produce an identical product it may be difficult for them to work together. Even if skills are complementary competition may drive them apart and cause the venture to fail. While the partners must offer complementary objectives and skills, both partners must believe that they can trust each other and that mutual commitment is a reality.

As Cullen explained, "A common theme among managers from both failed and successful strategic alliances is the importance of building mutual trust and commitment among partners. No matter how mutually beneficial and logical the venture may seem … without trust and commitment the alliance will fail entirely, or it will fail to reach its strategic potential".

There are a variety of ways that a company can attain and sustain commitment and trust in cooperative ventures. Goal and intent revelation is a crucial step toward building trust.

Difference Between Joint Venture and Strategic Alliance (with Comparison Chart) - Key Differences

Cullen identified five typical management structures used by companies for their joint ventures and strategic alliances: The dominant parent is generally the majority owner of a joint venture. In cases where there is no majority owner, the dominant parent may be the company that contributes the most valuable resources.

When there is a dominant parent, this company makes more operational and strategic decisions. In many instances, a joint venture is treated as a subsidiary of the dominant parent. Often when large multinational firms have cooperative alliances with firms in small countries, the multinational firm comes in as the dominant parent. The shared management structure and the split-control management structure are very similar. In these structures, both parent companies share decision-making responsibilities.

In the shared structure, there are an equal number of managers in controlling positions from each company board of directors, top management, and functional management.