CHAPTER 3
Analysis of the Market B U S I N E S S R E L A T I O N S H I P S , particularly JVs between parties from different countries, cultures, and legal systems, present unique challenges. Parties tend to focus on the business and economic terms and consequences of their relationship, but they must also respect the different values they will encounter when they approach a cross-border relationship. For the process to succeed, a careful analysis should always be made of the markets in the country or countries where the JV will be active.
INTERNATIONAL
Social and Political Factors In an international JV, the cross-border nature of the transaction requires that the parties pay close attention to the social and political factors that might impact the success of the JV. The social and cultural beliefs and practices of another population are based on its history, education, and fundamental understanding about how society ought to be ordered and regulated. Political factors can extend beyond the structure of government and the rule of law to include informal methods of power and influence in the marketplace. In many ways, the decision to enter into a new foreign market is an adventure in cultural anthropology. The foreign party needs to consider carefully all the traits and activities that make up the way of life in the subject country. This analysis requires identification and understanding of the controlling institutions and customs that regulate how people think and what goals they seek in their dayto-day lives. These cultural values will, in turn, influence the structure and operation of business enterprises. For example, consider the argument that management practices in a Japanese corporation, including the emphasis on group values and subordination of the desires of the individual, are a byproduct of the social organization in that country. Consider also how clan and extended family relationships in a small developing country can often overwhelm the nominal authority of the government, thereby reducing the degree to which foreign parties can rely on guarantees of the state with respect to the operation of a JV. In addition, a foreign party must carefully evaluate the political environment of the subject country. Political evaluation has often been neglected, or contemptuously ignored, by managers in developed countries. The results can be disastrous, leading to misunderstandings between the parties and direct clashes between the foreign investor, regulators, and other institutions within the subject country. Relevant considerations include an estimate of the political stability and the likely direction of political development in the subject country, an appraisal of the quality of the public service, the possibilities for long-term economic growth, and the attitude of the government and people toward foreigners in general and toward the prospective venturer’s nation in particular. National pride and sensitivities must be taken into account. Finally, the foreign party should remember
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