CHAPTER 4
Parties to the JV: The Roles an international JV flow from the fact that the typical JV involves several different parties, each with its own unique set of goals and objectives. Obviously, the main parties are the joint venturers themselves. Although a JV can include more than two partners, or partners that operate primarily in the same jurisdiction, we will assume that the JV involves a foreign party (i.e., a business entity that operates outside of the country where the JV activities will be carried out) and a local party (i.e., a business entity owned and operated by parties in the country where the JV activities will be carried out). Although success of the JV will ultimately depend on the relationship of the venturers, other parties will also play an important role. In many emerging markets, the most important of these parties is the local government, which may not only regulate the terms of the JV but may also own part of it. In addition, the tone of the JV relationship may be dictated by the advisors to the venturers, particularly their lawyers and accountants. Finally, the concerns of local managers and union leaders should always be accounted for in the planning process.
MANY CHALLENGES IN LAUNCHING AND OPERATING
The Foreign Party A JV offers inherent business advantages to a foreign party seeking a local business partner. International joint venturing, once limited to large corporations in developed economies, is attracting smaller businesses today as innovative technologies are making global commerce more accessible. Regardless of a foreign party’s size, its key objectives usually include the following: A foreign party might prefer a JV when tapping into the local party’s existing market and distribution channels.
■ IMPROVED ACCESS TO THE FOREIGN MARKET
If a local partner contributes working capital, raw materials, facilities, and other assets, the foreign party may realize significant cost savings by entering the market through the JV as opposed to starting up on its own.
■ COST REDUCTION
The best entry into a local market is through managers experienced in marketing to the unique needs of customers in the foreign country. A JV offers a local management structure that the foreign party would otherwise have to hire and train if it were to launch its own business.
■ ACCESS TO LOCAL MANAGEMENT
The government’s attitude toward foreign investment is particularly important in emerging economies. Often, a foreign party will enter into a JV only if it can receive favorable government treatment.
■ FAVORABLE GOVERNMENT TREATMENT
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