East Meets West: Business Joint Venture

Case 1.2

East Meets West: Business Joint Venture

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Questions & Solutions:

1.  Why would a joint venture partner from a planned economy have difficulty understanding that the consumer is king or queen?

Answer:

Joint venture partners from a planned economy system often face difficulty in understanding about the business of their partner. Soviet Union is a region of planned economy system. They don’t give priority to their customers. But Americans aren’t like them. They give their most priority to their clients and customers.

Joint Venture:

It’s a strategic association where two or more partners join to operate the business, partnership to share markets, intellectual properties, knowledge and assets for profit. Partnering is very helpful to successfully fight the bigger competitions.

Joint Venture Partners:

It usually to dissolve after the objectives has been achieved. This kind of partnership is fairly common who wants to do business in a foreign country. Partners have many resources, so that the venture could be succeed and they can earn a great amount of profit.

Planned Economy:

A planned economy is an economic system in which inputs are based on direct allocation. It may carry out in a decentralized, distributed or centralized manner depending on common economic institution. Government of Soviet Union owns everything and every business in their region.

Difficulty in Understanding:

In joint ventures, two parties have always misunderstanding situation. In fact, for that sometime joint ventures fail to do business. So, there should be a mutual understanding among parties and their rules and regulations have to be less hard to their partners.

Consumer is the King or Queen:

Soviet Union business firms sell a product to the consumers, but they don’t give any facility for that product to them. That’s indeed a fault of Soviet business firms. It’s kind of autocratic system like, “Take it or Go away”. On the other hand American business firms’ conception is “Consumer is the King or Queen”. Because of thinking about the future of their business, they want to make their clients and customers happy and want to achieve their loyalty by giving many facilities. It’s the conception why American businesses are successful in the world market. Because, they always keep their customers happy.

1.  Could a small Business owner tolerate a business deal (joint venture) that had little probability of being profitable within the first 10 years?

Answer:

This Question’s answer is kind of difficult. The decision involves addressing various elements. However, it is easy to overlook the “how” and “what” questions in this perspective.

How a business is needed to be planned, executed and organized; to keep success on our side we have to execute following strict plan. The “what” questions should be covered in a legal agreement that will carefully listed. There should be statements about which party brings which assets to the joint venture, as well as the objective of this strategic association or venture. It would be more appropriate to seek legal advising when entering in such kind of business.

Important to Consider:

• What do I sell in the market?
• How do I reach my target market?
• Who are my competitors? If they are better in generating revenues?
• How to generate revenues better than competitors?
• Where I could do our business? Can we do it without local partners?
• How to operate the business? Do I have enough human resources in marketing, production, promotion and distribution?
• How are the rules and regulations for the environment of business?
• Do I have access to be successful joint venture’s who can share their experience with me?
• What are strengths and weaknesses? What are the threats and opportunities?
• Do I have all support that I need for achieving business goal?

The venture can be for one appropriate project only, or a continuous business relationship. The major problem is not being able to create profit about first 10 years for small business with their capital. The partners who have huge capital dominate the small ones. They lead the business over small business. For small business, an owner should be patient for 10-15 years. By this 10 years they have tolerate the domination for taking the opportunities of making their network with other countries. First few years are not so profitable for them. After several years their networks become huge, so that they can express demands in high range. After 10-15 years, they are began to be counted. They can easily work with the big partners or investors. But first few years they can’t compete with huge partners because of their poor network. They can hardly afford the things that they need to develop in business world. After struggling, their business is exposed to international market by the time. Joint venture is usually for protecting harmful competition. So, small businesses want the huge business’s support for their capital.

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