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Retail Business Environment

Notes of integrating the acquired businesses into the existing system, and lower levels of managerial
commitment to acquired outlets. In more risky environments retailers may favour a less costly
strategy such as franchise and proceed at a more controlled pace. The geographical and cultural
distance of the host market will also influence the decision. In markets perceived as distant, a
slower more incremental entry strategy may be used in order that the company learns about
market conditions and adapts accordingly. Acquiring a company outright in a culturally distant
market is a very risky option, and one that may be extremely costly if the retailer subsequently
withdraws.
The size of the company is also a determinant of market-entry method. Large, powerful
companies have the financial backing to follow high investment strategies such as merger or
full acquisition. They can also achieve large-scale entry, which may provide volume-driven cost
advantages. The great scale of business is obtained. Smaller companies are obviously not in a
position to follow the same path. Private companies also have the freedom of perhaps taking a
longer-term view of expansion, as they are not restrained by the opinion of shareholders.
Linked to this, the management culture often influences strategy, while some retailers have a
clear mission to be global players and will take risks to achieve this central aim; others are not
willing to consider such strategies. The opinion of senior management often determines whether
a retail company becomes global or not. Research suggests that it often takes a main board
member to champion the idea of going global for it to occur.

Joint Ventures

A joint venture (often abbreviated JV) is an entity formed between two or more parties to
undertake economic activity together. The parties agree to create a new entity by both
contributing equity, and they then share in the revenues, expenses, and control of the enterprise.
The venture can be for one specific project only, or a continuing business relationship such as the
Sony Ericsson joint venture. This is in contrast to a strategic alliance, which involves no equity
stake by the participants, and is a much less rigid arrangement.

Use of Joint Ventures

Joint ventures are common in the oil and gas industry, and are often cooperations between a
local and foreign company (about 3/4 are international). A joint venture is often seen as a very
viable business alternative in this sector, as the companies can complement their skill sets while
it offers the foreign company a geographic presence. Studies show a failure rate of 30-61%, and
that 60% failed to start or faded away within 5 years. (Osborn, 2003) It is also known that joint
ventures in low-developed countries show a greater instability, and that JVs involving
government partners have higher incidence of failure (private firms seem to be better equipped
to supply key skills, marketing networks etc.) Furthermore, JVs have shown to fail miserably
under highly volatile demand and rapid changes in product technology.

Some countries, such as the People’s Republic of China and to some extent India, require foreign
companies to form joint ventures with domestic firms in order to enter a market. This requirement
often forces technology transfers and managerial control to the domestic partner.
Another form that joint ventures may take are the Joint Ventures (JV’s) in the U.S., Canada, and
Mexico dedicated to the conservation of priority bird species and their associated habitats. Each
of these JV’s is different in how they go about their respective missions, but all try to follow the
principles of Strategic Habitat Conservation (SHC). SHC combines biological planning,
conservation design, conservation delivery, and evaluation and monitoring. Gulf Coast Joint
Venture, Lower Mississippi Valley Joint Venture, and Prairie Pothole Joint Venture are just
three of the 20+ JV’s found in North America.

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