Page 229 - DMGT548_GLOBAL_HRM

Global HRM

Notes Self Assessment

Fill in the blanks:
11. …………. downturn in the global markets plays havoc with the buyers and will severely
affects the business prospects and forecasts.

12. ………… issues are the biggest challenge for any cross-border acquisition.

12.4 Indian Joint Ventures

JV is a strategic business alliance for conducting the business globally. It is a separate legal
organisational entity, controlled jointly by its partners and created by the investment of two or
more parent firms.

Example: Ranbaxy has several JVs across the world in countries like Japan and South
Africa. HCL Technologies still take the JV route, one of the few large IT services around such
collaborations. The Delhi-headquarter IT services giant has had several JVs with companies like
Deutsche Bank, Jones Apparel and NEC.

The crucial factors for the success of a JV are what each partner brings to the table, how
complementary their respective skills are, and the understanding that the partners have about
each other’s needs. Factors that leads to the success of the joint ventures are:
1. It is a low-risk strategy where partners share the risk of a new venture.
2. Is helps the company to entry into new domains. An Indian player can enter or beef up his
domain expertise with the help of a foreign partner who has been in the space. JVs are a
back door route to client acquisitions.
3. Easy to acquire the local knowledge. Instead of reinventing the wheel, companies can ride
on the experience of a local player who knows the ropes in foreign markets.
4. Hiring people is an easier proposition in a joint venture if the local company has a good
reputation in the foreign market.

Example: The Chennai-based Sundaram Fasteners Ltd. (SFL) traditionally has not been
a great believer in JVs. But in 2004, the leading auto ancillary manufacturer entered into a JV
with Bleistahl Productions Gabh, Germany, to manufacture value chain parts in India. SFL
invested 76% of the equity capital and Bleistahl chipped in with the rest. It was a first SFL and
found that Bleistahl shared its vision of India being an outsourcing hub for manufacturing. In
addition, Bleistahl agreed to transfer its assets, including production facilities to the JV. Bleistahl
also chose to focus on marketing, allowing SFL to concentrate on its core manufacturing strength.
So, SFL is ensured of a steady increasing export turnover and not worry about off take, sales and
people aspects. SFL example is unique because it allows the company to target international
markets by manufacturing out of India with some help from an overseas partner.
Most JVs are signposts that Indian companies use while exploring global markets. JV allows one
to leverage the strengths of the partner who is well aware of the market dynamics and knows
the rules of the game. In 2002, when Ranbaxy decided to enter Japan, the world’s second largest
pharmaceutical market, they decided to tie up with Nippon Chemiphar Limited of Japan to
form a JV called Nihon Pharmaceutical Industry, Japan is amongst the most regulated
pharmaceutical markets. Local knowledge is the key to success in Japan. The distribution system
is very different in Japan. Other than language issues, in Japan, doctors dispense drugs. To

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