Advantage of Joint Ventures

Today joint ventures constitute an important route for carrying on international business. Indian firms too are realizing the advantages of the JV route; they have set up a number of joint ventures in several countries. These joint ventures cover wide product range like iron and steel metal products, machinery and appliances, light engineering items, sugar and textiles, chemicals and pharmaceuticals, pulp and paper, food products, leather and rubber products, construction jobs, transport services, trade and consultancy service. Some Indian firms have also established multilateral joint ventures, in which apart from the Indian firm and the partner company, a third company for industrially advanced world also participates.

Setting up joint ventures in foreign markets is certainly a useful strategy for gaining entry and access to global markets. In recent years, the joint ventures concept has taken firmer roots; more companies have picked it up their strategy for realizing their globalization ambitions; not only has the number of joint ventures grown the size of investments in individual ventures have also increased considerably.

Getting Right partners for joint Ventures:

How to get hold of a sound foreign partner for one’s joint ventures abroad is the real issue. In fact, an essential condition for a joint venture to succeed is that the Indian company concerned should be able to attract a sound foreign company as partner. To facilitate such a partnership, the Indian side should possess certain basic strengths like: (1) substantial capital to invest, (2) some attractive products/product idea, and (3) the expertise required make the product tick. If the joint venture is proposed in a developing country, all the three ingredients may have to be offered by the Indian promoter, whereas in the case of ventures in the advanced world, the capital may come from local sources. The point is that to get a proper partner, the Indian companies should be seen as candidates with some substantial competitive strength at their disposal. For example, when a join venture between Toyota Motor Company of Japan and General Motors of the US was mooted, Toyota was in a better position to negotiate, as it had a good product idea with it – the small front wheel drive Toyota model. Toyota could also secure the right to appoint the president and CEO of the joint venture which was to be based at the GM site in California.

Fortunately, at least some Indian companies are in a position to demonstrate such strengths, and gain the right partners for their joint ventures abroad. Blowplast, for example is setting up joint ventures with major distribution companies in Europe for the export of molded luggage. Blowplast will go into a 50:50 equity partnership with one of the largest distributors in the line in the UK. A similar tie-up with a company in Germany is on the anvil. Blowplast is already the second largest manufacturer of molded luggage in the world, next only to Samsonite. Blowplast, in other words, is able to provide capital, product idea and expertise. Naturally, it is able to promote joint ventures with considerable ease with the best possible foreign partners.

Becoming Multinational Traders:

Another way to get access to world markets is to become a multinational trader. In fact, trading is an area in which Indian companies can shine, because traditionally India had been a good trading nation. In modern times she has been cut off from world markets for a variety of reasons which are well known. The time is now ripe for Indian companies to sharpen their traditional skills in trading and make available to the global market products on demand at an acceptable price. And in the changed world context, where modern facilities of communication have compressed distances, the required products can be sourced from anywhere, not necessarily from one’s own country and supplied to any market. Some big business houses like ITC have already entered this field.

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