1. International Joint Ventures Motivations Macro-structure Cooperative Activities and Modes Role of IJVs in International Strategy Nora-Sakari as exemplar

2. International Joint Ventures Motivations – Complementarities vs. Size: – Market access – Risk / experience (lack of / superior) – Too small / resource pooling – Intense competition – Technology (lack of / superior) – Learning

3. Motivation: Size Acme Inc. U.S. Braunschweiger AG Germany

4. Motivation: Complementarities Acme Inc. U.S. Braunschweiger AG Germany

5. International Joint Ventures Range of Possible Cooperative activities: – R&D – Manufacturing – Marketing – Sourcing – Service – Everything?

6. International Joint Ventures Forms of agreement: – Equity vs. arms-length contract/agreement Structure: – Ownership (50-50 … 51-49 … 90-10) – Contribution ($, technology, plant, marketing) – Strategic and operations roles & responsibilities Active vs. Passive Value-chain scope

7. Cooperative Modes Independent –Act as two separate companies; no constraints Coordinated / Complementary –Act as two separate companies with established operational, product, or geographic domains or constraints Joint –Act as single company

8. Independent R&D Acme Inc. U.S. Braunschweiger AG Germany

9. Independent R&D Coordinated Marketing Acme Inc. U.S. Braunschweiger AG Germany North America European Union

10. Independent R&D Coordinated Marketing Joint Manufacturing Acme Inc. U.S. Braunschweiger AG Germany North America European Union A-B Mfg. SA, Mexico

11. International Strategy: Managing Dual Pressures Pressures for Global Efficiency Pressures for Local Responsiveness High Low High Low Multidomestic Strategy

12. Multidomestic Strategy Acme’s Intended Strategy Germany Mexico Japan Entry Mode Decisions What Acme wants? What Acme wants? What can Acme achieve? What can Acme achieve? Acme Inc. U.S.

13. Multidomestic Strategy Germany Mexico Malaysia REMEMBER: IJV is also an entry mode Acme Inc. U.S. Who does marketing in these countries?

14. IJV in Multidomestic Strategy Acme Inc. U.S. Braunschweiger AG Germany Cervesa SA Mexico Sashimi LTD Japan Local JV partners can do marketing Acme needs local JV partners to help it build its Multidomestic strategy

15. IJV in Global Strategy Acme Inc. U.S. Braunschweiger AG Germany Cervesa SA Mexico Sashimi LTD Japan

16. IJV in Transnational Strategy Acme Inc. U.S. Braunschweiger AG Germany Cervesa SA Mexico Sashimi LTD Japan

17. Nora-Sakari IJV Tale of the Tape Nora Sales: $100 million Employees: 3,081 Deal % of sales: 123% Big Picture: –Needs technology –Local knowledge –Government ties –Deal in hand –Seeks regional expansion Sakari Sales: $4 billion Employees: 29,000 Deal % of sales: 3% Big Picture: –Has Technology –Seeks regional presence –Lacks local knowledge –Has other options

18. Negotiation Issues Equity ownership Technology transfer Royalty payments Expat salaries Arbitration

19. Negotiation Issues Equity ownership Technology transfer Royalty payments Expat salaries Arbitration How is each related to: Entry mode decision International strategy implementation Capabilities

20. Negotiation Issues Equity ownership Technology transfer Royalty payments Expat salaries Arbitration Creative alternatives??Creative alternatives?? How is each related to: Entry mode decision International strategy implementation Capabilities e.g., Two JV’s Long-run & short-run Mfg. & mkt./distrib.

21. Big-Picture Issues What is Sakari’s overall international strategy? –What does it want? What is Nora’s overall international strategy? –What does it want? What role should the joint venture play in facilitating each company’s intended strategy?

22. Nora’s Technology Acquisition Strategy 20% of Malaysian Telecom Market Indonesia Thailand Vietnam Export Markets NoraSakari TechnologyTransfer

23. Sakari’s International Strategy North America Malaysia S.E. Asia Finland Sakari HQE.U. Expand to New Region

24. What ‘Actually’ Happened? Equity: 60% Nora -- 40% Sakari, JV must export ~ 40% of production Technology: JV will assemble low-tech SK33 switch for TMB contract, jointly develop new/high-tech switch for export Royalty: 3% of net sales Components: 65% discount Wages: Nora’s rates Arbitration: Switzerland

25. Global New Product Launch Simulation Read Manual –Understand “back story” –Understand simulation roles –Your team’s preferences in role to play? Kick-off –Tomorrow 8:00 a.m. – Morning Cohort 10:00 a.m. – Afternoon Cohort Simulation Communication Platform –Facebook Groups