Reasons for Failure of Joint Venture---Case of Tcl & Alcatel Joint Venture

Joint ventures (JV) are a popular method of foreign market entry because they theoretically provide a way to join complementary skills and know-how, as well as a way for the foreign firm to gain an insider’s perspective on the foreign market. Since China began its market opening in 1978, joint ventures have been the most commonly used form of foreign direct investment (FDI), with about 70% of FDI in China in the 1980s and 1990s taking the form of joint ventures (Qui, 2005, p. 47). The Chinese company, as well as the foreign investor, has since 1978 been drawn to the joint venture form. Walsh, Wang & Xin (1999) note that from the Chinese

“Culture consists of the symbols, rituals, language, and social dramas that highlight organizational life, including myths, stories, and jargon. It includes the shared meanings associated with the symbols, rituals, and language. Culture combines the philosophy of the firm with beliefs, expectations, and values shared by members. It contains the stories and myths about the company's founder and its current leading figures. Organizational culture consists of a set of shared meanings and values held by a set of members in an organization that distinguish the organization from other organizations. An organization's culture determines how it perceives and reacts to the larger environment (Becker, 1982; Schein, 1996). Culture determines the nature

Every country differs in culture which has been there for centuries. The international market is growing rapidly, with more and more multinational organisations entering new markets each day. In this assignment I will evaluate how the difference in cultures affects the performance of international businesses.

The organization culture as a leadership concept has been identified as one of the many components that leaders can use to grow a dynamic organization. Leadership in organizations starts the culture formation process by imposing their assumptions and expectations on their followers. Once culture is established and accepted, they become a strong leadership tool to communicate the leader 's beliefs and values to organizational members, and especially new comers. When leaders promote ethical culture, they become successful in maintaining organizational growth, the good services demanded by the society, the ability to address problems before they become disasters and consequently are competitive against rivals. The leader 's success will depend to a large extent, on his knowledge and understanding of the organizational culture. The leader who understands his organizational culture and takes it seriously is capable of predicting the outcome of his decisions in preventing any anticipated consequences. What then is organizational culture? The concept of organizational culture has been defined from many perspectives in the literature. There is no one single definition for organizational culture. The topic of organizational culture has been studied from many perspectives and disciplines, such as anthropology, sociology, organizational behavior, and organizational leadership to name a few. Deal defines organizational culture as values,

the success of the joint venture depends upon the compatibility of the partners and this compatibility involves culture as well. Culpan (2002) suggests that each partner in the joint venture brings its own culture and if these cultures are not

Cultures are very unique and require a lot of understanding and comprehension. To do this, different cultural value dimensions should be studied and applied to a culture. Applying this to the business environment will be more complicated especially in a multinational company. To be a successful leader or manager in a company, one must fully understand each member of his team as well know his team’s cultural background. Cultural value continuums would be helpful in considering which management style might work best for a team. After which, changes of collaboration and cooperation among members of the team should cross cultural boundaries and should make the team work together harmoniously.

Joint venture can help Saudi Group in diversifying its business activities. Milton R. Stewart; Ryan D. Maughn (2011) pointed out “Efficient and cost effective ways to enter foreign markets that allow companies to share risks and exploit synergies with partner companies continue to drive businesses toward international joint ventures, it can provide access to unique business opportunities and new geographic markets that may not otherwise be available, especially to smaller and medium sized businesses”. Business diversification can avoid Saudi Group depends on profit contribution from local business activities only, profit from international entry can help in expanding the local business activities. Joint venture is able to resolve both long and short-term problem and effectively deal with the weaknesses and thread of Saudi

Cultural organization is unique and configures their norms, beliefs, values, and behavioral characteristics into the individual and groups that unite to get things accomplished. Patterns begin to evolve and become a rule of basic assumption; whether it is a new idea, one recently discovered or under development by a certain group as they learn to cope with internal integration and external adaptation problems. Cultural characteristics are hard to define because culture is multi-dimensional with integrated components that intertwine at different levels and ever-changing which takes time to establish and therefore time to change it also. Culture becomes the fabric or social glue that unites its participants, this will counteract any processes that are different becomes an unavoidable side-effect of life in an organization. Mutual understandings and a shared system of meanings becomes the basis of communication in a cultural organization. Functions of a society need to be fulfilled with a certain amount of satisfaction or culture can impede the efficiency of that organization. Problems with this concept arise when trying to categorize culture or when, why, or how corporate culture should be changed or finding the best, healthiest or most desirable one.

The economic and political development cultivates the global vision and perspective of companies. An increasing number of companies opt for forming the collaboration relationship with foreign partners. Those companies strive to fully utilize the complementary strengths and achieve a win-win situation such as increasing profitability, higher production efficiency, access to a new market and lower production cost. (Cavusgil, Ghauri and Agarwal, 2014)

Issue 1: Consequences the partners’ contributions have on the partnership and on the partners themselves. How will the contributions and distributions (of liabilities) made affect each partner’s inside and outside basis in the firm? What is the holding period for the partners and the partnership of the contributions?

The lesson learned from this is that sometimes it is easier and faster reach a new market via joint venture, even though the profit will be less, but the company can save a lot of money in studying the new market trying to understand the new culture and how they purchase and also it can minimize the risk because there is a national brand supporting the new international brand, which gives confidence and security to the customers.

Culture is one of the terms that have been becoming more familiar in the 21st century among the multinational companies all around the world. The world has been shrunken by the fasting travelling and communicating technologies which has brought down the barriers for the organisations having business in international market. But still then there are few barriers that make the international business critical and hard for everyone to succeed in it. This is due to the factor that the businesses have direct influence over the culture that is followed in the respective country where the business is carried out. So it would be interesting to

Using appropriate theories critically analyse the role of culture in International Business. Support your answer by quoting relevant examples from the case study.

First, cultural difference can pose great problems in communication and collaboration in a joint venture. In this case, an attempt to attract a strategic investor had failed primarily because of lack of cultural sensitivity by the U.S.

It is because through the joint venture, the company is more familiar with the situation of the company there. The negative outcome is that the management system different between the company. So it is hard to make a decision making. It is because there is different opinion of each person.