L'influence des facteurs structurels sur le choix de mode de présence

Chapter II :

The Joint Venture : a form of cooperation

The world economy knows a perpetual change of structures, in particular related on technical progress and the increasing globalisation of the markets. That presents at the companies a challenge in all the fields (technological, marketing, management, finances), challenge which they cannot assume separately. The co-operation between the companies becomes an essential solution.

The joint venture, a form of cooperation, is a passage obliged in very firm countries which impose it legally and which prohibit the creation of companies held with hundred percent by foreigners.

The creation of a joint subsidiary (joined venture) with local companies is also desirable to penetrate durably and effectively certain markets characterized by legislations, administrative constraints, cultural or commercial differences, distribution networks,... which make them too complex.

Section 1 :

Definition and characteristic of the joint venture

1-definitions

The definitions relating to the joint ventures, proposed in the economic literature are multiple. We quote some:

« At least two sovereign companies, not belonging to the same group, are intended to work towards a joint end in a specified space, sharing or exchange resources to obtain advantageous results, while remaining independent apart from alliance. This one takes form through the installation of a distinct joint organisational entity.

On the other hand, the acquisition of a company by another, the unilateral grant of a license, research under contract or total fusion are operations which do not answer the definition suggested. »^36(*)

« The joint venture implies an association with an external industrial partner and relates to a jointly determined project ; it comprises the pooling of means and risk. Its character is contractual : even if it joint venture needs a support, in the form of a legal entity, it « contract » (agreement of the parts) overrides « structure » (legal entity control by the company law). It is one « marriage » which implies, in theory, an equal access to the decisions, independently of the respective contributions of the partners : the joint venture is founded on the principle of parity. The cohesion and the solidity of the business resident, ultimately, in balance resulting from mutual interest, in perfectly definite reports/ratios of complementarities. »^37(*)

« Entities which play a full part on the market and are held or controlled by two people at least who are not ordinary investors and are not either under common control. »^38(*)

Thus, it joint venture is the result of an association between two or several independent economic entities, but which do not give up their independence because of agreement.

The partners take part in the management of the firm and contribute significantly to the decisions, by their voting rights.

2-characteristics of the joint venture

Historical 2-1-outline

The first forms of cooperation between firms were primarily joint ventures (JV). They are subsidiary companies create in target countries by multinationals (generally American) which seek to penetrate in a new geographical area. The principle of the joint venture consists in dividing the capital of the subsidiary company with a partner « indigenous ». The activity of the company common and normally limited to the marketing and possibly, the manufacture of the products of the multinational in the host country.

This form of agreement between firms progressed quickly towards a new type of co-operation, whose weights and implications strategic for the companies concerned exceeded those of the joint traditional ventures by far. Strategic alliances had been born.

ventures and mutinationalisation join

If one seeks to include/understand how the real activities of the international joint-ventures evolved/moved, one notes a fundamental change since 1975. As of this time alliances of a new type, near to the current strategic partnerships, appear among the joint traditional ventures. Indeed, the activity of certain multinational firms is not limited any more to local marketing of products already developed and manufactured by the American head office ; she extends herself with the development of new products and export towards new countries.

Thus, it clearly appears that the joint international ventures are released gradually from the traditional model, which made a simple mode of export of it, to evolve to more strategic autonomy, to even compete with the activities of the head office. One thus sees appearing, through the evolution of the joint ventures of multinationalisation, the current phenomenon of alliance strategic. However, that does not mean that the traditional ones joined ventures of international expansion are dedicated to disappear. On the contrary, the multinational groups continue to create some, in particular in the countries in the process of development and the countries of Eastern Europe where the legislation imposes that a certain percentage of the capital of the companies is held by local shareholders^39(*).

B-joint ventures and competition

Whereas the initial objective of the studies on the joint international ventures was to include/understand the various modes of multinationalisation of the companies, the aim of research on the joint ventures between firms of the same country is in general to evaluate the anti-competitive effects of them.

The majority of the studies carried out in the United States in years 1960 and 1970 tend to show that the agreements between American firms are concluded with an aim of collusion and have anti-competing effects. It appears besides that, in the majority of the cases, the joint ventures associate concurrent firms between them, which seems well to prove their collusif character.

However, towards the end of 1970, of the radically different analyzes start to appear. Certain authors start to plead in favor of alliances by showing that those can meet perfectly legitimate aims, going in the direction of economic progress. Indeed, of many joint ventures are justified by the will to acquire and combine know-how, which makes it possible to innovate and better to satisfy the customers. By tying alliances, the companies do not aim thus systematically first to increase the prices, to carry out immediate profits or to improve their safety, they rather seek an alternative to research and development (R & D) intern^40(*).

2 - 2 them reasons to be

There is a multitude of reasons which justify companies to be joined in order to create a joint subsidiary. The principal ones are generally to exert on a common basis of the activities of production or distribution and sale of products.

to it universalization has

According to Garrette and Dussauge (1995)^41(*), the universalization of the economy (or globalisation) is general and occurs in all the activities. Information technologies (data-processing, telecommunications, telefax...) enormously evolved/moved, thus facilitating the international communications within the same company. It is thus from now on possible for the companies to make work together teams located on all the continents and to reach all kinds of technical resources world-wide. In addition, one attends a certain standardization of the ways of life and behaviors of consumption, especially in the three most developed zones world : The United States, Europe and Japan.

B-acceleration of the technological change

The speed of the changes does not make it possible to remain in contact with all the innovations.

The company must concentrate on its activity and guarantee the access to other essential fields using co-operations between firms.

In the sectors where technology is an important source of competing advantages, it is not possible any more with the companies to assume only the expenditure in research and development, nor to develop only the whole of competences necessary to carry out a perfectly autonomous strategy. The prospects for research are more numerous and of this fact more expensive whereas the results become more random. The importance of the resources to be invested as well as the complexity of technologies to be developed encourage the companies to be combined, in order to combine varied and complementary competences.

The joint ventures thus allow, by distributing work of R & D between partners, to multiply the explored tracks, to share the costs and to combine competences^42(*).

C them obstacles with the trade

The variations of exchange, diversities of national conditions and the obstacles tariff and non-tariff always persistent oblige to set up international structures pressed on partners who have an experiment and contacts in the community of businesses and near the local authorities^43(*).

2-3-advantages and disadvantages

Multiple advantages and disadvantages are related to the choice of the joint venture like form of cooperation

A-advantages

The joint creation of a subsidiary company can have the following advantages :

- Easier Penetration of the markets and more rapid for a company limited in financial and human resource. Indeed, it can lay out of the distribution systems already well established locally its partner, which enables him to carry out a higher volume of sales in less time ;

- Reduction in the financial risks and the costs which are theoretically shared between the partners. The joint venture allows certain companies thus, thanks to the pooling of means, to finance projects which differently would have been inaccessible ;

- Reduction in the commercial risk because the company can profit from the experiment of the market (culture, regulations, contacts...) and of competences of management of its local partner. The exporter is familiarized and adapted consequently more easily to the conditions and the specific needs for the foreign market ;

- Naturalization of the products. The joint venture not being perceived like a foreign company, it makes it possible to establish better relationships to the local government and the trade unions and thus to simplify the administrative negotiations and formalities ;

it flexibility of organization of the joint venture ;

it tax flexibility related to the choice of the host country of the joint company ;

- The independence and dynamism of management related to a specific entity ;

it responsibility limited for the partners ;

- The granting of an ideal structure for creation of new technologies jointly.

B-disadvantages

The company is exposed to a certain number of risks and disadvantages when it chooses the creation of a joint subsidiary^44(*) :

them potential benefit are less because they must be divided ;

them costs of creation and, the échant case, of winding-up of the company are rather important. In addition to the financial investment, the creation of a joint venture requires an investment in time and energy much more important than the other forms of partnerships ;

it formalism of the structure is higher than in other forms of partnership. The legal assembly is very delicate to set up ;

- Risk of disagreement in connection with the distribution of the dividends. The evaluation of the contributions of each partner, considering their at the same time material or intellectual nature, is a complex and delicate stage ;

- Risk of disagreement on managerial philosophies to apply (strategy, staff management, political marketing, research and development,...) ;

- Risk of conflict of interest ;

- Risk of lack of front communication, during and after the formation of the joint venture ;

- Risk to affect the operations on other markets. If the company wanted to create a local structure in a third country where the joint venture is active commercially, it then becomes a potential competitor of the joint venture whereas it is still partner ;

- In addition to the advantage which it brings to the shareholders, the responsibility limited to the authorized capital limits the guarantee brought to the thirds.

* ³⁶ Jolly D (1995) «  To manage a technological partnership  », Expansion Review Management, June 1995.

* ³⁷ Libbey J (1990) the entrepreneuriat in French-speaking Africa, Editions AUPELF-UREF, 1990.

* ³⁸ Werden G (1998). «  Antitrust Analysis off Joined Ventures: Year Overview  », Antitrust Law Newspaper, vol. 66,

* ³⁹ Alain NR & Philippe V & Michel W  : «  Prospects in strategic management  », Volume II, 1994-1995

* ⁴⁰ Alain NR & Philippe V & Michel W (1994-1995) COp-cit

* ⁴¹ Garrette, B & Dussauge, P (1995) COp-cit

* ⁴² Dussauge, P & Ramanantsoa, B (1987) «  Technology and strategy of company, McGraw-Hill

* ⁴³ Langefeld W K (1992) COp-cit

* ⁴⁴Guédon S & Mélou C (2002), COp-cit