One widely used method of entering into or expansion within non-domestic nations’ markets is through Foreign Direct Investment (FDI). One method of FDI is to form a joint venture or other form of alliance with a local partner from within the market which the JV/Alliance is intended to serve or with a partner of a non-local company operating in this same market.
When a company is relying on exporting to serve its foreign markets one method of expanding its operations within a non-domestic market it to switch from export to FDI. One method of FDI is to form a Strategic Alliance with either a partner company domiciled within the foreign country or a partner from another country which also wishes to do business within that country or group of countries concerned. A common form of Strategic Alliance is to form a formal and legally constituted joint venture (JV) owned jointly by the partner companies concerned.
1. Explain the essential features of a joint venture
2. What are the main problems and difficulties the participating companies in
a JV are likely to encounter?
3. How would you evaluate the suitability of a potential JV partner before
committing to the partnership?
B) Once a JV has been formed this may be intended as a permanent arrangement or just a temporary means to an end. If one partner wishes to exit the JV (cash in its investment) at some future date what are the main methods by which it could do so at the same time as maximizing value for its parent company shareholders?
Sections A and B carry equal marks.
