Problems and challenges that arise in the management of international joint ventures are mostly of inadequate planning . Sufficient and evaluated planning of the management involved ensures that the venture succeeds. The parties in the venture might have been too hasty in their cooperation which leads to pressure on the management of the international joint venture. Hasty planning and lack of required information always fails to evaluate and assess appropriate factors involved mounting more pressure on managing the venture. All parties involved in the international venture need to pay more attention on all factors , customers and information before starting the venture which facilitates the management of such a venture. Failure to observe this initiates a poor beginning, setting a stage for future challenges and problems.
Management of international joint ventures is also faced with the problem of misfit managers (Chung & Paul, 990). This is usually brought about by struggle by both parties to gain equal rights. This innapropriation in structure makes it hard for management decision making as it slows down the process. Periodic decisions for the purposes of operation which should be made quickly are also slowed down since there should be lobbying before a simple decision is made. Sometimes a committee has to be set so that it reconciles the parties, which is time wasting. This problem coupled with poor communication distracts management from the real issues affecting the venture hence creating major challenges in the long run.
In addition, trust in joint venture management brings about certainty in business operation and enhanced exchange of information within the venture. Intra and inter-organizational trust could be ensured in the international success of the joint venture through personal attributes which includes consistent and reliability respect honesty, expertise and behavior (Beamish & Killing, 23). This creates goodwill and facilitates commitment within the venture thereby establishing an open and broad share of information. Successful management of international joint venture shows proof that trust is critical.
There are several key issues and strategies that managers of successful international joint ventures have utilized. Trust is a critical success factor in the management of international joint venture. There needs to be trust between joint venture parties as this is the most crucial factor affecting and influencing the success of the management and ultimately success of the joint venture. Successful joint ventures such as Cargill were built on trust which is seen to stabilize relationships between inter-organizational. This reduces complexity in the contractual agreement and behavioral uncertainties.
During the second phase, the parties identify the interests that brought them to the table, determine how they differ from the interests of others, set directions and establish shared goals. Gray calls this the direction-setting phase. It is characterized by six essential steps: 1) establishing ground rules; 2) setting the agenda; 3) organizing subgroups, especially if the number of issues to be discussed is large or the number of stakeholders exceeds a dozen or so people; 4) undertaking a joint information search to establish and consider the essential facts of the issue involved; 5) exploring the pros and cons of various alternatives; and 6) reaching agreement and settling for a course of action.
Whereas joint ventures might be a small undertaking, major organizations utilize this business strategy for the purposes of diversification. A joint venture can facilitate the success of smaller undertakings for those enterprises that have just begun operation in international business or for established and stable corporations (Chen, 470). Joint venture management thus refers to a framework through which managers use in identifying pitfalls and benefits of cooperation so that realistic expectations and strategies are set to successfully transfer resources, personnel and knowledge in the joint venture. Since the cost of operating joint ventures is significantly high, joint venture management allows proper managing of shares and revenue acquired.
Since a lot of resources and money is involved, it is necessary and critical to have a planned strategy management. Joint venture management ensures that both parties in the venture commit to focusing progress and success through integrity, honesty and effective communication.
Analyzation of joint venture management reveals three categories of management that is a parent joint venture, joint venture companies and independent joint venture management. In this case control of the initial companies in joint venture management is analyzed so that their influence on strategic and operational decision making is known. In dominant joint venture category, management is generally run by the major parent company (Stevens, D., & Beamish, 456). This means that the decisions on the strategic operation and arrangement of the joint venture is dominated by the parent company. In management of shared joint venture, both initial companies have dominance on the decisions of the venture. In this type of joint venture management, board directors have a greater say in the decisions that facilitate operation of the venture. It is here that both parent companies contribute equally in the composition of the board.
Joint venture in practice refers to a contractual business agreement where two or more parties agree to join together for the sole purpose of executing a new business entity through contribution of equity (Ainuddin & Azimah, 47). The parties involved exercise total control over the business entity and therefore share expenses, assets and revenue (Inkpen, 450). It is worthy noting that the joint venture definition may vary in accordance to the laws of a particular country. This implies that a joint venture in a country like France might be different from that of Germany. This definition by country has made joint venture an elusive topic. To some extend a joint venture might also refer to individuals coming together with the purposes of executing a particular project. In this case both parties invest equally in the entity in terms of time, effort and money required to build and develop on the original concept (Chen, 45).
International joint venture management is put in place so that the success of the venture is realized. This is not always the case since the management frequently faces challenges that hamper the success of management. The following are challenges facing international joint venture management.
Then, the project feasibility study transferred to investment department who is responsible to search for the financial funding through several channels such as has partnership with government or private entities, joint venture or fully financed by MOF....
Management of international joint venture can sometimes result in a dire frustrating experience and total failure due to poor strategy and planning. Factors like technological issues, the economic meltdown and market place development are difficult to predict and therefore can have deliberating consequences for management.