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Most Common Causes of JV Failure |
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According to surveys6,
only 49% of
CEOs of JVs characterized their venture as "very successful".
The most common causes of failure cited by
CEOs are1:
Other factors that contribute to the
poor track record of international joint ventures3:
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Conflict over delegation of
decision-making to the local joint venture management by a foreign
partner which sees the JV operations as only a small part of the
global picture and is trying to maximize profits globally, while the
local partner is trying to maximize profits locally.
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Disagreement between the partners over
operating policies,
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strategies,
and tactics in the local market.
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Differences in the approach of each
partner towards
management
style
(decision-making, communication,
delegation, and so on) and systems (performance
management,
accounting, control, and so on)
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References:
1. Joint Ventures: Minimizing Risk and Maximizing Success,
Hewitt
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Most Common Causes of Joint
Venture Failure
Research indicates
that 50 to 70% of all joint ventures fail. Not many
→
CEOs
of joint ventures characterized their venture as "very successful".
>>>
→
Cultural and ideological differences
top the list. In evaluating joint venture partners, most companies don’t
perform a proper compatibility and integration analysis. Neither make they a
thorough evaluation of corporate culture and management style. As a result,
they fail to find a way to blend their differences, which makes their joint
ventures unstable.
→
9 Signs of a
Losing Organization
Poor or unclear leaders is another top reason
of joint venture failure. Too often, joint venture partners insist on
sharing a
→
project leadership role.
>>>
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Negotiation DOs and DON'Ts
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Wise
Agreement
When the parties disagree, a standoff occurs.
If the parties don’t agree from the very beginning who will have day-to-day
operational control of the project and how fundamental decision will be
made, the JV is bound to fail.
→
12 Major Causes
of Failure in Leadership
→
Entrepreneurial Leader:
4 Attributes
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How To Solve
People Problems
Insufficient
planning
is also one of the most prevalent reasons for failed joint ventures. Too
often, a joint venture “plan” consists of nothing more than a statement of
each party’s intended contributions to the project and their respective
share of the
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7
profits. This seldom works. If the parties wish their joint
venture to succeed, they should agree to a comprehensive written plan
upfront.
→
6Ws
of Corporate Growth
→
2 Basic Business
Growth Strategies
→
Balanced
Business System
The plan should include provisions for future contributions,
logistical issues, governance of the joint venture, dispute resolution,
ownership of jointly-developed assets, including
intellectual property. The terms of termination of the joint venture,
including provisions for winding up its business should also be elaborated.
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Preparing for a Successful
JV: HR Action Steps
As
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Konosuke Matsushita the legendary founder of Panasonic, put it,
"Business is people.
Business success is achieved by getting each and every
person in the organization to be more successful in the job they do.
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The Tree of Business Success
Here are human resources (HR) action steps to
prepare for a successful joint venture...
More |
