Vadim Kotelnikov personal logo Vadim Kotelnikov, Founder, Business e-Coach

 

Joint Ventures Managing Cross-cultural Differences Strategic Leadership Decentralization and Delegation Business Strategies Main Causes for Joint Venture Failure

Most Common Causes of JV Failure

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:

  • 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.

  • Disagreement between the partners over operating policies, strategies, and tactics in the local market.

  • 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)

 

 

References:

1. Joint Ventures: Minimizing Risk and Maximizing Success, Hewitt

 

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.  >>>

Negotiation DOs and DON'Ts

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.

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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 7 profits. This seldom works. If the parties wish their joint venture to succeed, they should agree to a comprehensive written plan upfront.

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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.  >>>

 

 

Preparing for a Successful JV: HR Action Steps

As  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.

The Tree of Business Success

Here are human resources (HR) action steps to prepare for a successful joint venture... More