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Most Common Causes of Joint Venture Failure

Cultural Differences, Unclear Leadership, Poor Process Integration

By: Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation unlimited!

    

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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".

 

The most common causes of failure cited by CEOs are:

Cultural Differences

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.

HARNESSING CULTURAL INTELLIGENCE (CQ) - Building Cross-cultural Competence and Leveraging Diversity (mini-course, PowerPoint presentation download, Vadim Kotelnikov, One World One Way Many Paths)

Poor Leadership

Poor or unclear leaders is another top reason of joint venture failure. Too often, joint venture partners insist on sharing a project leadership role. 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

Insufficient Planning

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 profits. This seldom works.

If the parties wish their joint venture to succeed, they should agree to a comprehensive written plan upfront. 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 term and termination of the joint venture, including provisions for winding up its business.

Other Failure Reasons

Other reasons of joint venture failure include poor commitment; disagreement over operating policies, strategies, and tactics; and differences in the approach towards management style and systems

 

 

 

References:

  1. Joint Ventures / Partnerships, Hewitt

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

  3. Close Connections, Ranjit Shastri

  4. Trusted Partners, Jordan D. Lewis

  5. Joint Ventures Revealed, PlugInForProfit

  6. Mastering Alliance Strategy: A Comprehensive Guide to Design, Management, and Organization, James D. Bamford, Benjamin Gomes-Casseres, Michael S. Robinson

  7. Strategic Alliances: Three Ways to Make Them Work (Memo to the Ceo), Steve Steinhilber

  8. SMART Business Architect, Vadim Kotelnikov

  9. Harnessing Cultural Intelligence (CQ), Vadim Kotelnikov

  10. Happy About Joint-Venturing: The 8 Key Critical Factors of Success, Valerie Orsoni-Vauthey

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