As you all may be aware I am reading for my MBA with Heriot Watt University – Edinburgh Business School. One of the modules which is offered to students is “ Managing People in Global Markets” Having not been successful in my first attempt at the exam, I am re-examining my approach to the subject. Thus far I am trying to:
- “Learn off” some of the concepts in the chapters,
- Apply my experience to the concept,
- Cite from the various researchers whose work was used in the module,
- Practice make up exam questions
So here goes my attempt at # 1,2,3, 4: Chapter 10 International Joint Ventures – “starter”:
“International joint ventures (IJV)s and local joint ventures (JV’s) are one form of direct investment strategy (DIS) according to Monir Tayeb, http://home.clara.net/mon1/MonirTayeb/ with the other type or form being foreign subsidiaries. The purpose of establishing an IJV or JV, apart from the profit motive, may be to:
- expand product,
- customer or
- geographic reach.
In keeping with this concept, in an IJV, each party may offer one or more of the following:
i. A specific skill such as expertise and or knowledge of a process
iii. A resource or
iv. A product
For ease of control and for legal reasons, in many instances the legal form of an IJV may be that of a limited liability company. This form allows for limits to be set on the exposure of each party to losses and for risks to be managed within the IJV. Also the formation of a company establishes the country in which the IJV will be operating from and by whose laws the company will be bound. This concept will have important consequences on the company and individuals especially for tax purposes in light of withholding tax being liable on types of transactions as compared to the application of corporation or income tax on the company. This may be an area of interest for the Organisation of Economic Co operation and Development (OECD) as countries are signing on to the Organisation and each one brings a history of law, treaties and case law which may have great implications for the country.
Prior to the establishment of the company (IJV) a Memorandum of Understanding (MOU) may have been drafted which covers major items of discussion and agreed terms or clauses. Given that IJVs may be established between companies which operate in or originate in different cultures and languages the MOU process may be lengthy and may need to allow for discussion and approval, perhaps at the level of the Board of Directors. This process may be required for each clause and for the supporting concept embodied in the MOU. Also given that companies may operate in different time zones, the process of obtaining feedback and approval may take longer than if the parties to the negotiation are located in the same time zone. In the age of the internet, emails may be used to fast track this process. However that is another process which may require amendment to the law and company’s documents prior to it occurring so that the process and authorisations may be valid and acceptable to the shareholder, investors, and other stakeholders of the company.
There is still more to come so keep reading and thank you...
© Jennifer N Bailey - Symbol obtained from https://en.wikipedia.org/wiki/Copyright_symbol