THE HONEYMOON IS OVER !

In my book, A Guide to Global Joint Ventures and Alliances published by Heinemann Asia, Singapore late last year, now selectively available in India, in the introduction to my book, I have shown the analogy of Joint ventures and marriages and I have said that in a love marriage, two people fall in love and emotions and passions are the driving force towards them getting together and the offsprings of these people act as a binding force and learn to either give and take as they go along or eventually end up in a divorce as is evident by the increasing divorce rate. In many western countries, the divorce rate is now reaching 50 to 70%. In an arranged marriage, things are done much more carefully with a mutual sizing up of partners by each other, by respective guardians, parents, protectors, friends etc. The couple gets into the alliance expecting to give more than they expect to receive whereas in a love marriage they expect to receive more than give. Hence, a joint venture should be a bit more like an arranged marriage rather than a love marriage.

While the offspring can act as a binding force in a love marriage, the offspring i.e. the product / project can become the bone of contention in a business venture.

It may appear glamorous and sexy for Indian companies to woo partners with major international brand names / global images in order to feel assured of success in the marketplace. However, compatibility of partners is the key issue.

Let us look at some of the key issues that one needs to focus on in a Joint Venture:

Business Philosophy: What is the business philosophy of the respective firm ? What are the foundation stones of their businesses ? e.g. Is the business philosophy one in which a company is looking for a long term position in the marketplace with large investments and small returns to build image, brand loyalty, quality, service and settle for negative / nominal returns in the first few years ? Does it have a long term vision which is clearly defined and based on a mission that embodies the philosophy of the firm. Is this business philosophy compatible between the two intending partners or does one firm seek quick returns because of shareholder pressures or short term perspective of the owners ?

The business philosophy of the firms will reflect their attitude to external agencies. Towards government policy and regulations:

Are they both scrupulous or is one party willing to take shortcuts towards safety considerations, environmental considerations, social obligations, the taxman.

Do they treat their customers as long term partner in their business or does one partner see them as suckers for the bottom-line ?

Do they value their employees ? Are they committed and caring ? Do they expect to get ready people who can give instant results?

What went wrong with Proctor & Gamble and Godrej ?

One can conjecture that the Godrej culture as one which is paternalistic and benevolent. This means that the owners see their employees as part of their extended families, that they don’t look for quick performance and results. They develop people and give it a great deal of importance. Proctor & Gamble, on the other hand, is a hard nosed American firm that probably wants everyone to deliver all the time and hence are these two philosophies really compatible ?

On another score, major companies such as Proctor & Gamble are very strong on their systems and methods and Indian family owned companies are not quite to the same level of refinement.

They rely more on people than on systems and want people to be the long term partners. Multinationals, on the other hand want the systems to work whether people change or not. This is also partly because of the very high frequency of manpower turnover in the developed world especially in the United States. As result of this business philosophy, the management style is probably not so people oriented.

Similarly, in the case of Modiluft-Lufthansa, one wonders whether the scientific, precision driven, German culture based Lufthansa found it difficult to adjust to the Desi version of management of the albeit successful entrepreneurial group of Modis. Perhaps conflict of values also comes to the fore as to whether the customer comes first or whether the shareholder does.

Compatibility and other crucial areas in management style: What are the management styles of the two respective firms ?

Are they professional with clearcut plans, goals and objectives laid down with professionals operating within clearly laid out parameters or is it the old family style with only key members acting as thinkers and the rest as doers under specific instructions that come from the top.

Thus is all the decision making and authority centralised and controlled or is broad based and dispersed in the organisation? Thus are the two firms’ ‘management styles’ compatible ?

While factors such as Market Access, Technology, Strategic interest, ability to invest, exporting opportunities, product range, status, size etc. may show compatibility, it is the area of management style and philosophy which are of crucial importance in determining long-term compatibility of the two intending joint venture partners. The only way to find out is to actually watch its people in action, visit factories, offices have multilevel and frequent interactions among professionals / Directors of both companies before deciding to jump into bed.

Questions also need to be answered as to whether both sides can make the necessary adjustments with reference to attitudinal obstacles and cultural adaptations.

The Britannia - Kwality tangle though a joint venture with both indigenous partners one being homespun Indian managed company whereas other one a multinational run by professionals. From what one garners from press reports it seems the bone of contention was that having entered into a partnership, Kwality group seeing the pie get bigger wanted a bigger share in the pie as opposed to what they agreed to. Was a lack of contractual clarity at the outset a problem in this case ?

What also needs to be clear is whether there is a clarity of understanding on individual and collective roles. Whether the contributions of both sides are balanced and seen to be balanced, whether power and control are shared equally and fairly.

Whether there is a commitment of the right kind of people and also whether these people are duly trained to make the necessary adaptations.

These are some of the key issues that need to be looked at to ensure that the Joint Ventures really work in the long term and do not result in premature, unpleasant and expensive separations as is the case in most Indo-foreign joint ventures turning sour.

 
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