HOW TO DEVELOP A SUCCESSFUL JOINT-VENTURE IN CHINA 1
SUMMARY slides 3-4: slides 5-6: 4 STRATEGIC REQUIREMENTS FOR SUCCESS IN THE CHINA MARKET WHAT IS A JOINT-VENTURE? slide 7: STEPS FOR DEVELOPING A JOINT-VENTURE slides 8-11: HOW TO DEVELOP A SUCCESSFUL JOINT-VENTURE slide 12 : THE COMPETITIVE ADVANTAGE OF THE JOINT-VENTURE slide 13: JOINT-VENTURE: ALIGNING COMPANY FUNCTIONS (slide in English) slide 14: JOINT-VENTURE: ALIGNING COMPANY FUNCTIONS (slide in Chinese) 2
4 STRATEGIC REQUIREMENTS FOR SUCCESS IN THE CHINA MARKET HIRE A GOOD CONSULTANT, AND GOOD LOCAL MANAGERS! START BY HIRING A GOOD INTERNATIONAL BUSINESS CONSULTANT TO DESIGN AND DEVELOP A FOREIGN MARKET ENTRY PLAN STARTING WITH MARKET RESEARCH, MARKET ANALYSIS, MARKET INTELLIGENCE. HE WILL BE YOUR RELIABLE CONTACT REPRESENTING YOUR INTERESTS IN THE J/V AND MONITORING YOUR LOCAL PARTNER WILL COMPLY WITH THE J/V AGREEMENT. R THEN HIRE AND TRAIN GOOD LOCAL MANAGERS, INSTILLING A SENSE OF LONG-TERM INVOLVEMENT. YOU NEED THEM TO BE LOYAL! THIS IS A MUST CONDITION FOR SUCCESS! PLAN TO INVEST IN THE LONG TERM! DO NOT EXPECT QUICK PICKS. SUCCESS DOES NOT HAPPEN OVERNIGHT, AND YOU WILL NEED TO INTEGRATE YOUR CULTURE INTO THE LOCAL CULTURE AND BUSINESS ENVIRONMENT 3
4 STRATEGIC REQUIREMENTS FOR SUCCESS IN THE CHINA MARKET CREATE AN EFFECTIVE MARKETING PLAN! R ACKNOWLEDGE, ACCEPT, RECOGNIZE THAT CHINA IS A DIVERSE COUNTRY, AND NOTA SINGLE NATIONAL MARKET R ADAPT TO THE UNIQUE LOCAL VALUES AND CULTURAL DIFFERENCES BY DEVELOPING DISTRIBUTION, AND DESIGNING MARKETING STRATEGY AND ADVERTISING MESSAGES ACCORDING TO THE NEEDS OF LOCAL MARKETS R ADJUST THE MIX ANDATTRIBUTES OF YOUR PRODUCTS TO THE NEEDS OF THE LOCAL MARKETS, AND TAKE INTO ACCOUNTALL DIFFERENCES WHEN DESIGNING YOUR MARKETING STRATEGY FOCUS ON YOUR CORE COMPETENCES! SIMPLY ASK YOURSELF THE FOLLOWING QUESTIONS: R WHAT DO WE OFFER CUSTOMERS THAT WILL ATTRACT THEM? R HOWARE WE DIFFERENT FROM POTENTIAL COMPETITORS? R WHAT CAN WE DO WELL IN CHINA, AND WHAT CAN CHINESE COMPANIES DO BETTER? 4
WHAT IS A JOINT-VENTURE? SIMPLY PUT, A JOINT VENTURE (J/V) IS NOTHING MORE THAN AN ECONOMIC COOPERATION, OR BUSINESS COMBINATION, OF TWO OR MORE PEOPLE, COMPANIES OR ASSOCIATIONS WITH A COMMON ECONOMIC GOAL A SHARING OF RISKS AND PROFITS IN A SPECIFIC PROPORTION, COUPLED WITH A CONTRIBUTION OF EXPERTISE AND ASSETS TO THE J/V, WHETHER THOSE ASSETS BE HUMAN CAPITAL OR MONETARY CAPITAL THE J/V MAY BE LIMITED IN TIME, OR MAY HAVE NO TIME LIMITATION, ALTHOUGH MOST J/V ARE LIMITED IN SCOPE, LIMITED TO THE EXPERTISE OF THE J/V PARTNERS IT IS QUITE COMMON FOR A J/V TO HAVE SOME FORM OF TIME LIMITATION SUCHASA PRELIMINARY PHASE, WITH PRESCRIBED TIME LIMIT WITHIN WHICH THE J/V MUST ACCOMPLISH MINIMUM GOALS IF THOSE TARGETS ARE MET, THEN THE J/V AUTOMATICALLY PROCEEDS TO ANOTHER PHASE ORA PERMANENT PHASE, SUBJECT TO EARLY TERMINATION UNDER CERTAIN DEFINED CIRCUMSTANCES 5
WHAT IS A JOINT-VENTURE? PLUS R VERY EFFECTIVE WAY TO ENTER A FOREIGN MARKET R LICENSING THE RIGHTS TO DISTRIBUTE OR MANUFACTURE YOUR PRODUCT TO A LOCAL COMPANY R OFF-SHORE PRODUCTION WITH YOUR OWN FACILITY R FLEXIBILITY IN BUSINESS RELATION WITH LOCAL PARTNER R LOWER PRODUCTION COSTS MINUS R ACCORDING TO LOCAL RULES, FOREIGN INVESTOR ALLOWED TO INVEST IN A MINORITY STAKE OF THE ENTIRE CAPITAL R GREATER RISK DUE TO LICENSING AND CONTRACT MANUFACTURING, BUT ALSO POSSIBILITY OF GREATER PROFITS 6
STEPS FOR DEVELOPING A JOINT VENTURE NEGOTIATION WITH THE SELECTED JOINT-VENTURE PARTNER LEGAL PROCEDURES FOR JOINT-VENTURE JOINT-VENTURE COMPANY MARKET RESEARCH IDENTIFICATION OF J/V PARTNER(S) STUDYING AND EVALUATING OPTION(S) NEGOTIATION DUE DILIGENCE & BUSINESS VALUATION MEMORANDUM OF UNDERSTANDING JOINT-VENTURE AGREEMENT ANCILLARY AGREEMENTS REGULATORY APPROVALS DEFINITION MANAGEMENT OPERATIONS BUSINESS PLAN 7
HOW TO DEVELOP A SUCCESSFUL JOINT-VENTURE AS A JOINT VENTURE PROJECT, IT IS EXPECTED TO GENERATE A COMPETITIVE ADVANTAGE THE J/V DOES NOT ONLY NEED TO BE DEFINED BY A SERVICE LEVEL AGREEMENT, WHICH ONLY EMPHASIZES OPERATIONAL PERFORMANCE METRICS THE J/V MUST SWITCH THE FOCUS FROM: OPERATIONS TO: STRATEGY & COMMITMENT AND CONCENTRATE ON THE STRATEGIC OBJECTIVES, BYALIGNING FUNCTIONS AND CREATE A BETTER ALIGNMENT BETWEEN THE 2 JOINT-VENTURE PARTNERS 8
HOW TO DEVELOP A SUCCESSFUL JOINT-VENTURE ESTABLISH AN ALLIANCE BOARD COMPOSED BY 3 COMMITTEES: A JOINT VENTURE COMMITTEE (or JVC), AT BOARD LEVEL, TO LEAD THE GOVERNANCE PROCESS A JOINT VENTURE BUSINESS DEVELOPMENT COMMITTEE (or JVBDC), AT CONSULTANTS AND SENIOR MANAGEMENT LEVEL, TO DEFINE BUSINESS GOALS, SET MILESTONES AND MONITOR PROGRESS A JOINT VENTURE PROJECT TEAM (or JVPT), AT MIDDLE LEVEL MANAGEMENT, TO OVERSEE PROJECT MANAGEMENT, AND MONITOR PROGRESS 9
HOW TO DEVELOP A SUCCESSFUL JOINT-VENTURE STRATEGIC OBJECTIVES NEED TO BE TRANSLATED INTO THEMES, TO BE OVERSEEN BY THEME LEADERS ACCOUNTABLE FOR THEME S OBJECTIVES AND FOR OVERSEEING CROSS-FUNCTIONAL INITIATIVES. STRATEGIC THEMES MAY INCLUDE: KEEPING THE ALLIANCE: ENSURE THE J/V HAS THE RIGH TRUST, CULTURE, COMMUNICATION, PEOPLE DEVELOPMENT, REWARDS AND RECOGNITION COOPERATION: TRANSPARENCY AND OPTIMAL USE OF RESOURCES ACROSS BOTH COMPANIES INNOVATION: LEVERAGE GLOBAL EXPERTISE GROWTH: CREATE THE RIGHT PORTFOLIO AND MIX OF PRODUCTS 10
HOW TO DEVELOP A SUCCESSFUL JOINT-VENTURE IN BRIEF, HERE S THE PATH TO SUCCESS: AGREE ON THE STRATEGY AND, ADAPT THE STRATEGY TO: EVOLVING EXTERNAL CONDITIONS AS WELL AS TO NEWLY CREATED INTERNAL CAPABILITIES DESIGN THE METRICS TO DETERMINE HOW WELL THE STRATEGY IS BEING IMPLEMENTED COMMUNICATE A COMMON VISION OFFER INCENTIVES TO MOTIVATE EMPLOYEES TO IMPROVE COLLABORATION AND DELIVER RESULTS TALK OPENLY ABOUT DIFFICULTIES, AND RESOLVE POSSIBLE DISPUTES SHARE INFORMATION WORK COLLABORATIVELY AND PRODUCTIVELY TO ACHIEVE BENEFITS OTHERWISE NOT ACCOMPLISHABLE 11
THE COMPETITIVE ADVANTAGE OF THE JOINT-VENTURE TANGIBLE INTELLECTUAL PROPERTY RIGHTS COMPETITIVE ADVANTAGE INTANGIBLE STRONG BRAND EXCLUSIVE LICENSE(S) LEADERSHIP KNOWLEDGE & SKILLS TEAMWORK ORGANIZATIONAL CULTURE TEAMWORK ORGANIZATIONAL CULTURE INTERNATIONAL COMPANY LOCAL PARTNER COMPANY IN CHINA THIS SET OF DISTINCTIVE CAPABILITIES CANNOT BE IMITATED BY COMPETITORS 12
JOINT VENTURE: BALANCED SCORECARD & ALIGNING COMPANY FUNCTIONS OPERATIONAL EFFECTIVENESS REVENUE MAXIMIZATION LOYALTY OPERATIONS LEARNING AND GROWTH EARNINGS GROWTH LOYALTY VALUE CREATION HUMAN CAPITAL EXCEED EARNINGS EXPECTATIONS PRODUCTIVITY IMPROVE COST STRUCTURE CAPTURE MARKET SHARE VIA LOCAL DISTRIBUTION, RETAIL, INTERNATIONAL, AND INTERNET SALES INCREASE PROFITABILITY REVENUE MANAGEMENT DEVELOP AND KEEP LOYAL CUSTOMERS IMAGE CONSISTENCY DELIVER PRODUCT BRAND PROMISES INTERNAL BUSINESS PROCESS VALUE CHAIN INNOVATION R&D OPERATIONS SERVICE DOMESTIC CHINA SALES INTERNATIONAL SALES INTERNET SALES ATTRACT AND RETAIN TOP TALENTS AS CONSULTANTS, MANAGERS, LOCAL & INTERNATIONAL AGENTS AND DISTRIBUTORS DEVELOP STRATEGIC SKILLS: TRAINING FOSTER A DIVERSE WORKFORCE
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