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Risks And Benefits Of a Joint Business Venture To Enter International Markets

833 Downloads1 I Published: 27 Nov ,2019

Topic - The risks and benefits of a joint business venture to enter international markets

1. Background of project

Globalisation gives opportunity to organizations to move their businesses in international market and generate high profitability. For this purpose, companies dealing in small sector needs to make appropriate project plans to enter into new market (Singh and Delios, 2017). As to move business in other countries, firms require adequate amount of funds and resources, therefore, they use to merge business with other for fulfilment of the same. In context with Rowlinson Knitwear Ltd., it deals in apparel and footwear market of UK, that produces school wear and knitwear for students. In order to expand business at international level, it is going to joint its venture with one of the European trading company, named by Coop Trading A/S.

It is a purchasing company of Sweden that sells products by own brand name, with focusing on quality of products and offers at good price. In this regard, through the concept of joint venture, both firms can combine their resources and expertise for serving products in Asian marketplace, to ensure the success of a venture.

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This project is going to identify the risk as well as benefits both companies may gain after  make agreements for joint business venture, to enter into Asian marketplace. For this purpose, both primary and secondary resources are used to gather adequate amount of reliable information on given topic. This would aid to analyse what types of risks associated with joint venture for small companies and benefits availed by the same (Nicholas and Steyn, 2017).

Therefore, main reason behind chosen of this topic is to enhance knowledge on joint venture and understand the term globalisation. This would aid project makers in enhancing skills and knowledge to work on future assignments more effectively.  

2. Aim and objectives of project

Aim: “To determine the benefits of joint business venture for small companies to enter into international market, with risks associated with the same.”  

Objectives:

  • To ascertain the concept of joint business venture for small companies
  • To identify the benefits availed by Coop Trading A/S and Rowlinson Knitwear Ltd., after joining their business to enter into Asian marketplace
  • To determine risks associated with joint business venture for small organizations

3. Scope and limitation of proposed project

Through the concept of joint venture, small companies get chance to work together on a joint project like open an branch in international market. This would also provide benefits to maintain rest part of business separate from each other and run in own manner (Milosevic and Martinelli, 2016). In context with  Coop Trading A/S and Rowlinson Knitwear Ltd., as both companies deal in small sector therefore, to move business in international market is really a difficult task for them. In this regard, by forming a joint venture they can combine resources, to ensure success of launching business in Asian marketplace.

Although there is a large scope of project for small companies but still it includes some major limitations, that classified as control and specification limits. Here, control limits majorly occur in a project through variations in gathered information. It includes disagreement among project members which leads to failure of outcomes (Yan and Luo, 2016). While specification limits are associated with dissatisfaction of clients or stakeholders, that somehow sway the project.

4. Resources and cost considerations

To work on a common project, it is essential for companies to collect adequate amount of resources, which includes both tangible and intangible resources. Here, tangible resources include latest tools and technologies, VRIO framework that contributes to gain competitive advantages, internal skills and knowledge, human resources etc. While, intangible resources includes goodwill, patents and expenses. Therefore, by combining all such resources, both Coop Trading A/S and Rowlinson Knitwear Ltd., can work on a common project in collaboration.

STRIP6

In context with project completion, resources required by researchers include capital, latest technologies for investigation, team-members having appropriate skills (Hollender, Zapkau and Schwens, 2017). In this regard, minimum 18k Euro are required to complete this project. While for business expansion in international market, both companies need to make investment with minimum amount of £100 million. This would help in conducting market analysis for determining demand and purchasing level of potential customers and offering them products on such price accordingly.    

5. Gantt Chart

6. Risk Register

It refers to a tool which defines risk management plan in terms of problems that may occur while working on a project. It also shows path to address the same in following manner:-  

Risk

Mitigation action

Contingency action

Pre action score (Out of 10, where 10 is high risk and 1 is low)

Post action score (Out of 10, where 10 is high risk and 1 is low)

Increase in price of resources such as tools and technologies  which are required for successfully completion of project

A contract can be signed between Coop Trading A/S and Rowlinson Knitwear Ltd., related to fixing price of such resources so that affect of increment in price do not affect cost of project.    

Existing techniques can be reused by both companies  to launch business into international market.  

7

3

High fluctuation in cash flow

Since managing capital in the form of is difficult for a company. Therefore, by creating  a provision for assuring smooth day to day cash flow help in maintaining high fluctuation in cash flow.

Take short term finance from banks and other fund sources to remove barriers related to manage and maintain an adequate amount of cash.

8

4

Internet shutdown due to any emergency

For conducting market survey and operating business across the territorial boundaries, internet refers to a major resource.

Company requires to do major task manually which doesn't need internet sources much

9

6

Client change demand

Developing plan to meet instant demand of customers

Modifications can be done within existing project to meet demand of clients.

6

3

Government increases tax rate

Provision can be made to reduce impact of such long term risk.

Optimise use of cost of business helps in reducing impact of same

4

2

References

  • Hollender, L., Zapkau, F. B. and Schwens, C., 2017. SME foreign market entry mode choice and foreign venture performance: The moderating effect of international experience and product adaptation. International Business Review. 26(2). pp.250-263.
  • Milosevic, D. Z. and Martinelli, R. J., 2016. Project management toolbox: tools and techniques for the practicing project manager. John Wiley & Sons.
  • Nicholas, J. M. and Steyn, H., 2017. Project management for engineering, business and technology. Routledge.
  • Singh, D. and Delios, A., 2017. Corporate governance, board networks and growth in domestic and international markets: Evidence from India. Journal of World Business, 52(5), pp.615-627.
  • Yan, A. and Luo, Y., 2016. International Joint Ventures: Theory and Practice: Theory and Practice. Routledge.
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