As the world gets smaller and smaller due to globalization and technological advancements, countries and companies have access to the global market with a wide range of collaboration opportunities. Heidelberg (2004) defines that “Collaboration in the organizational context is the effort made by two or more organizations to achieve results that they cannot achieve working by themselves”. Countries being more liberal and open towards their trade policies indulge in importation and exportation of goods and services. This paved the way for globalization, In which companies can become global through expansion, which benefits the economy of different countries and companies. Among them are joint ventures. According to Friedmann and Kalmanoff (1961) the central concept in the joint international business venture is that of partnership. Partnership has two sides, technical and emotional. On the technical side it is joining of contributions whereas on the emotional side it is a feeling of cooperative effort. Joint ventures play a vital role for companies to access foreign markets.
“Working collaboratively in an international organization benefits everyone” this statement will be verified with evidence by analysing the joint international ventures of numerous countries. Dinu (2016) states that “There are several motives as to why a company wants to enter an international joint venture, among them are lower manufacturing costs, advantageous monetary conversion rates and lower taxes”.
The major benefits resulting from the formation of international joint ventures is that all the partners involved in it save money and reduce their risk in the business from capital and resource sharing. They give the minor firms a chance to work with them which helps in progression of developing, manufacturing and marketing new products and services. Enterprises gain access to a bigger market for their goods and services which has a chance to raise the sales. They can help small business grow on a fast pace which leads to increase in profits. Joint ventures help to strengthen and develop long term relationships of businesses of any size apart from helping them with additional resources which include staff, technology and finance. International joint ventures are not usually long term. Therefore long term commitment is not required (Dinu 2016). It has been argued Friedmann and kalmanoff (1961 pp.5) that joint international ventures have appeared as a possible technique for reducing conflicts and promoting harmony. The benefits of the international joint ventures mentioned above prove that working collaboratively have huge benefits for everyone. Taking this into account we will further move on to how joint international ventures have become successful with financial results and how they impact the economy. A study of a Mexican steel company called Altos Hornos de Mexico, which was the first company to engage in the integrated production of steel in latin america. The shortage of steel early in the second world war interested the Mexican industrialists for a possibility to establish another steel mill resulting in the second integrated steel mill called Altos Hornos de Mexico. Foreign technical assistance was sought and was obtained from a leading steel mill producer, The Armco International corporation of the United States. The Mexican industrialist with the collaboration of their government bank and Armco international corporations came into an agreement and was legally constituted on July 6, 1942. Armco got into a contract for the technical assistance of supervising the construction and operations of the plant. To achieve this they had to train a lot of Mexican personnel. The collaboration between them resulted in benefits for everyone. The company earned huge amounts of profit. The production of steel were substantially increasing over the years making it the leading steel manufacturers in the country and represents close to one-third of the total production in the country.(Friedmann and Kalmanoff 1961). Moving on to an Indian dyestuffs and pharmaceutical company which collaborated with multiple countries, The company took the initiative to seek collaboration of foreign companies. Cyanamid an American company joined hands with them to provide technical data and information about the plant layout, equipment specifications, organisation to construct the plant and install the equipment. Atul later on entered into an agreement with another collaborator called Ciba Ltd of Switzerland. Ciba had experience in the field of chemical production. Atul also collaborated with a company in London. Taking into consideration the international composition of the company, it was found that personnel relationships were satisfactory, which a benefitted the company for its progress. Working collaboratively with these companies resulted in smooth production, which led to increasing amounts of profit over the years. Moreover it paved the way for direct foreign investment which benefitted the Indian economy (Friedmann and Kalmanoff 1961). Analysing another Mexican company called Industria Electrica de Mexico (IEM) which was developed by a group of Mexican bankers to produce electrical equipment. The company was formed with the technical assistance of Westinghouse electric corporation of the United States. They supplied design information. Mexican personnel were trained by them in the United States, the training given by them was successful. Labour relations were good. IEM played a big role in the economy. It became the largest company to produce electrical equipment’s for industries and for domestic use in Latin America. The value of their shares steadily increased. The company earned a decent amount of profit. The company kept expanding with more manufacturing factories which create employment opportunities (Friedmann and Kalmanoff 1961).
To conclude, looking at some of the above examples and hundreds of other collaborations worldwide, we can say that international joint ventures are a win win for all. Both the countries stand a chance to gain and nothing much to lose, if they plan their ventures properly and think of long term planning and strategy rather than short term gains, which may sometimes work in their favour or may not.
- Dinu, A 2016. Knowledge Horizons. Economics. Vol. 8. Bucharest: Dimitrie cantemir Christian university.
- Friedmann, W and Kalmanoff, G. 1961. Joint international business ventures. New York: Columbia university press.
- Heidelberg. 2004. Information systems and eBusiness management. Vol. 2. Hamilton: springer- Verlag.