International Joint Ventures

International Joint Ventures
International Joint Ventures

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International Joint Ventures

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The Board of Directions of an International Joint Venture Company must take important strategic decisions about the direction of the collaboration. Therefore, in setting up a new JVC, it is essential to consider how such decisions would be made. taking into consideration the desire of partners to expert an “appropriate” level of control over their JVC:
(a) Critically compare the relative merits and limitations of making decisions by vote or by consensus (through power of veto)
(b) if consensus is needed but then cannot be reached on a vote concerning a significant issue for the business, what options do the partners have to move forward? 

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International Joint Ventures

Introduction

            The concept of joint venture companies has been instrumental in the success of various firms across the world. The most common of these being strategic and international joint ventures, where two or more independent firms come together in a bid to conquer a market that neither of them would have achieved as individual entities (London Business School Review , 2013; Anderson, 1991, pp. 19 – 20). Prior to the success from the establishment of international joint ventures, a lot of work in terms of planning goes into the formation of the joint venture.

Among the critical points of the planning process involves the definition of terms of the joint venture agreement. Key among the terms in the agreement is the structure, control, and voting procedures of the board of directors of the joint venture company (Gutterman, 2017; Yan & Luo, 2016, pp. 87 – 89). Such terms in the preliminary stages of the formation of the joint venture outline, among others, the use and direction of decision-making tools.

Such tools include the use of veto power and the sharing, or lack thereof, of voting rights between the partners who make up the joint venture. This paper looks to expound on the use of voting as a tool to reaching a consensus within the board of directors of a joint venture company and the options available to them if there is no consensus on a vote.

Decisions by vote or consensus

            During the course of operations, the board of directors in the strategic international joint venture will have to make many decisions regarding an array of issues. In spite of the issue at hand, there will be a need for consensus among the board members. Various decision tools are useful during such times, including authoritarian decisions, brainstorming, and voting. Of these examples, most international strategic joint ventures opt for the use of voting, since it provides a conclusive decision based on majority (Demirbag, 1997, pp. 143 – 146).

Other closely related options include the use of veto power and reaching a consensus through discussions before putting the issue at hand to a vote. The section below looks into the use of voting in an international joint venture by enumerating the various merits and limitations of using voting as a decision-making tool within the organization.

Merits of making decisions in a joint venture by vote

            The use of the voting method as a decision-making method in a joint venture entails the casting of ballots to decide on an issue at hand. All the members of the board of directors will have a reasonable if not total understanding of options prior to casting of the votes. A key advantage of using this method is the ability to combine individual skills, strengths, and knowledge into a formidable block to push for decisions and relevant changes. Members with similar ideology will unite and provide a united front to discuss the ideas from a varied viewpoint in terms of skills and contributions toward the needed changes.

            The use of the voting method for decision making in a joint venture company helps provide a unified front for the board of management. In this case, once the board completes the voting process, they come together and discuss the next steps. This allows for the enhanced understanding of the criterion of the decision, as well as the presentation of a collective effort to engage and act on the decision made. This is imperative to the continued operations of the joint venture organization and allows for fluid operation of the company through a united front from the directors.

            By using the voting method, there is a sense of an enhanced commitment from the entire board of directors. The engagement of all the members of the board in the process instils a sense of belonging and camaraderie. In addition, in spite of their leaning on the decisions, the participation in the voting process and the implementation ensures a greater commitment from the entire team. This sense of commitment and belonging spurred by the voting method is vital to the effectiveness of the board in carrying out their mandate within the organization.

            The method of voting as a decision making instrument in a joint venture will serve to inspire a sense of team spirit among the directors. The choice of voting helps bring together individuals with different points of view to collaborate on implementing a given task. In addition, the process serves as a team building activity through constant interaction with other board members who may not meet too often. This enhancement of team spirit allows the board to operate better together in times of unity and disagreement.

            The use of voting in a joint venture is useful when the board of directors is pressed for time. When the directors need to make a quick decision on the direction that the firm should take on a given matter, a vote helps since it may be conducted in a single sitting from the individual views of the members. Such a scenario does not require prior engagement and the decision is made in a matter of a few hours. This allows for the quick turnaround on time-bound decisions that could be potentially beneficial to the organization.

            In the same light of the ability to use the voting as a fast-paced method of decision-making in a joint venture company, the board of directors may use the method to eliminate non-critical decisions. At some point in the operation of the organization, the board will be faced with the challenge of making a number of simultaneous decisions that are time bound. In such a scenario, the use of voting could help the directors to eliminate the non-critical decisions quickly, thereby leaving room and time for discussions on the more demanding issues.

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