Explain the business opportunity in India
Business opportunities in India are good considering the fact that India has a population of about 1.2 billion people. The luxurious living among Indians and their capital abilities provides a good domestic market for the companies and other businesses operating in the country. However, there are challenges involved in starting up a business in India which range from political, level of competition, education, as well as preference and taste.
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Politically, there are lacks of political goodwill among the Indians in welcoming international investors. This is based on the need to promote local industries and give them a space to escape vast competition from the giant and already established corporations. However, due to the need to secure employment for their populations, it tends to give in to the demands of those international companies. Indians also have a culture in which they tend to shun away from products that are not homegrown hence failing to provide a market for the products of those companies. (Lockheed, 1993).
The Indian language is an issue to the investors operating in India because their English is not easily understood and, hence, causing a language barrier. Indians are also known to be good business people, this provides stiff competition to their competitors and, hence, before a business can succeed in India, it has to have a proven record of good competition. However, once a business gains momentum in the country and with good management, it automatically leaps good returns since the population tends to consider it as one of their own. Motor vehicle business has a record of thriving in this country as characterized by presence of companies like Fiat Autos, Tata Motors, Premier Auto, Honda, Toyota, Nissan and others, most of which deal with smaller cars, which is the favorite for Indians.
Based on your understanding of the case, explain if fiat can benefit from a partner and provide your rationale
Maximizing the benefits from an alliance seems to involve building trust between partners and learning from partners (Hill et al 2012). FIAT had engaged itself in a series of joint venture but, in most cases, throughout its operation in those ventures, it was making losses. A perfect example is when the company enters into a joint venture with premier automobiles limited. In the 1997 venture, the group recorded losses as it was not quick in embracing the changed economic environment in Italy and Europe.
There was also a massive loss recorded in its market in India at the same period. Their managerial strategies also do not help in curbing the heightened losses and an example is when they decide to do mass production and of low quality, this resulting in complaints from their customers. Its combined venture with GM did not either do it any justice as it also recorded losses amounting to 1.3 billion us dollars. Hence, the company does not stand to benefit from a joint venture.
Discuss whether FIAT and TATA can make good partners and provide at least two examples supporting your position
FIAT and TATA have been in the business for a long time dating from early 1880s’ and, therefore, are well aware of the dynamics and challenges involved in the market. The firms, therefore, can make good partners considering that they both have their weaknesses and can use their strong areas to neutralize the effects of weaknesses in their partners as well as strengthening their roots. On entering into an agreement in , TATA motors targeted to get technology to help them develop smaller cars that were economical and also be marketed in Latin America and Europe where it almost had no presence, while FIAT wants to maintain presence in India without massive investment.
TM helped in marketing some models of FIAT cars in regions of its stronghold and also sold spare parts for FIAT cars and improve their image in India. It is noted that TM had no sufficient technology on diesel engines while Fiat had expertise on it, hence, this would benefit TM. Since both parties are leaping good benefits from their joint venture, they, therefore, stand a chance of making good partners for prosperity of their firms (Triantis, 1999).
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Discuss possible challenges that could affect the partnership long term long term
It is apparent that acquisition and joint ventures are complex transactions and a large number of these projects fail with amazing regularity (Triantis, 1999). FIAT has a record of not doing well in a joint venture and its continued trend on the same direction may see TATA pulling out of the venture as GM did and concentrate on developing its own venture. The distorted image of FIAT in India may affect the sales of TATA goods contrary to improving its image if proper measures to market both parties is not put into place.
The massive competition among other automotive firms such as Hyundai, Renault, Nissan and Suzuki may impact the venture negatively. The aggressiveness of TATA is also another challenge where TATA has a clean record of rebranding itself and also entering into new ventures like it did with Daimler Benz and M.G Rover, hence, reducing its commitments with the joint venture between it and FIAT.
Evaluate the business case for a joint venture strategy and support your rationale
A joint business venture is rewarding and, if well taken care of, with the involved parties having maximum cooperation and commitment to discovering success in their venture and also living to fulfill their visions. This is because the involved parties stand to make positive gains if the opportunity is well utilized. They milk benefits from each other ranging from managerial principles, technology, and market to financial stability.
TATA and FIAT demonstrate this better when on entering into joint venture, TATA was to gain technologically as far as diesel technology was concerned and also has its market radius widened. FIAT, on the other hand, was to have its image rebranded and its operation costs reduced and also was to benefit by using the cost effective production system in India. Though FIAT had a series of joint ventures that it did not fully succeed, it benefited positively and a good example is its joint venture with PAL where they were successful in introducing UNO, a new product into the market. Therefore, joint venture is good when well utilized to benefit all the parties (Mathews 2001).
Make recommendations to be successful
A successful joint venture needs to be assembled as part of a strategy and then well organized (Matthews, 2001). Joint ventures are known to pose paramount challenges to the managing authorities and can suck life out of these officials if proper measures to provide smooth running of the firms is not set in place. In various cases, the organizations are totally crippled to a point of getting to the death bed. To avoid such an occurrence several measures are put in place as outlined below.
“Utmost good faith” is a priority ingredient for a successful joint venture. The need to have every stake holder on board matters most in success of a firm and, hence, agreeable terms to the satisfaction of the involved parties must be set in place. Smart objectives should act as a lead if success is to be realized. Good managerial tactics should be put in place and this call for the involved parties to provide intelligent officers to run the firm. Transparency and integrity must as well be taken into consideration as this always acts as the litmus to the existence of the firm.
Hill, et al. (2012). Strategic management theory an integrated approach. USA: South Western Publishers.
Lockheed, M. (1993). Joint ventures management and contracts. Khrunichev: RSC.
Mathews, C. (2001). Managing international joint ventures, the route to globalizing your business. London: Kogan Page.
Triantis, J. E. (1999).creating successful acquisition and joint venture, a process and team approach. West Port: Conn Quorum.