CHOOSING YOUR JOINT VENTURE PARTNER

Since the very concept of a joint venture involves the merging of more than one corporate culture and set of values in terms of how the business will be conducted, and the fact that many joint ventures experience a high rate of failure (many published statistics available  indicate  a failure rate of almost 75%), the single most important  decision  when entering into a joint venture arrangement is the careful selection of the joint venture  partner  or partners.  This is further compounded in the international context  in that the partners themselves   are  from  different  jurisdictions   and  the  foreign  culture  of  each  joint  venture  participant becomes an added  dimension of unfamiliarity.If the operational base of the venture is to be situated in a foreign jurisdiction,  many issues such as ability to access  a talented   labour   pool,   language   and   investment   barriers,   transportation limitations, management expertise,  international industrial  property  protection, technical standards and  a vast array of other key issues relevant  to the joint venture's business  activity must be addressed well in advance of choosing  the home  base  of the venture  or the selection  of partners  to participate  in the venture.  These elements  are not to be underestimated in assessing the likely success  of the venture  despite  the amount of capital  and home-base expertise  available  going into the venture.

However,  over and  above  these  issues, the lead  sponsor  of the joint venture  must ascertain what  is the most important  facet that the other participants must bring to the table:

Capital

Management Expertise

Customer Base 

Technology

An efficient business  operation

Market Share in the Target Market

Superior Business Reputation

Key Individuals

Distribution  channels

Once  the important  elements  of the co-venture  arrangement have been  identified  and put in some order of priority,  it is at  this  stage  that  the  sponsor  of the  joint  venture  will  be armed with  the  required knowledge  and   ability  to  eliminate   many   co-venture   candidates that  might  otherwise   have   been approached to participate. As soon as a 'short list' of candidates has been identified, it is equally important to invest the time and energy to verify, through independent research  on each of the 'short list' candidates, that  each   candidate  under   consideration  for  inclusion   in  the  joint  venture   possesses   the  desired qualifications.

Following  completion of your  research  on  the  qualifications of the  'short  list' of candidates, it is then essential  to focus on the ability of each  joint venture  candidate to be able to integrate  into the corporate culture  of the sponsor venture  partner

The next step is to identify the people  within your organization that will have responsibility  for the joint venture's operations and ensure that those individuals  actively participate  in the partner selection  process from beginning  to end.  A joint venture  is nothing  more  than  a corporate marriage  and  in order  for the marriage  to endure,  the partners must be compatible at all levels.

Although the legal, accounting and other planning  aspects  associated with forming the joint venture  are critical, the single most important  aspect of joint venture planning  is to ensure the right partners have been selected.

Winston Wambua

 

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