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International Joint Ventures

International joint ventures, a form of partnerships between companies in emerging and/or established markets, are an important tool for companies interested in tapping into new growth opportunities—such as entering new markets or accessing new technologies—but which cannot or do not want to pursue them entirely on their own.

Joint ventures are still a proven mechanism to collaborate in established industries but are now increasing being used internationally to support growth in digital products and services. International joint ventures allows many of the benefits and rewards of a full merger or acquisition—with only a share of the risk, an option to exit, and limited consequences for partner organizations. The best of both worlds.

But the advantages of joint ventures can be offset by misaligned interests and business objectives, lack of commitment, unclear governance, problems with talent, and operational inefficiencies. It’s essential for international joint ventures to be carefully planned and managed along each of the five distinct stages of their lifecycles:

Alliance Strategy. Once the company has chosen a joint venture as the optimal form of collaboration, they must be explicit on their key strategic objectives, define their expectations from their future partner, and outline the scope of their joint venture.
Partner Search and Negotiation. Finding the right partner for a joint venture is essential. Failure to do so often results in unaccomplished business targets, damage to business relations, lengthy legal disputes, IP theft, and bad publicity. This stage of the lifecycle includes defining elimination criteria to narrow the scope of candidates; applying prioritization analysis to create a shortlist of potential partners; and rigorously screening the final candidates to assess their strategic and cultural fit.
Setup. Setup is the cornerstone of every successful joint venture. A successful setup covers the fundamental design of the joint venture—including business strategy and scope, decision mechanisms and board structure, HR and talent management, IP protection, as well as operational control—which aligns all partners from the outset and ensures a functional JV organization throughout the partnership.
Ongoing Management and Intervention. Similar to any other organization, the management and operations of an international joint venture require dedicated attention throughout the span of the partnership. However, unlike other companies, international joint ventures encounter unique challenges caused by colliding interests of their parent companies, such as alignment on objectives, strategy, operations, and HR and talent management issues.
Exit Preparation and Support. An exit strategy and mechanism should be planned in advance based on regular feedback and evaluations of the portfolio—yet only 19% of joint ventures report doing so. Both parties can receive exit support from a third party in order to protect their best interests in the deal.

Digital Trends Shaping International Joint Ventures

Companies from all industries are leveraging joint ventures to gain access to digital capabilities; develop new digital solutions; or provide digital solutions. For those companies exploring the possibility of an international joint venture, there are four digital trends to keep in mind:

Growth of digital joint ventures remains strong.

Emerging markets play a prominent role in digital joint ventures.

Asia’s participation in digital joint ventures has significantly increased.

Chinese companies are gaining popularity as partners in digital joint ventures.

Service and retail industries have the most digital joint ventures due to proximity to customers.

Globalization

The Secrets of Success in Joint-Venture Management

Joint ventures remain a key driver for go-to-market strategies in emerging markets. BCG’s Nikolaus Lang explores the factors differentiating successful and unsuccessful joint ventures.