Dynamics of Strategy implementation: a study of international joint ventures

Abstract

The importance of cooperative strategies in today's business world has been increasing. Of the various mechanisms by which such strategies are realized (like technology collaborations. licensing. joint ventures, contractual agreements) joint ventures are considered to provide the right mix between joint ownership, control and risk taking of the parents. Research in international joint ventures has adopted a limited approach. The unit of analysis in most studies has been the local parent, foreign parent, or both. The motives of the parents and their impact on the joint venture have been focused upon. Another stream of research has attempted to identify the factors leading to stability and instability of the joint venture. These studies have often adopted a prescriptive stance for practicing managers. However, the process of strategy implementation in these organizations has received little attention. This study is based on the strategy—environment—organisation variables interlinkage. It attempts to study the causal linkages among these variables and identify the factors influencing the process of strategy implementation in an international joint venture. The study was conducted on three international joint ventures in the manufacturing sector. The research strategy adopted was one based on case methodology. The data was collected from semi—structured interviews with executives at all hierarchies across functional areas, in-house company documents and government publications. The major findings of this research are: 1) Prior exposure of the local parent in the industry of the Joint venture results in increased contributions by the local parent, in the strategic decisions of the joint venture. 2) Parents (local and foreign) of the joint venture, centralize decision making in areas which they perceive as their strengths. 3) An international Joint venture entered into by a local parent through related diversification, is less prone to accepting systems of the foreign parent, than one which has been entered into by a local parent through unrelated diversification. 4) The influence of the local parent, on the structure and systems of the international Joint venture, outweighs that of the foreign parent. 5) The foreign parent is willing to contribute more to the Joint venture if it perceives the fate of the Joint venture to be a test of its future participation in the country. 6) In international joint ventures, with parents entering through related diversification, the differentiation strategy is implemented through a centralized structure with low delegation of responsibility. 7) Cost leadership strategy is difficult to sustain in a dynamic environment in which international joint ventures exist. 8) The structure and systems implemented by the joint venture are dependent on the strategy adopted, with the environmental variables and parents‘influence mitigating the impact of the strategy. 9) The main environmental factors influencing strategy implementation in international Joint ventures are: a) Foreign currency exchange rates b) Government policies primarily on licensing, import duties, and administered prigeg c) Nature of markets d) Stage the product is in its life cycle at the time of introduction e) Nature of competition

Avenues for future research have been identified. Implications for managing international joint ventures, for managers of local and foreign parent firms involved with these ventures, and for national policy makers, have been suggested.