Source: INDOLINK
The joint venture is often considered the first option when the idea of doing business in India arises. Nevertheless, the experience proves that these associations rarely reach the expected goals and results. In most cases it turns out on traumatic experiences and failure for at least one of the partners (usually the foreigner).
There are logical reasons why foreign companies consider advantageous to join local Indian partners: lack of local knowledge –bureaucracy, market dynamics, business culture, management styles, labour laws…- quick access to the local market –due to distribution networks and customer portfolio of the local partner, and immediate availability of starting infrastructure –land, manufacturing plant, licenses and operation already going on-. For all this, the local partner is expected to pave the way for an easier, quicker and safer or lower investment.
This approach may seem logical a priori, but instead, we eventually find out that in many cases these assumptions prove wrong. Us in INDOLINK, after years of helping foreign enterprises to enter the Indian market, find the following main reasons that lead the joint ventures to fail:
- Lack of experience. To the usual confusion when entering a new market add the fact that often it is the first Joint Venture for both partners. The lack of previous experiences and the need of consensus between the parties normally turn things around and create difficulties to solve the conflicts and for correct decision-making, both vital for the positive progress of the business.
- Cultural differences. Even if the business culture in India may be more similar to ours than what we may expect before hand, Indian values, customs, management style and communication subtly differ from that of western cultures. The use of a non-mother language is also an additional barrier. Even when the parties talk in similar English, huge gaps stand between what one wants to say and what others may understand.
- As a natural consequence of the previous two points, a lot of communication problems and misunderstandings arise, ingredients for a stew of mistrust.
- Referring to operations, it is frequent to establish Joint Ventures between companies that produce the same goods, leading to conflicts on strategic objectives. This may turn the success of the JV on a theat to one or even both of the partners.
- To this add the fact that still nowadays, it is difficult for both partners to think on win-win terms and so both partners tend to look after oneself by trying to profit as much as possible their part instead of the JV.
- Sometimes, the JV is perceived as a business on itself for one of the partners, who may focus on exploiting this relationship instead of focusing on the development of the JV.
- All the above explained, plus the combination of the day-to-day problems inherent to the management of a company and the no less numerous difficulties of the Indian market, create a lot of tensions at all levels. Add the usual resistance to change and we get an accumulation of non-solved problems that tend to paralyze the functioning of the JV that feeds the loss of trust between the partners, ending irremissibly in rupture.
Eventually, it is common to find out that not only have we not achieved the expected benefits from the JV, but also we have wasted valuable resources, “burned” the people involved in the project and lost a precious time, during which the window of opportunity has been closing.
Nevertheless, sometimes the JV may be the only valid option to enter the Indian market.
For these cases, we will shortly offer some recommendations that seem obvious but are frequently ignored.
Spanish version of this article
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