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Joint venture subsidiaries evolution path

Author: XueQiuZhiĦĦLuoLaiJun From: www.yourpaper.net Posted: 2009-04-02 21:03:37 Read:
[Abstract] strategic decisions of multinational companies operating in China "to get rid of to seek a joint venture owned" the new changes, this article from the perspective of the parent company's strategic analysis of the parent how to keep the joint venture and scale expansion to a wholly-owned or divestment, reveals resulting in different evolutionary path to explain the joint venture subsidiaries have been changed, and to determine and influence their future direction.
[Key words] strategic decision evolutionary path of strategic opportunism

The first to enter the Chinese market, foreign investment, joint ventures. But the era of a joint venture last did not last long, foreign investors began to seek the actual operation of holding and wholly foreign-owned. Such as Whirlpool, USA, multinational giants to enter the Chinese market, has a joint venture established in Beijing, Shanghai, Shenzhen and Shunde, refrigerators and other four production bases, but after ten years, they will refrigerators, air conditioners business China pull back and full acquisition of Shanghai Narcissus, the sole proprietor. Unilever, Schindler, a joint venture in China has made significant adjustments. This phenomenon not only in China, other countries have similar economic behavior. Explore the root causes of these economic behavior, we believe that this is a new strategic adjustment of multinational companies, is a strategic decision made by the departure from the strategic perspective of multinational companies.
Multinational strategic adjustments made by the joint venture subsidiary, concentrated expression of three ways: to maintain the joint venture, sole proprietorship or divestment. The manner in which the parent company's strategic decision-making about different strategic decision-making will lead to a joint venture subsidiary different development path. Therefore, from the strategic perspective of the parent company, to explore the joint venture subsidiaries evolution path, can reveal the joint-venture subsidiary, changes in trends in the practice. We discussed the general evolution of the joint venture subsidiary path and special evolutionary path, the general evolutionary path has a more complete life cycle stages, the special evolution path due to the divestment and wholly owned subsidiaries of the life cycle stages snippets, cycle characteristics of interference, many fail to reflect the periodic case, this is our evolutionary path instead of the life cycle to study the course of development of the joint venture subsidiary reasons.

A joint venture subsidiary of the general evolution path

The joint venture subsidiary of the general evolution path refers to the general growth of the joint venture subsidiary through the life course, we reveal the general evolution of the joint venture subsidiary path through the life cycle and the various stages of the double feature.
Theoretical discussion trajectory of the development of enterprises, is reflected in the corporate life cycle, the most representative of three kinds: the classical model of the Iraqi Chuck Aidi Si (Ichak Adizes) [1], Chen Jiagui and the yellow quickly built raised growth model [2], Lee Yip correction model [3], in accordance with their respective indicators on the life cycle of different stages of division. According to our research, the joint venture subsidiary as a subset of the enterprise groups, the general evolution path followed by the majority of enterprises life cycle; same time, as a joint venture with its unique properties, comprehensive consideration of these factors, we joint venture sub- the life cycle of the company is divided into the demonstration period, run-in period, growth, maturity and recession. The division try to highlight the joint venture subsidiaries attributes, run-in period, for example, emphasized the different stages of a joint venture between coordination and conflict, is a joint venture subsidiary of the main features of development at this stage and the principal contradiction; during the demonstration period, the joint venture subsidiary and not come out, but just like a baby as the development of a period during this time as a joint venture subsidiary, we vividly described as "the existence of the entity", although the entity has not been set up, the scale is zero, but has already begun "existence", reflecting the joint venture subsidiary investment feasibility and preparatory work.
Joint venture subsidiary in the characteristics of the various stages of the life cycle of duality: First, as has the characteristics of general enterprises at all stages; has the characteristics as a joint venture, the two aspects of the life cycle stages of the joint venture subsidiary the dual characteristics (see Table 1).

Second, the joint venture subsidiaries special evolutionary path

The special problems of the joint venture subsidiary
The special problems encountered in the development of joint-venture subsidiary are three: First, the joint venture is owned alternative. Intensive (Kogut) in 1989 [4] and P. Gomez and Icahn (Beamish and Inkpen) in 1995 [5] 1997 [6], showed that many large companies to explore overseas operating joint venture subsidiary as a transitional, and then build their own overseas wholly-owned subsidiary. The second is to maintain a general joint ventures, before and after the recession anti-recession innovations, the company toward a new course of development. Luo (Luo, 2001) [7] studies, if the joint venture hopes that a joint venture subsidiary with more long-term development, it is necessary to carry out a more long-term investment, typically targeting the host country competitive market position and scale, which must continue to unique resources injected into the joint venture subsidiary. Third, withdrew from the joint venture. When the joint venture uneconomical, joint venture to take a divestment program to exit the joint venture. The divestment and wholly owned subsidiaries occur, resulting in a large number of joint subsidiaries fail in the middle. Intensive (Kogut, 1988) [8] found that 92 joint venture subsidiary, to joint venture sixth year, about half have failed or dispersed. Zou Derui (Roy Chowdhury, 2001) [9] are also being considered that, at the end of the 20th century, accelerating the formation of the joint venture subsidiary, but at the time of the study showed that the joint venture subsidiary easier failed. The above three issues will change the general evolution path of the joint venture subsidiary, leading to their special evolutionary path.
We are from the perspective of the strategic decisions of the multinational parent to explore these evolutionary path, to reveal the source of the joint venture subsidiary development. Parent company owned, divestments to maintain the expansion of the size of the joint venture or procure strategic decision-making, will consider a range of impact parameters, in fact, in the form of a more independent variables of strategic decision-making function S = S (x1, x2, x3, ......), the final decision is affecting the result of the combined effect of the parameters. In order to facilitate the analysis of the the parent strategic decision all the parameters through the parameters of a representative to express, we have chosen to invest mainly on the return on investment, represented by R, R = R (x1, x2, x3, ...) and S = S (R), the positive and negative of each parameter will affect ROI affect the final strategic decision-making.
By the evolutionary path in the joint venture to a wholly-owned conversion case
Parent converted to wholly-owned by the joint venture, sole investment rate of return at some point over the joint venture rate of return (see Figure 1). Rate of return on the level of the situation was reversed, the parent company owned more scientific and rational than the original joint venture, from the initial joint decision-making into the later owned the decision-making area, the implementation of the strategic transformation.
The parent company wholly-owned by the joint venture to convert the realization of the strategic decision-making, generally two ways: First, quit, start all over again from the original joint venture subsidiary, directly create a separate wholly-owned subsidiary. The formation of a wholly-owned subsidiary, often use and learn from the experience and in the original joint venture has received a number of conditions, such as in the joint secondary to internal management experience, market knowledge, and sales channels and customers, raw materials supply. Has a stake of more than 95%, by raising the shares in the joint venture subsidiary, to achieve the purpose of a sole proprietorship. In order to achieve owned, multinational parent company, on the one hand directly inside the joint venture subsidiary acquisition of the shares of the other joint venture partner, can also increase their investment to improve their equity ratio. Parent company owned by the joint venture to a strategic shift will occur in the joint venture subsidiary of General at any stage of the life cycle, when this conversion occurs at some stage, necessary to terminate the life of the joint venture subsidiary, at all stages due wholly-owned alternative termination may thus give rise to a new evolutionary path, the joint venture to a wholly-owned conversion evolutionary path.
The above analysis can be used to explain many Sino-foreign joint venture owned after China's accession to the WTO, the external environment has been greatly improved governance issues in the joint venture, while in the past also revealed internal and external factors led multinational strategic decisions of the parent company in a joint venture yield curves and owned yield curves and joint ventures initial ratio shift some of the parent company from a strategic point of view has become wise to make the adjustment towards wholly-owned joint venture subsidiary.
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