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While are a variety of technical, business, and cultural reasons that JVs fail, most JV failures can be attributed to lack of shared strategy, poor communication, lack of trust and mutual understanding, or tension around goals. In the international setting, cultural differences add an additional layer of complexity and often contribute to failure as well.
Where joint ventures represent the combined effort of two separate parent companies with divergent goals and interests, coming together around a common purpose and goals and establishing a separate organization to pursue those, it is critically important that the resulting goals be defined clearly and truly represent shared interests. Operationally as well, JVs often run into problems where the expectations of one company diverge from another's despite the use of common terminology and the perception of shared goals and interests.
While companies may agree to establish a JV around common goals and interests, the competitive interests of the parent firms are not eliminated, and often contribute to tension within the JV itself. Excessive rivalry is a common factor in the undoing of JVs; while rivalry is a fact of life and competition between and among firms is not expected to dissipate with the establishment of a JV, problems arise when such rivalry eclipses cooperative tendencies.
For example, US companies are often concerned about losing proprietary information, and may hesitate to share technological information amid concerns of not being compensated properly or losing a competitive advantage, even within a partnership. Activities and operations within the JV setting do not occur in a vacuum, and parent company concerns about the proprietary information and trade secrets often create tension one side of the JV partnership, which naturally creates problems of trust and communication in the JV as a whole.
The JV path is precarious, a route rich with opportunity and yet fraught with the potential for failure, where cultural understanding is absolutely critical. Engaging in a multi-national JV without first undertaking to understand the cultural differences and their implications at both a strategic and operational level is a recipe for disaster.
When alliances are being built and structured at the corporate level, attention is rarely paid to how those lower in the hierarchy will work together on such simple daily activities as running meetings, making decisions, solving problems, managing employees, and communicating proposals, but people do from different cultures do these things very differently. Each culture assumes that their way is the 'normal' way, which inevitably leads to problems and misunderstandings especially where neither side has any training in the norms of the other culture or what to expect, what is considered normal in the culture of the people with whom they will soon be working closely.
The lesson for firms interested in new JVs is to provide some basic training about intercultural communications, to encourage people on both sides to consider their own culture and prejudices and to understand themselves first and then begin to understand the norms of the other culture in the venture. Critical areas to discuss in intercultural training are time (how important is punctuality and adhering to deadlines?), truth (attitudes toward honesty, right and wrong), relationships (how important is hierarchy and status, and how is that expressed?), the human condition (attitude to risk, belief in free choice?), and communication (is frankness and directness valued or avoided, and in what settings?). By understanding these basic features of their own cultures and those with whom they will be partnering, companies on both sides will be well positioned to avoid common cultural pitfalls resulting in JV failure, and will be on track to develop healthy and successful long-term relationships.
Successfully Managing Relationships
Anderson and Jap discuss what they describe as a dark side of close relationships, arguing that the same factors that strengthen a partnership can also open the door to relationship problems. For example, where positive personal relationships were developed an alliance between an automaker and a supplier, the same trust and personal relationships enabled the supplier to cut corners more easily on the production side.
If both firms agree up front on strategic goals and operational standards for achieving those, then the relationships can be developed and utilized toward that purpose and not to subvert it. Building those trusting personal relationships at all levels of the hierarchy is an important success factor. How to manage those trusting relationships to ensure that the partnership is not subverted is a wonderful problem to have in the scheme of things, as those relationships can certainly be managed to ensure that everyone is working toward the identified strategic goals, resulting in success for the individuals involved and the JV as a whole.
However, relationships are not enough to carry the JV forward to success. Once the cultural understanding is in place and relationships are built, both companies need to ensure that their interests in the JV are aligned with those of their partner, both from the outset and on an ongoing basis.
A recent case study in the Harvard Business Review addressed these issues from the perspective of an American manager of a textile JV in China, and all four experts agreed that the American and Chinese companies had divergent goals and interests that could not be managed through close relationships alone: the Chinese company saw 5% profit margins as extremely successful and wanted to continue expanding and acquiring companies, building a national brand, where the American company wanted to see 20% profit margins after having invested years of time and resources in the JV. The companies' goals had been aligned for the first several years, but their definitions of success had seemed to move along different paths.
Shared definitions of profitability and success, and quantifiable methods for benchmarking progress are critical to the success of any partnership, and yet often overlooked in the enthusiasm to establish a JV around what are perceived as common goals.
Global Marketing Strategy: Joint Venture Marketing Conclusion
Many of the usual pitfalls of JVs can be avoided through investments in cultural training in advance, which paves the way to building successful relationships at all levels of the JV hierarchy. These relationships must be managed to ensure that employees are all working toward a common purpose. The purpose needs to be defined and agreed upon in words and spirit and revisited regularly to ensure that the strategy and goals of the JV continue to be aligned with those of the parent firms, for a truly united enterprise.
Cultural Considerations in Global Advertising Strategy
Before creating a standardised advertising campaign aimed at a global audience, any firm must consider several critical cultural factors in the countries to which the advertising will be targeted, including language, religion, history, and cultural icons. While sensitivity to and appreciation of these factors will not guarantee advertising success, they are essential to ensure that the advertising does not accomplish the opposite of the intended effect by offending or alienating the very people it was designed to appeal to.
The classic case of language error in advertising is Chevrolet's experience with the Nova car in the 1970s. Where no va in Spanish translates to doesn't go, it was no surprise that the product did not translate well to the Latin American market. More recently, two well-known and deeply experienced multi-national firms have made embarrassing missteps advertising in China, failing to understand and respect the local culture.
In December of 2004 China banned a Nike television commercial showing basketball star LeBron James in a battle with a kung fu master as an insult to Chinese national dignity. Nike's use of the kung fu master was clearly intended to incorporate Chinese cultural symbols. While China did not give specific reasons that the ad was offensive, many business and media experts speculated that allowing James to beat the kung fu master, a highly respected figure in Chinese culture, was perceived as insult and slight to Chinese culture rather than a respectful incorporation of it.
McDonalds made a similar error in their Chinese advertising even more recently, when a television commercial intended as humorous was offended far more viewers than it amused. The commercial showed a Chinese man on his knees begging for a discount, a culturally sensitive position that was not received humorously by the Chinese government or public.
An international advertising campaign must minimally avoid being offensive, insulting, or self-defeating, which requires understanding of the norms, values, and sensitivities of the cultures to which the advertising is targeted. Attempts to incorporate elements of the local culture in advertising are very sensitive and must be handled with care, especially if they are intended as humorous or light. Obtaining feedback from local focus groups before launching an advertising campaign incorporating elements of local culture would help to eliminate the potential for unexpected responses from the local audiences, and should be incorporated whenever possible.