Many companies in the process of entry into a new market or in a new country try to form a joint venture with a firm that is already operating in that market or geography. These decisions are taken by the top management of the company. Harrigan (1985) divided the motives for forming a joint venture into three parts: a) Internal Benefits b) Competitive Benefits c) Strategic Benefits
Internal Benefits: Joint ventures are formed in quest of managing company's resources in efficient manner. This includes techniques to reducing cost and risk that the firm faces, obtaining scarce resources, obtaining cheap factors of production (land, labour and capital), to include new information and increase the managerial know how so that productivity can be increased and to retain innovative employees of the firm. There are many capital intensive techniques followed by companies in oil and gas exploration, metals processing and mineral extraction.
Get your grade
or your money back
using our Essay Writing Service!
Internal benefit include building company's core strengthsÂ Â
Helps in to develop economies of scale by gaining access to other financial resources
Joint venture help company to acquire new technologies and customers and
gives access to knowledge, skills and better management
Competitive Benefits: Joint venture helps companies to restructure their organisational structure. Competitive advantage is achieved by vertical integration or consolidation of the firms. This also helps the firms to have an influence on industry structure and competitors. Responding to the new globalisation trend this approach may help in creation of more effective competitors. Some other benefits are:
Joint ventures are helpful in building competitive barriers against the new entrants.
They act as a defensive strategy in response to the converging markets
Helps in creation of small and competitive units of the firm in various geographical locations
It also helps in reducing the time cycle to the market they are involved in
Strategic Benefits: Joint ventures help in companies to implement change in their strategic position. This helps in better creation and exploitation of synergies among the two companies. Joint venture facilitate in the transfer of technology and diversification of the firm.
Technology transfer helps in building knowledge to expand into key markets
It also helps to develop new products and improve productivity by shared expertise and lower costs because indulging in research activities to develop new products can be time-consuming and costly. Small businesses also gain lead-time
In the total number of joint venture formed, many were international joint ventures. Many of them were due to the cost involved in the operations. Companies in some industry depend on the technology to reduce costs. Joint ventures are favourable for them because they help them in accumulating money and people to work in short time, with not much time wasted in training and later to develop specialisation in a specific activity. This all leads to reduced exploration and production costs and thereby increase in the profit margins. Joint ventures are not as easy to manage as we are talking about. Sometimes companies are forced to follow a joint venture strategy because of the host country's business regulations. For example China does not allow outside company to own a majority of domestic business. Mexico requires the companies for any foreign company which is operating in the country to have a joint venture with a domestic company. In addition to government regulations, other reasons for multinational joint ventures as mentioned above are cutting the costs of doing business, sharing risks with acquiring technological information and management expertise from other companies.
Kogut (1988) gave 3 different reasons for the existence of joint ventures. They were:
Transaction cost approach: The cost aspect of a transaction in joint ventures helps in explaining joint ventures in terms of market failure for intermediate inputs in the production, various asset specificity, and high uncertainty over specifying and monitoring performance. As inspired by Penrose's (1959) work, it is specified and shown in recent development in management research that to one should analyze and develop a firm's strategy by focusing on its resources instead of the external environment. Two key behavioural assumptions of TC theory are opportunism and bounded rationality (Williamson 1991a). The transaction theory suggests that if firms with complementary resources try to produce individually then they will have to fight for the scarce resources and acquire them at greater cost. Another major motive behind joint venturing is the possibility of creating Ricardian rents. A Ricardian rent means the presence of scarce resources which generate higher profits than other resources of the same type.
Always on Time
Marked to Standard
Strategic behaviour approach: A joint venture addresses the difficulties faced by the organisation by providing a superior alignment of incentives through the mutual dedication of resources and by sharing the residual value of the venture. Joint venture is established in a spirit of mutual trust and commitment to its long-term success, the potential threats posed by opportunism and a small-numbers condition can be reduced.
Organisational learning approach: Joint Ventures help in organisation learning Williamson (1991b) extends his analysis to strategic alliances, which is said to have the hybrid mode of governance, which are considered to occupy positions between the two ends of the market-hierarchy continuum. These hybrids in joint ventures are said to have stronger incentives and adaptive capabilities than hierarchies, which helps in providing more administrative control than markets. In global industries with globalisation there is higher need for organisational learning. This asks the firm manager to look for global efficiency, which later plays an important role in resource based theory. In a joint-venture setting, there is interaction and communication between the members of different firms. This information flow increases the boundary permeability with respect to the partners' resources. This helps in offering an opportunity for learning. A popular example of this is Toyota--GM joint venture, in which both partners had clear learning objectives (Adler and Cole 1993).
Another use of joint ventures is to get rid of a business unit, that is, disposal of resources. Nanda and Williamson (1995) have argued that converting the business unit into a joint venture between the parent and buyer helps in selling of the unit. The joint venture operates for several years during which buyer learn about the operations of the unit is going to acquire and slowly resources will be integrated with those of the buyer. By initially running the business as a joint venture, the buyer in benefit of obtaining hands-on management experience and an insider's s view of its operation. Seller also has interest to teach the skill and tricks to buyer of business, since the price that the buyer is willing to pay when buying out the business depends on the joint venture's performance.
Firms often go for the local partners in the domestic market in which they want to mark a presence, these are because of the following reasons:
Items readily capitalised
Human resource needs
Government regulations and incentives
Market access needs and speed of entry
Knowledge needs and learning of new marketing methods
A joint venture is formed only when all the organizations involved individually arrive at a positive net benefit calculation. For example, one partner considers the joint venture as an opportunity for learning a new technology while the other uses the venture to further exploit the technology. When two firms have had a great deal of experience of working together, they get to know more about one another's culture and management style, and adjust their own accordingly thus the two firms are in a better position to explore collaborative opportunities compared to other firms which don't form any alliance with other firms. This all leads to identify ways of complementing joint venture their resources effectively for creating rents. This involves the proper analysis of costs involved in different companies. For example If there exist two oil companies which want to set up a new drilling platform in ocean areas, and neither one has capability to finance the project on its own, so the simple solution to them is to look for joint venture. That way, they share the costs of setup of drilling platform and other projects which later helps them in reducing their individual risk should they find no oil. That is a decided advantage to many business people.
A complete study of operation, management and finance has to be done to successfully implement the joint venture. Joint ventures are quite helpful to some companies in gaining access to foreign markets. Sometimes both the firms forget the primary objective of their operation and just form joint venture to come into foreign market. These products bring in the foreign domestic investments in the host country through the firm with which joint venture is formed. So many governments give incentives for joint ventures.
This Essay is
a Student's Work
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.Examples of our work
Joint ventures are a sometimes used to boost up the creeping sale. This can be the first step in acquisition of a business. It can also be used to act as catalyst for change, which is by bringing in a partner one, can stimulate more entrepreneurial activity in a particular area of a firm's business. Joint venture also helps in expansion of customer base by expanding the scope and utilising other firm's strength in different geographic market, using its distribution or sales network
International joint ventures have also been pushed by international financial institutions such as the International Monetary Fund, the World Bank, and the World Trade Organization, who have given incentives by forming policies to eliminate trade barriers and deregulate foreign ownership restrictions and the international flow of capital. This helped in creating a climate in which international investment and partnerships have become increasingly attractive. In new scenario joint ventures have become means by which companies seek to expand profit margins and market share. In addition, regional trade areas such as the North American Free Trade Agreement (NAFTA), the European Union (EU), and the Association of South and East Asian Nations (ASEAN) have worked to establish favourable conditions for joint ventures within specific, relatively localized regions.
Why Renault entered into joint venture with Mahindra & Mahindra?
As told by the CEO of Renault Mr. Carlos Ghosn this joint venture was seen to be useful to mark a new step in Renault's global expansion strategy. The joint venture has started the Renault operation in the Indian market which is highly emerging market with respect to automotive sector. As Renault had no experience with the needs of Indian customer joint venture with M&M was seen to help to create the first right hand drive version of Logan created to meet the needs of our Indian customers. Renault was also eyeing to mark its presence in Indian market in short period of time, Mahindra and Mahindra gave them that adequate platform.
In the beginning of 2005 Renault designers visualized a low-cost car that was to retail for under Euro 5000. The car had quite good features however it looked robust and trustworthy compared to the sleek beauties manufactured by the Japanese and the Koreans. The car became a big hit and enjoyed pampering from buyers in most parts of Europe. Europeans liked the car's no-frill appeal. Renault thought of entering into Indian market, when it analysed the companies it sought upon Mahindra and Mahindra which was the main force behind the Tata Group. Mahindra and Mahindra helped Tata Motors for over ten years helping them build the modern day passenger vehicle. Mahindra also in seeing the future prospects of snatching the opportunity and mark its presence in Indian market started working in unison with Renault and started building and selling the Logan in India.
Both Mahindra and Renault shared the profit of gaining knowledge and expertise. M&M would get all important expertise needed to build monocoque or unitary construction. Renault, on the other hand, would gain direct knowledge of the cost-effective supplier base that Mahindra enjoyed in India. A labour-intensive car plant was established as against a fully automated one to analyze the quality and cost-effective work force available in India. The two groups concluded a framework agreement for setting up a joint venture in India with Mahindra retaining a 51 per cent share and Renault 49 per cent. The JV will be called Mahindra Renault Ltd. The estimated project amount was 125 million Euros. With other European automotive counterparties like Fiat and Skoda had little presence this venture was also seen a major competition to them.
Mahindra did a customer research in Logan segment and found strong response for this C-segment car. Renault was looking for major global expansion; along with India it was also starting its operations in Romania, Russia, Morocco, Colombia and Iran. Renault was looking for a long term relationship with Mahindra and Mahindra and was looking for greater prospects in coming years of 2010 to 2012. Renault chose Mahindra and Mahindra because of the following reasons:
Mahindra Group a US $ 2.5 billion company is the market leader in multi-utility vehicles and tractors in India.
Mahindra and Mahindra had 55 years of manufacturing experience
M&M had built its high network of distributors and suppliers in India efficiently
Mahindra group had built a strong base in technology, engineering, marketing and finance (Mahindra intertrade and M&M financial services Ltd.). It also has a significant presence in key sectors of the Indian economy
High presence in automotive components, information technology & telecom (Mahindra British Telecom), and infrastructure development (Mahindra GESCO, Mahindra Holidays & Resorts India Ltd.)
Mahindra had a reputation of providing TATA Motors the platform to harness the automotive growth in India
M&M had not much presence in Sedan segment i.e. C-segment so Renault had no fears of having conflicts of interest
Mahindra as a brand was a trusted brand in India.
With the leverage of Mahindra as a brand Renault was also leveraging its own brand in Logan, as the joint venture was called Mahindra-Renault
The transfer of knowledge and technology was mutually beneficial for Renault and Mahindra, it was good symbiotic relationship
Risk and Problem Associated with International Joint Ventures
Joint ventures between the International Company and the domestic company offer lot of benefits for both the sides. The local company brings with it, the knowledge about the local conditions, managing the bureaucracies, and available manufacturing facilities. Likewise, the international company offers advanced technologies, management capabilities and access to other markets. Also for both the local and the international companies, it reduces the capital investment that they would have to make, if they decide to go alone. Both the local and the international company can benefit from each other by taking advantage of the comparative offering offered by either of them.
Though the Joint ventures seem to offer advantage to both the local as well as the international company, it frequently fails to perform or the performance seems to be unsatisfactory for most of the time. Lot of studies indicates that large percentage of Joint ventures performs very poorly. There are lot of factors that contribute to this unsatisfactory performance.
Agreement between the negotiating companies is very critical for the successful Joint ventures. It requires both the companies to willfully cooperate among themselves to reach a satisfied agreement. Studies indicate that negotiating the agreement takes lot of time to reach a solution but the ultimate satisfaction of the Joint venture operation lies only to a very lesser extent on the agreement negotiated.
There are two issues that are very critical for Joint venture negotiation. Equity structure is the first issue and is often the most difficult of the problems to come to a conclusion. Most often companies do not want to share or surrender the control of the organizations and in some cases even if the majority ownership is achieved, it does not necessarily confer all the control rights to all the aspects of the Joint venture operations.
The second issue is about the technology transfer from one company to the Joint venture operations. There are lot of critical factors that govern the technology transfer issue, right from what and how much of the technical knowhow should be transferred to who will have the rights to the derived technology when it is developed. There are also issues relating to royalty fees especially when the technology loses its value in the market.
Both the local as well as the international company bring financial and other assets to the Joint venture operations and it is very difficult to calculate the true value of these assets. Also some company might not have issued any shares issued and trading and in this case it becomes particularly difficult to value the assets brought in by these companies. The value of the technology brought in by the companies is also difficult to measure and value as its true worth cannot be established until it reaches the market.
Data transparency between the companies is also very difficult to achieve during the stages of negotiation. If the accounting standards of both the companies are different, it will be very difficult to base the calculation of the assets.
Conflicts between the companies forming the Joint venture are inevitable. Sometimes the conflict can be so high that one company might try to dissolve the joint venture itself. Hence it is very important that some sort of mechanism is established for conflict resolution in the initial stage of formation of Joint venture itself.
The chance of failure of Joint venture in which the parent companies try to manage all the aspect of the joint venture operations is high. The Joint venture's management should be separated from the parent companies and the critical decisions needs to be best left to the management of the Joint ventures.
The Joint venture ownership structure is one critically argued point, and it affects who and how much one controls the Joint venture. The structure can be used to gain the control of the Joint venture and as such the one parent company needs to be wary of giving too much ownership to other company with whom they are trying to forge a partnership.
Marketing and the control of the distribution is also critical functionality in the Joint venture which the local company would like to have its control undiluted to have say in the operation of the Joint venture. It might also be the issue which the international company would like to gradually bring under its control to gain knowledge about the local condition and reduce its reliability with the local company. Hence there is a potential conflict between the goal of the local company and the international company which may lead to further difficulties in the operation of the Joint venture.
International organization usually tends to have lot of joint ventures with the domestic companies and even though the domestic companies are big as per the local market but usually they will be dwarfed by the size of the international organization. The international company's objective will be very different from the objective of the local companies and the international company would like to see the Joint ventures operate as per their global perspective whereas the domestic company would like it to operate as per the local needs. This different perspective leads to lot of problems in the Joint venture
Right to export:
International companies that have presence in lot of markets would like to limit the export capability of the Joint ventures to the countries they already serve. Allowing the Joint ventures to expand to other countries can cannibalize the existing market of the international companies in countries they already doing business with the similar products or technologies. The domestic company would like to expand to other markets through the Joint ventures for their other products. Hence there is potential for conflict in this situation.
The Joint ventures can be significantly affected by the tax saving objective of the international companies. The international organization tends set objective to minimize the global tax burden. This can have its effect felt especially in Joint ventures, where the domestic company import raw materials or technology from the international company and use the international company to export its finished goods. In order to reduce the overall tax effects international company tend to manipulate its transfer prices, and which might affect the profitability of the local company.
International organization tends to increase its overall profitability and the growth and hence prefer to get the dividends from the Joint ventures rather than reinvest in the same Joint venture itself. They can use this dividend to invest in the companies that will give them the maximum return. But the domestic companies would like to reinvest in the same Joint venture to grow and expand.
Size of companies:
Size of companies has an important role to play in the way the Joint ventures are operating. The international organization tends to be larger than the domestic companies and they would want to infuse large capital for the rapid expansion of the Joint ventures, which the domestic companies would not be able to support. The international organization tends to have lot of joint ventures and hence might not give much attention to a specific Joint venture whereas for the domestic companies, the Joint ventures are critical.
The change in ownership of both the domestic as well as the international companies can affect the Joint venture. This is specially the case when the Joint venture formation is an initiative of the management which got changed. As the attitude of the new management tends to be very different from the earlier management, problems tend to rise.
The interest of domestic as well as the international company varies over the period of time and their attitude towards the changing market conditions and hence one might want to continue and expand the current product whereas the other might want to remove the product.
The cheaper raw material and better technology could become available locally, but the international company would want to continue with their supply and hence the Joint venture might become non competitive.
The company which gives technology input, usually the international organization, would want to withhold critical technological solution, which again reduces the competitiveness of the Joint ventures or at the least reduces the profitability of the Joint venture.
International Joint ventures are formed by the companies from different countries that have varies in their cultures significantly. Local and domestic companies might perceive things differently than what is meant and this gives rise to lot of problems. For example, corruption can be widely prevalent in one country and the company that forms Joint venture with the company from this particular country can view this as unacceptable.
The relationship governing the Joint venture changes over time as the market conditions and the organizations learns. For example, the international companies tend to learn more about the local conditions and might increase the control in the Joint venture. The changes in the technology might increase the control of the local company at the cost of the international company. The change in the market condition might require heavy capital infusion to maintain the competitiveness of the international organization and the partners might take different view on this matter. Hence the relationship is always dynamic in the Joint Venture
The rigid legality enforced during the formation of the Joint ventures might also lead to problem when the market condition changes. For example, if the agreement spells that the international organization will buy a percentage of the product produced by the Joint venture, and when the market condition changes, making the international organization uncompetitive in other markets due this buying behavior, this will lead to lot of problems. The renegotiation tends to be longer, the more rigid the agreement is.
Mahindra - Renault Joint Venture- Reasons for Failure
Renault entered in to series of Joint venture with Indian domestic players like Ashok Leyland, Bajaj and also with Nissan. Renault tried to have different Joint ventures with different companies for different car markets. Hence the trust between the Mahindra and Renault was not high giving rise to lot of problems.
Marketing and Distribution:
Logan was promoted using the distribution channel owned by the Mahindra and since the trust was not there, it was never fully promoted or positioned properly by Mahindra. Logan was distributed using the 100 distributers all over the country and the feedbacks from the customers, never really reached the MRPL factory located in Nashik.
Mahindra - Renault Joint venture launched Logan in to the Indian market, and positioned it as midsized car. But there was very high competition in this market both from the domestic players as well as from International players such as Toyota, Honda etc. There were no differentiating factors from the midsized cars of these companies and the price was higher than that of these competitors. Hence the Joint venture was not able to create kind of sales target it was aiming to achieve.
At the time of launching Logan, Mahindra and Renault was expecting to achieve a target of around 30000 units per year, which is about 2500 cars per month. But the actual figure was about 500 units per month.
Logan had about fifty percentage of components sourced within India, which is much lesser than that of the competitors. This is much higher than that of the competitors. Also the engine was brought from the Renault factory in France, which added to the price pressure. These factors gave very little leeway for the Mahindra - Renault to competitively price the Logan. High Import duty in India also increased the price of Logan considerably.
Logan suffered heavily because of the tax structure in India. The excise duty in India was 10% for the car sized up to 4 meters and 22% for car sized greater than 4 meters. Logan was sized about 4.24 meters and hence it led to Joint venture paying high duty. This also increased the price of the Logan considerably making in uncompetitive in the segment they were competing.
MANAGEMENT STRATEGIES FOR INTERNATIONAL JOINT VENTURES
Having seen the reasons for which the firms go for a joint venture and the difficulties they face in such a strategy, we will now discuss some essential management strategies that will result in the required successful performance.
As seen in the above figure there are some steps which are very essential in the JV management process. The first step and the second have already been discussed in detail in the previous sections. We also restrict the theoretical discussion of management of JVs to HRM because of the marked difference of the HR practices.
NEGOTIATING THE TERMS OF THE CONTRACT
Even if the Joint Venture achieves its targets which it had set out to achieve, both the parents might not be equally excited about the result. The main reason for this is that one company gets a better deal at the expense of the other during the JV formation stage itself. This might lead to discontent in the losing company and the JV might be in jeopardy. To avoid this, parent companies should take extra care when it comes to negotiating contracts in International Joint ventures.
Many practitioners follow a NPV approach in valuing the Joint venture. That way the benefit to each parent company from the joint venture is known and they can negotiate the terms of contract. But in spite of successful valuation of JVs they fail. The reason is the lack of emphasis on social contracts. Social contracts refer to the expectations of the companies regarding the nature, extent and the interactional features of the agreement. So, the companies should zero in on the economic and social contracts at the negotiating table itself and get a fair deal in the valuation process.
CONTROL OF IJVs
International Joint Ventures are set up with an agreement which both the parties agree to follow. So IJVs are built on the premise of trust and commitment. But due to the unreliable nature of most businesses no firm can realistically expect JVs to be ideal models. So there is an element of control that is required to monitor whether the individual companies are following their part of the agreement whole-heartedly. These control measures, if present, will also stop the companies from deviating from their agreed stands.
The Control of an International joint venture can be done through various control mechanisms. One of the most effective control mechanisms is equity ownership. The contract specifies the exact amount of equity share in both the partner's hands. Minority ventures are more problematic when compared to 50-50 ventures because of lack of commitment from the minority stakeholder. Also, the local government may use some regulatory measures to increase the share of the local parent company. Hence both the companies should take care of all these concerns before entering into a JV. In addition to the equity ownership control mechanism there are lots of other methods through which control could be exercised like the right to veto, each company's presence in the JV board of directors and technology special arrangements. Experts also differentiate the control mechanisms based on the effects they bring about on the company. Positive control mechanisms promote the IJV whereas a negative control mechanism stops it from deviating from the expected performance.
In addition to the mechanisms of control, there are also concepts like control extent and control focus. Control extent refers to the length of control that the IJV's control mechanism has, whereas control focus refers to the breadth. JVs might try their hands at shared control- wherein they form a joint managerial team from both the parent companies and then they take care of all the managerial functions. Split control refers to each company wholly managing only that part of the business which is its core competency. This is much better in terms of managerial efficiency. Only trade-off is that if the companies had entered into JV with an aim of acquiring the local company's knowledge base, then it would not achieve that because the local company would be working alone on its strong areas.
HR MANAGEMENT IN IJVs
International Joint Ventures face many challenges on the human resources front because of the cultural difference in the workforce and the complex organisational structure. The IJV will have to formulate a formal set of HR policies with which it is planning to operate. The trade unions and regulatory environment of the planed location should also be kept in mind when designing a formal HR policy.
There are many HR strategies which could be used to overcome these difficulties. In most of the IJVs the host country company takes care of the staffing. This is because it is more aware of the labour market and the regulations present in the country. If the host country is a developing country, then there is always the advantage of low cost labour (as is evident in the case of India where labour costs are considerably low).
But one main reason why IJVs are formed is to facilitate learning between the 2 companies. So, if all the employees of an IJV are employed by the host company then it is almost impossible to transfer tacit knowledge to the foreign partner. In order that the foreign partner doesn't lose out on the learning part, companies can use HR practices like on-site trips, use of expatriate managers etc. The second strategy is especially of great value to the companies. The expatriate managers know both the countries well and will be loyal to the parent company. If some inherent shortcomings with such a strategy, like high compensation cost, are overcome then it is a must-have strategy for IJVs.
The HR practices should also depend on the cultural differences of the host country. This is highlighted using the following points in which Hofstede's cultural dimensions are used.
If the power distance in the location is high, then the HR strategy totally depends on the boss. Everything is decided by the top management and there is just a one way communication to the employee. Here, HR strategies are not that important as the employee will not question the higher authorities so easily. Similarly, if the individualism is low then HR practices should focus on group oriented working, appraising and compensating. Uncertainty avoidance, if high, demands clear job descriptions, clear consistent pay structure and clear career paths. Masculinity will also have an impact on the strategy to be adopted. Highly masculine cultures are always up for challenge and for taking risk. So the company needs to formulate the HR structure keeping all these in mind.
Renault-Mahindra JV has been the latest in the long line of JV failures. The major reason why it failed is because of inflexibility. Both the parent companies were sticking to their stands without relenting. M&M wanted Renault to allow it to customise the product to suit the Indian market. But Renault was not willing to modify Logan and wanted to sell the same global product. To take one issue to illustrate, Logan's length is 4.2 metres which makes it subject to 20% tax which could have been drastically reduced if the length was made slightly smaller and hence the price would have come down significantly. All these point to the fact that if the negotiations were done perfectly before the JV formation, this mishap could have been avoided. M&M would have known about all these issues due to its knowledge of the local market and even then it let Renault to take a hard stand. So for the success of any Joint Venture, negotiation stage is very important where all the competencies of both the players should be discussed and leveraged while forming the JV.
One more issue regarding Renault is partner selection. It has apparently put a lot of thought into this issue because it has come up with 3 different JVs with 3 big Indian companies M&M, Bajaj and Ashok Leyland. But this only makes it more complex and Renault has to devote most of its time in negotiating with and monitoring its JV partners. A better strategy for success would have been a comprehensive JV with a single partner who has expertise in all the three segments that Renault wanted to cater to. The Indian market definitely has big players like M&M itself and Tata motors. So partner selection is very vital for the success of Renault in India or any JV in general.
Renault also has an international venture with Nissan wherein Renault owns 44% of Nissan's shares and Nissan owns 15% of Renault's. This international JV is applicable in India also. Renault and Nissan both a considerable presence in India now and they follow completely different strategies. Nissan has come up with its own 1.5 lakh low-cost car whereas Renault has been struggling with the JVs. "Uniformity is not part of the alliance's objective; the idea is to leverage each other's presence and strengths. That is the best way forward, in my view, to get the best performance," said Mr Carlos Ghosn, Chairman and Chief Executive Officer of Renault-Nissan. So, the three party agreement between Renault, Nissan and Bajaj needs extra caution on the part of Renault as multiple partner agreements are inherently complex.
Coming to the way forward for Renault, it has to do a radical rethink of its strategies. M&M is all set to take over Renault's 49% stake in Mahindra-Renault and so Renault should think of other avenues. It has been expanding its dealer network rapidly setting a target of 150 new dealers in the next 30 months. It has to leverage its JV with the existing local players and get sufficient local knowledge in order to be a standalone successful player in the future.