Part 2 How to Form a Profitable Joint Venture

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Friends or More than Friends

Valentines day  is nearly upon us and so the question has to asked whether joint venture partners need to be friends or more than friends.

Whether you are a fan of Coca-Coca or prefer a Pepsi, it’s not hard to see that the Pepsi Company (PepsiCo) has thrown their faith in the joint venture direction. The soda giant is in a joint venture with Unilever (think Lipton). According to their website, this ready-to-drink joint venture enables them to expand their drink options to consumers. The same is true of their joint venture with Starbucks. In a September 27, 2007 press release, Gerry Lopez, Starbucks Global Consumer Products Group president, shared why this joint venture was a win-win. “With our coffee expertise and PepsiCo’s extensive sales and distribution network, this joint venture will allow us to provide an authentic Starbucks coffee experience to millions more consumers around the world anytime and anywhere they want it. This could include countries that may not currently have a Starbucks store.” Not to put too fine a point on this, the greatest strength PepsiCo brings to this venture is their sales and distribution; including in areas where Starbucks is not available. As for Starbucks, they bring to the arrangement their substantial coffee expertise and even branding in the coffee beverage industry that PepsiCo does not have.

World Class Joint Venture

Three writers collaborated on an article in Harvard Business Review in January 2004. Titled, “Launching a World Class Joint Venture,” the article started out by indicating that in the prior five years over 5,000 joint ventures had launched across the globe. They indicated that in 1991 they did research and found that about 50% of joint ventures were successful. They reported that when they assessed this data again in 2001, the rate was slightly higher at 53%. The article details some ideas for successful launching of a joint venture; including aligning the partners’ interests around the joint venture’s objectives upfront and specifying first year goals.

Taking Action to Pre-empt Failure

Amongst other things, this article outlines how joint ventures should behave; including taking action steps to pre-empt failure. The writers also hold the idea that joint ventures should be entered into judiciously. The triad of writers include these words, “Some managers avoid or overlook the JV option because they aren’t sure at what point the advantages outweigh the complexities. Yet some companies have developed a core competency in alliances and pursue JVs over and over again with good results.”

Future Plans

Join us on Tuesday 10th February for the final part of: How to Form a Profitable Joint Venture.

Foodie Insights

Just to let you know that the February foodie photos as featured in our Food Resource Gallery will be out on Friday 6th February.