Project Organisation

by Amit Agarwal

By Amit Agarwal
 Forms of Organising
► Joint Venture
► Alliance
► Licensing
► Contract Manufacturing
► Franchisee
► Royalty

By Amit Agarwal
JV

By Amit Agarwal
 JV

Entity formed between two or more parties to
undertake project .

Parties contribute equity , share in revenues ,
expenses , & control .

Venture for a specific project only, or continuing
business relationship ( e.g. Sony Ericson)

May be company or limited liability partnership or
trust or other depending on considerations such as
tax, financial or tort liability sharing etc.

By Amit Agarwal
 JV types
► Equity JV
 New entity where parties contribute equity
capital
 shares of existing company distributed to
others.
► Contractual JV
 No new entity
e.g. A & B enter into contractual relationship to
perform a specific job for third party C
By Amit Agarwal
 Reasons for JV
► Internal :
 To Build on company's strengths; new businesses & contacts
 Spreading risks;
 Economies of Scale, advantages of size;
 Access to new technologies, Skill sets, and customers ;
► Competitive goals :
 Pre-empting competition ;
 Creation of stronger competitive units ;
 Speed to penetrate market ; Improved agility ;
► Strategic :
 Legal requirements
 Diversification , business in unknown locations & systems,
 Reduce inefficiencies & costs (associated with multiple sub-contracts)
 Enhance time, cost performance
By Amit Agarwal
 Laws for JV in India
► No separate laws for joint ventures in India.
► Companies incorporated in India, even with
up to 100% foreign equity, are treated the
same as domestic companies.

By Amit Agarwal
 Demerits of JV
► Under-performance of Partner
► Demands higher efforts in coordination
► Trust – crucial factor
► Dispute resolution is tedious / costly
► Overseas – Local partner very demanding

By Amit Agarwal
JV agreement – necessary contents

► Applicable law.
► Shares : Holding , Transfer
► Management : Board of Directors, General meeting.,
CEO/MD ,Management Committee
► Dividend policy
► Funding
► Change of control
► Non-Competition, Confidentiality, Indemnity to other party
► Dispute resolution agreement
► Termination.

By Amit Agarwal
Alliance

By Amit Agarwal
 Alliance
► Association ( collaboration) formed for
furtherance of common interest & aims of
participating parties
 share resources, technologies,
 supplement each others capabilities to gain
competitive advantage.
► Primarily based on trust & commitment

By Amit Agarwal
 Alliance contd.
► involves no equity stake by participants, no new
entity, much less rigid arrangement.
► For One-off activity or just one part of a business
or developing a new products jointly for a
particular market.
► Firms retain independence & may not be formal JV

By Amit Agarwal
 Activities under Alliance

► DESIGN CONTRACTS
► JOINT PRODUCT DEVELOPMENT
► PURCHASING AGREEMENTS
► DISTRIBUTION AGREEMENTS
► MARKETING & PROMOTIONAL
COLLABORATION
► Intellectual advice

By Amit Agarwal
 Advantages

► Leveraging firm’s strength

► Risk sharing
► explore new opportunities, expand
overseas.
► Allows smaller companies grow - marrying
A’s product to B’s distribution set up ; C’s
R&D to D’s production skills.
► Enhances ability to respond quickly to
change & grab opportunity.
By Amit Agarwal
 Consortium
( Latin word : partnership or
association)

By Amit Agarwal
 Consortium
► Association of two or more individuals, companies,
organizations or governments
► Objective : participating in a common activity or
pooling their resources for achieving a common
goal.
► May not be a full fledged JV
► India : a Pre JV structure

By Amit Agarwal
 Consortium Contd
► Example ( Non JV Consortium ) : Airbus Industrie

► Airbus is owned by EADS. EADS itself is a merger

of Aérospatiale-Matra of France, Daimler-Chrysler
Aerospace of Germany, and Construcciones
Aeronáuticas of Spain, which were originally
separate partners in the consortium, owning
37.9%, 37.9%, and 4.2%, respectively. BAE
Systems owned the remaining 20% but sold this in
2006.
► Profits accrue to the partner companies
representative to their interests.
By Amit Agarwal
 Consortium Structure
► Consortium agreement outlines
 Members rights and obligations,
 ownership of existing and newly created assets
 arrangements for operational, technical and
financial management.

By Amit Agarwal
SPV

By Amit Agarwal
 SPV
► Entity formed for a
 single & Specific ,
 well defined purpose

► Entityseparate from the sponsors – usually

a limited company.

By Amit Agarwal
 SPV
► Advantage to sponsors :
 raise capital from market,
 risk protection ,
 possibility of securitising future receivables

► Advantage to lenders :
 conveniently control cashflows for repayment,
 risk of sponsors not spilled over
By Amit Agarwal
 Organising
► Comprehensive association
 Forming separate entity
►JV : as SPV or GENERAL
 not forming separate entity
►Alliances
►Consortium

► Limited association
 Licensing, Contract Manufacturing, Franchising,
Royalties
By Amit Agarwal
Matrix Organisation

By Amit Agarwal
Project Oriented Orgn

By Amit Agarwal
 Project Organising
► basic approaches
► Separation of organizations. Numerous organizations serve as
consultants or contractors to the owner, with different organizations
handling design and construction functions. Typical examples which
involve different degrees of separation are:
 Traditional sequence of design and construction
 Professional construction management
► Integration of organizations. A single or joint venture consisting of
a number of organizations with a single command undertakes both
design and construction functions. Two extremes may be cited as
examples:
 Owner-builder operation in which all work will be handled in house by
force account.
 Turnkey operation in which all work is contracted to a vendor which is
responsible for delivering the completed project

By Amit Agarwal