Assignment

Project Planning Appraisal and Financing(404)

Consulair Case Study

Q. You are examining proposals made by two German and one French company. Which one
would you choose and what factors would you keep in mind while making the decision?
About the Company : A small plastics company based out of Chicago. The organizational structure
is positive and strong. They are looking for an opportunity to create a joint venture(JV) with an
European petroleum company. The plastics company is hoping to develop and market industrial
paint to the eastern European economies over a time period of 5 years through the JV.
Details of the proposal for joint venture :
Company Oskar Broe PGM Petrol Fargen Gas
Country Germany Germany France
Employees 18000 300 300
Management Style Participatory Hierarchical Patriarchal
Previous IJV Wide experience in Some experience in Some experience in
History East Asia the USA and eastern western Europe
Europe
Proposed time scale Five years Five years Four years

From the given case study, we get the following important points while considering international
joint venture
• Trust : It very important that both the partners should have trust in each other capability
and they must not get influenced by any other person.

• Goal : Both the partners must understand the objective of venture and ready to make best
efforts to achieve their target.

• Due diligence : Before entering an international joint venture, it is necessary to do due

diligence on the country, the business and the partner. It will help to make better profit and
mitigate risk. Understanding the market conditions and previous experience of target
market is very important since it helps in forecasting the demand and supply of the
product.

• Staffing a Venture : Managers of international joint ventures may not only have
communication problems but they may also have different attitude toward time, the
 importance of job performance and the desirability of change. Hence they must be ready
understand each other culture.

• Management Style : The managers should have the power to take independent decisions
and the superior management team must be easy to approach

• Operational clarity: Each department must have specific task and it must not be confused
by anyone.

• Entrepreneurial : The partners, managers and workers must be ready to take new
challenges since starting new ventures has lots of new problems and must upgrade their
skills.

• Managerial commitment: They must be ready to solve the problems of workers whenever
needed.

Analysis
Management Style : The work culture of the plastic company is positive and strong.
Fargen Gas: Patriarchal management style which is autocratic in nature. It means the employees
are not allowed to participate in important decisions affecting the company. The person responsible
for making decisions is the only individual in charge. And hence dealing with them leads hindrance
and effects the efficiency of the venture.
PGM Petrol : Hierarchical management style. This management style is mostly found in Germany.
The managers are independent to take the decisions and the higher authority people are ready to
discussions the challenges. One of the most suitable style to deal.
Oskar Broe : Participatory management style. Here managers asks for input from team members
and considers all opinions to find workable solutions to business problems. But this management
style is not suitable with large number of employees as it increases the time for decision making
and reduces the efficiency.
Previous IJV : Out of the three proposals, PGM Petrol has the most and diverse experience in
International Joint Venture. PGM Petrol has experience in the USA and eastern Europe. And hence
PGM Petrol has the maximum knowledge about the market condition of eastern Europe which is
the targeted market
Proposed Time scale : Oskar Broe and PGM Petrol both matches with the time requirement.
Business size : Plastic company is a medium size enterprise . Fargen gas and PGM Petrol both are
medium size enterprise whereas Oskar Broe is a large size enterprise. In many cases partnering
with similar size enterprise is favorable. Large size enterprise sometimes try to dominant the
companies which are small in size.
Conclusion
From the above analysis, PGM Petrol is most suitable for international joint venture with plastics
company
Both have a similar working culture and can work as a strong team. Hierarchical management style
will reduces the gap between the managers and superior management team. It will allow for
restrictions on capital investment and production processes will get more efficient.
PGM Petrol previous joint venture will help in increasing the productive of the business and helps
in achieving their goal. Their understanding of the market will help in forecasting and analysis the
demand and supply. It matches with the plastic company time scale requirement.
Venturing with similar business size companies have similar business challenges and hence they
can understand each other and can solve the challenges more effectively.

Submitted by:
Name :RAJAN BAA
Roll no : 3257
MBA (FM) Part II
Department of Financial Studies,
Delhi University