CHAPTER:-1 INTRODUCTION

A Joint Venture is a legal organization that takes the form of a short term partnership in which

the persons jointly undertake a transaction for mutual profit. Generally each person contributes

assets and share risks. Like a partnership, joint ventures can involve any type of business

transaction and the “persons” involved can be individuals, groups of individuals, companies, or

corporations. Joint ventures are widely used by companies to gain entrance into foreign markets.

Foreign companies form joint ventures with domestic companies already present in markets the

foreign companies would like to enter. The foreign companies generally bring new technologies

and business practices into the joint venture, while the domestic companies already have the

relationships, existing markets and requisite governmental documents within the country along

with being entrenched in the domestic industry. Joint Ventures are possible at private level,

public sector level and also at government level. The intension of entering into joint venture is to

undertake large industrial projects involving huge capital investment with the co-operation of

reputed companies from abroad.

A temporary kind of business activity carried on by more than on individual with a view to

earning profit in a pre-agreed manner without giving a firm name to the business is known as

joint venture. It is a temporary partnership between two or more persons for completing a

particular adventure. The relationship between them is ceased as soon as that particular venture

is completed.

The persons who enter into the joint venture agreement are called co-ventures. The joint venture

agreement will be automatically terminated after completing the venture. The profits or losses

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are shared between the co-ventures according to their pre-agreed agreement. In the absence of

agreement, the profits or losses are shared equally among themselves

When two or more persons join together to carry out a specific business venture and share the

profits on an agreed basis it is called a 'joint venture'. Each one of them who join as a party to the

joint venture is called 'Co-Venture'. No firm name is normally used for the joint venture business

because its duration is limited to a short period. During this period, the co-ventures are free to

carry on their own business as usual, unless agreed otherwise. The business relationship amongst

the co-venture comes to an end as soon as the venture is completed. Thus, a joint venture is some

kind of a temporary partnership between two or more persons who have agreed to jointly carry

out specific venture. The joint ventures are quite common in construction business, consignment,

sale and purchase of property, underwriting of shares and debentures, etc. For example, A and B

agreed to construct a college building for which they pooled their resources and skill. A

proveded Rs. 6 laky and B Rs. 4 laky as capital. They completed the building and shared the

profits in the ration of their contributions to capital. In this example, joining hands by A and B to

construct a building is a joint venture. A and B are co-ventures. They will share the profits in the

ration of 6 and 6 (same as the ratio of their capitals).

There are many good business and accounting reasons to participate in a Joint Venture (often

shortened JV). Partnering with a business that has complementary abilities and resources, such as

finance, distribution channels, or technology, make good sense. These are just some of the

reasons partnerships formed by joint venture are becoming increasingly popular.

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A joint venture is a strategic alliance between two or more individuals or entities to engage in a

specific project or undertaking. Partnerships and joint ventures can be similar but in fact can

have significantly different implications for those involved. A partnership usually involves a

continuing, long-term business relationship, whereas a joint venture is based on a single business

project.

Parties enter Joint Ventures to gain individual benefits, usually a share of the project objective.

This may be to develop a product or intellectual property rather than joint or collective profits, as

is the case with a general or limited partnership.

A joint venture, like a general partnership is not a separate legal entity. Revenues, expenses and

asset ownership usually flow through the joint venture to the participants, since the joint venture

itself has no legal status. Once the Joint venture has met its goals the entity ceases to exist.

A written Joint Venture Agreement should cover:

 The parties involved

 The objectives of the joint venture

 Financial contributions you will each make whether you will transfer any assets or

employees to the joint venture

 Intellectual property developed by the participants in the joint venture

 Day to day management of finances, responsibilities and processes to be followed.

 Dispute resolution, how any disagreements between the parties will be resolved

 How if necessary the joint venture can be terminated.

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  The use of confidentiality or non-disclosure agreements is also recommended to protect

the parties when disclosing sensitive commercial secrets or confidential information. 

From the above the essential features of a joint venture can be listed as follows:

1. It is formed by two or more persons.

2. The purpose is to execute a particular venture or project

3. No specific firm name is used for the joint venture business.

4. It is of a temporary nature. Hence, the agreement regarding the venture automatically stand

terminated as soon as the venture is completed.

5. The co-ventures share profit and loss in the agreed ratio. However, in the absence any other

agreement between the co-ventures, the profits and loss are to be shared equally.

6. During the tenure of joint venture, the co-ventures are free to continue with their own

business unless agreed otherwise.

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 CHAPTER:-2ADVANTAGES AND DISADVANTAGES OF JOINT

VENTURE

When two or more business join together to carry out a business by providing expertise and

resources, it is called a joint venture. The risk and rewards are shared as per the proportion of the

investment by the parties concerned.

The main advantages of a joint venture are:

1. more resources: since two or more firms join together to form a joint venture, there is

availability of increased capital and other resources.

2. Access to new markets: by engaging with a foreign collaborator, the products and services can

be marketed in a foreign country. 

3. New and improved Technology: One partner may have the new and improved technology but

do not have the resources. Other partner may have resources like capital but do not have the

technology. In such causes joint venture can fetch new and improved technology as well as great

resources. By engaging a foreign partner, improved foreign technology can be availed from its

foreign collaborator.

4. Use of existing marketing arrangements or existing distribution network of one of the party is

possible.

5. Access to improved resources like experienced technicians, experienced staff, and greater

capacity, financial resources etc. are possible through joint venture business.

6. Sharing of costs and risks with partners.

7. Diversification of business by producing new products or new area of business.

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8. Increased productivity and greater profits.

9. Exchange of Products: Joint venture companies can offer their existing product to sell through

the partner’s network and share the profit. Both JV partners can do the same. By exchanging

products and services of the partner, they can diversify the product basket and sell it to their

existing customers and increase the profit.

There many disadvantage in the joint venture form of business. They are:

1. it take time and efforts to form the right relationship.

2. The objectives of each partner may differ. The objectives needs to be clearly defined and

communicated to everyone involved.

3. Imbalance in the share of capital, expertise, investment etc., may cause friction in between the

partners.

4. Difference in the culture and style of business lead to poor co-operation.

5. Lack of assuming responsibility by the partners may lead the collapse of business.

6. Lack of communication between the partners may affect the business.

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 CHAPTER:-3REASONS TO ENTER INTO JOINT VENTURE

1. It gives you access to more cash, more opportunity. You are not limited to your own capital,

but you can use capital from your joint venture partner to enable not only your new business to

flourish, but also your existing business. If you choose a good joint venture partner, the two of

you are essentially doubling the value of your business.

2. It enables you to reach a new market. This is especially true when you enter into a joint

venture with someone from another country. You have a whole new market in which to sell your

product and so does your partner. Even if you just concentrate on selling each other's wares, you

are helping each other make money.

3. You gain new knowledge. You can always learn something about your business, even if you

have been operating a business for years. In exchange, you can also share your knowledge with

another individual. Both of you will benefit from the joint venture.

4. You incur less risk. You can expand your business without incurring a lot of financial risk

when you start a joint venture. Each party in the joint venture assumes some of the risk, which

means that the risk is spread out evenly and no one stands to lose too much.

5. You can gain new marketing ideas. With both of you willing to market your new joint venture,

you will most likely learn a thing or two from one another. By entering into a joint venture with

someone else who is also creative and has good marketing ideas, you can both feed off of one

another.

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6. You can each use your own talents. Entering a joint venture can allow people who have a

certain talent find someone who may need that talent to enable them to allow their business to

grow.

7. You can invest using your knowledge. In some cases, you may be able to make an investment

in something like a foreclosure or short sale with little or none of your own money. If you get

enough partners in your joint venture who are willing to put up some of the money for the

venture, you may be able to use your expertise to make money for them as well as yourself.

8. You have doubled the capital. Depending on how many people you recruit into your joint

venture, you can have double or even triple the capital that you would have if you were starting

out a business on your own. This gives you a chance to start a business the right way.

9. It is a good way to get started working with partners. If you are looking for a long term

business arrangement, it is a good idea to start out with a joint venture. This is not forever and

can be a good way to see if you like working with business partners. Those who you enjoy

working with may invite you or you may invite them to other projects.

10. It gets your business name out there. If you are looking to make a name for your business,

this is the way to do it. The more people who know about your business, the better off for you.

By starting a joint venture, you are allowing your business to get maximum exposure.

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 CHAPTER:-4TYPES OF JOINT VENTURE

As we said earlier, a joint venture is not an entity, but the reason for the entity. A joint venture

can be individuals, corporations, LLCs or even limited partnerships. There are tax advantages to

all of these types of holdings. How you should hold your joint venture depends upon the size of

the project and how long you plan to be involved in the project.

Corporation

A corporation is a separate entity. It can open a bank account, pay taxes and go bankrupt.

Because a corporation is its own entity, it is the safest way to start a business. By funneling

everything into the corporation, you limit the liability of the other parties.

Two corporations or other types of business can form another corporation. A corporation will

need people, however, to be officers of the entity. You also need a registered agent. The

registered agent is usually the attorney who fills out the articles of incorporation and will keep up

with the annual reports.

There are two types of corporations - a C corporation and an S corporation. You will most likely

charter your joint venture under an S charter in that you will not be selling stocks. An S

corporation, or a Sub S, as it is often called, is limited to the number of shares of stock it can

issue. An S corporation can only issue 100 shares of stock.

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The stockholders are the real power in the corporation. The stockholders do not have to be the

same people who are officers of the corporation. They can be businesses or individuals. Their

ownership of the corporation is not made public - the officers and registered agent are public

information.

A corporation has tax benefits that are not afforded to individuals. That and the fact that by

putting everything into a corporation puts a limit on the liability of those involved in the

corporation makes it an attractive entity to consider when you are considering how to hold a joint

venture.

LLC

An LLC is a limited liability company. Like a corporation, you have to file the LLC with the

state. The filing fees are usually higher for an LLC, but this type of company offers the same

protection as a corporation in that it is its own entity, but without the cumbersome paperwork

that is involved in maintaining a corporation. A corporation is obligated to have regular meetings

and keep minutes of the meetings. An LLC does not have the same obligation and is an easier

type of entity to maintain. Because it gets the same type of tax breaks and offers the principals

the same protection as a corporation, this type of entity is often preferred over a Sub S

corporation. You cannot sell stock in an LLC.

Limited Partnership

Some people confuse a limited partnership with a joint venture. A limited partnership is an entity

between two or more individuals for no specified period of time or for a particular project. A

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joint venture is similar to a limited partnership in that it is a legally binding agreement between

two or more individuals, but whereas the limited partnership is not limited to a specific project or

endeavor, the joint venture is. And the joint venture can be comprised of many different types of

entities.

Sole proprietorship

You can set up shop and open up your own business as a sole proprietor without having to file

any paperwork with the state or even talk to an attorney. The free enterprise system allows

anyone to just start a business as a sole proprietor. You will have to claim income taxes on this

business, but can do so on your individual income tax statement. You will have to file a Schedule

C for a sole proprietor business. You can enter into a joint venture as a sole proprietor, but be

aware that you are offered no personal protection. If the joint venture files bankruptcy, you may

be also finding yourself in bankruptcy court. The same goes if the joint venture is sued. If you

own your business as a sole proprietor, you will want to make sure that the joint venture is held

in a protective entity such as a corporation or LLC.

If the joint venture is held as a sole proprietorship, then any liability for the joint venture will fall

upon the entities or individuals that make up the joint venture.

Individual ownership

If you are not worried about liability and are in a small joint venture with another individual, you

can each take ownership of anything in the joint venture as individuals. If, for example, you form

a joint venture with someone to purchase a foreclosed house, you can each take ownership of the

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property as tenants in common. Any assets that the joint venture owns should be held by each of

you as tenants in common.

Prior to joint ventures, corporations, limited partnerships and LLCs, it was not unusual for

people in business with one another to manage their business by making sure that all assets and

liabilities were held as tenants in common. Tenants in common mean that both parties are owners

of the asset. Unlike joint tenants, when property or other assets is held as tenants in common, and

one of the tenants dies, the heirs of the deceased party will be entitled to their share of the assets.

With joint tenancy, the other partner would be able to claim the assets as their own.

Before our society became so litigious, it was not unusual for parties to strike out a verbal

agreement and hold assets and property as tenants in common. Today, however, you are better

off to gain the protection of a protective entity such as a corporation, limited partnership or LLC

when you are entering the business world.

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 CHAPTER:-5 PROCEDURE OF JOINT VENTURE

Joint Venture is where:

1. Two parties, (individuals or companies), incorporate a company in India. Business of one

party is transferred to the company and as consideration for such transfer; shares are issued

by the company and subscribed by that party. The other party subscribes for the shares in

cash.

2. The above two parties subscribe to the shares of the joint venture company in agreed

proportion, in cash, and start a new business.

3. Promoter shareholder of an existing Indian company and a third party, who/which may be

individual/company, one of them non-resident or both residents, collaborate to jointly carry

on the business of that company and its shares are taken by the said third party through

payment in cash.

Some practical aspects of formation of joint venture companies in India and the prerequisites

which the parties should take into account are enumerated herein after.

Foreign companies are also free to open branch offices in India. However, a branch of a

foreign company attracts a higher rate of tax than a subsidiary or a joint venture company.

The liability of the parent company is also greater in case of a branch office.

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How to Get a Joint Venture Started

 The first step to creating a joint venture is to set your goals and decide what you want

your joint venture to do. If you need help getting started with this, look at the four things a

joint venture can do that I've listed at the beginning of this article, pick one, and then develop

a goal that is as specific as possible.

 Then it's time to look for the like-minded - people or firms that might be interested in the

same goal or goals you want to pursue. Look in the business groups you already belong to,

both in person and virtually. Use your social networking connections. Study business listings

in the phone book or on Web sites to find those that might share your goals.

 And be open to being asked. Once you start talking to other people about what you might

do together, a joint venture idea you haven’t even thought of might pop up - one with a lot of

potential.

 Once you've found the people to share in a joint venture, be sure to have it all put into

writing in a joint venture agreement. I strongly recommend hiring a legal professional to do

this.

So instead of dismissing an opportunity as out of your reach, start thinking instead about how

you could participate with a joint venture. Properly planned and executed, joint ventures can

help your small business go where it's never been able to go before.

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Government Approvals for Joint Ventures...

All the joint ventures in India require governmental approvals, if a foreign partner or an NRI

or PIO partner is involved. The approval can be obtained from either from RBI or FIPB. In

case, a joint venture is covered under automatic route, then the approval of Reserve bank of

India is required. In other special cases, not covered under the automatic route, a special

approval of FIPB is required.

The Government has outlined 37 high priority areas covering most of the industrial sectors.

Investment proposals involving up to 74% foreign equity in these areas receive automatic

approval within two weeks. An application to the Reserve Bank of India is required. Please

see Foreign Investment in India - Sector wise Guide for sector wise guidelines under

automatic route. Besides the 37 high priority areas, automatic approval is available for 74%

foreign equity holdings setting up international trading companies engaged primarily in

export activities.

Approval of foreign equity is not limited to 74% and to high priority industries. Greater than

74% of equity and areas outside the high priority list are open to investment, but government

approval is required. For these greater equity investments or for areas of investment outside

of high priority an application in the form FC (SIA) has to be filed with the Secretariat for

Industrial Approvals. A response is given within 6 weeks. Full foreign ownership (100%

equity) is readily allowed in power generation, coal washeries, electronics, Export Oriented

Unit (EOU) or a unit in one of the Export Processing Zones ("EPZ's").

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For major investment proposals or for those that do not fit within the existing policy

parameters, there is the high-powered Foreign Investment Promotion Board ("FIPB"). The

FIPB is located in the office of the Prime Minister and can provide single-window clearance

to proposals in their totality without being restricted by any predetermined parameters.

Foreign investment is also welcomed in many of infrastructure areas such as power, steel,

coal washeries, luxury railways, and telecommunications. The entire hydrocarbon sector,

including exploration, producing, refining and marketing of petroleum products has now

been opened to foreign participation. The Government had recently allowed foreign

investment up to 51% in mining for commercial purposes and up to 49% in

telecommunication sector. The government is also examining a proposal to do away with the

stipulation that foreign equity should cover the foreign exchange needs for import of capital

goods. In view of the country's improved balance of payments position, this requirement may

be eliminated.

How to Enter into a Joint Venture Agreement?

Selection of a good local partner is the key to the success of any joint venture. Once a partner

is selected generally a Memorandum of Understanding or a Letter of Intent is signed by the

parties highlighting the basis of the future joint venture agreement.

A Memorandum of Understanding and a Joint Venture Agreement must be signed after

consulting lawyers well versed in international laws and multi-jurisdictional laws and

procedures.

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Before signing the joint venture agreement, the terms should be thoroughly discussed and

negotiated to avoid any misunderstanding at a later stage. Negotiations require an

understanding of the cultural and legal background of the parties.

Before signing a Joint Venture Agreement the following must be properly addressed:

 Dispute resolution agreements

 Applicable law.

 Force Majeure

 Holding shares

 Transfer of shares

 Board of Directors

 General meeting.

 CEO/MD

 Management Committee

 Important decisions with consent of partners

 Dividend policy

 Funding

 Access.

 Change of control

 Non-Compete

 Confidentiality

 Indemnity

 Assignment.

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 Break of deadlock

 Termination.

The Joint Venture agreement should be subject to obtaining all necessary governmental

approvals and licenses within specified period.

PLANNING THE JOINT VENTURE

The formation of an international joint venture can be an extremely complex process. The

goals of the enterprise must be defined, the structure must be negotiated, numerous legal

issues must be recognized and resolved, and potential areas of conflict between the JVPs

must be identified and reconciled. Careful planning is required at all stages.

The planning stages essential to the formation of a joint venture are outlined below. The

important considerations relevant to each stage are discussed in detail in later chapters of this

book.

Identifying Objectives

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 At the outset of every proposed joint venture, it is necessary to have an understanding of the

basic objectives of the proposed enterprise. This includes identification of the nature and

scope of the proposed undertaking, as well as the company's expectations and goals. For

example, if a company is seeking a short-term arrangement to measure the potential market

for a product in a foreign country, a licensing or straightforward contractual arrangement

might be preferable to a joint venture, which generally contemplates a longer term and more

substantial commitment.

Selecting a Partner

If a joint venture is deemed desirable, one of the first considerations is the selection of a

compatible partner. A concern may initially seek a co-venture of equal business stature and

with comparable corporate policies, philosophies, and financial resources. Through the

process of active negotiation, involving business people as well as lawyers, the JVPs should

determine whether their objectives are compatible. This process may be difficult, but it is

important, particularly in the context of multinational joint ventures, given the cultural,

linguistic, political, and social differences between the parties. Similarly, there may be legal,

accounting, and tax differences between the countries of the JVPs. Since all of these

differences may give rise to misunderstandings, they must be reconciled.

Choosing the Business Form

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 The next step is to choose the basic structure of the business venture. A variety of complex

legal and practical considerations are involved at this stage. It is necessary to identify the

respective contributions of the parties and the proposed financing arrangements in order to

measure the compatibility of the potential JVPs and to determine the appropriate

organizational form. Frequently, one JVP looks to a capital infusion and, in return, shares its

technology expertise, and know-how.

Identifying Legal Problems

At the beginning of the process, counsel must identify and resolve major legal issues and

potential problem areas, including governmental regulatory matters.

Identifying Conflicts between Partners

It is also important to identify potential areas of conflict between the JVPs so that they can be

reconciled prior to making an irrevocable commitment. For example, the parties may have to

deal with differing tax objectives resulting from fundamentally different business goals or,

more commonly, from different constraints of the tax laws and accounting practices of the

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home country. Early recognition of these issues may allow the parties sufficient flexibility to

structure the joint venture to avoid these problems.

WHEN ARE JOINT VENTURES USED?

Joint ventures are not uncommon in the oil and gas industry, and are often cooperation’s

between a local and foreign company (about 3/4 are international). A joint venture is often

seen as a very viable business alternative in this sector, as the companies can complement

their skill sets while it offers the foreign company a geographic presence. Studies show a

failure rate of 30-61%, and that 60% failed to start or faded away within 5 years. (Osborn,

2003) It is also known that joint ventures in low-developed countries show a greater

instability, and that JVs involving government partners have higher incidence of failure

(private firms seem to be better equipped to supply key skills, marketing networks etc.)

Furthermore, JVs have shown to fail miserably under highly volatile demand and rapid

changes in product technology

Some countries, such as the People's Republic of China and to some extent India, require

foreign companies to form joint ventures with domestic firms in order to enter a market.

Brokers

In addition, joint ventures are practiced by a joint venture broker, who are people that often

put together the two parties that participate in a joint venture. A joint venture broker then

often makes a percentage of the profit that is made from the deal between the two parties.

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Reasons for Forming a Joint Venture

Internal Reasons

Build on company's strengths

Spreading costs and risks

Improving access to financial resources

Economies of scale and advantages of size

Access to new technologies and customers

Access to innovative managerial practices

Competitive Goals

Influencing structural evolution of the industry

Pre-empting competition

Defensive response to blurring industry boundaries

Creation of stronger competitive units

Speed to market

Improved agility

Strategic Goals

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 Synergies

Transfer of technology/skills

Diversification

Reasons for Dissolving a Joint Venture

Aims of original venture met

Aims of original venture not met

Either or both parties develop new goals

Either or both parties no longer agree with joint venture aims

Time agreed for joint venture has expired

Legal or financial issues

Evolving market conditions mean that joint venture is no longer appropriate or relevant

Examples

LG, Philips Components (LG + Philips)

Nokia Siemens Networks (Nokia + Siemens AG)

Sony Ericsson (Sony + Ericsson)

Verizon Wireless (Verizon Communications + Vodafone)

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 WHY JOINT VENTURES?

As there are good business and accounting reasons to create a joint venture (JV) with a

company that has complementary capabilities and resources, such as distribution channels,

technology, or finance, joint ventures are becoming an increasingly common way for

companies to form strategic alliances.

Sustainable Competitive Advantage

In a joint venture, two or more "parent" companies agree to share capital, technology, human

resources, risks and rewards in a formation of a new entity under shared control.

Important Factors

To be considered before a joint venture is formed

 screening of prospective partners

 joint development of a detailed business plan and short listing a set of prospective

partners based on their contribution to developing a business plan

 due diligence - checking the credentials of the other party ("trust and verify" - trust the

information you receive from the prospective partner, but it's good business practice to verify

the facts through interviews with third parties)

 development of an exit strategy and terms of dissolution of  the joint venture

 most appropriate structure (e.g. most joint ventures involving fast growing companies are

structured as strategic corporate partnerships)

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 Availability of appreciated or depreciated property being contributed to the joint venture;

by misunderstanding the significance of appreciated property, companies can fundamentally

weaken the economics of the deal for themselves and their partners.

 special allocations of income, gain, loss or deduction to be made among the partners

 compensation to the members that provide services

Joint Venture Technology

The concept of a joint venture technology is important to understand if you consider entering

into a joint venture. You all strategies and contracts must be planned properly in accordance

with the law. Joint venture association can be used effectively in a business-based

technology, especially where the Intellectual Property assets concerned. In joint venture

associations, businesses work together and share resources, knowledge, benefits and / or

geographic market. Joint ventures to help bring you in contact with new clients in the fast

and efficient and with it are very powerful mode for business entrepreneurs.

Various forms of joint ventures. Joint venture technology can be of various forms. In one

scenario, the organization in May to join together to form a joint venture that is its own entity

with the ownership shares and rights. This usually happens in a multi-national company or a

larger business. This form of a joint venture with technology in general to the merger of two

separate companies from the law itself.

In another method, a more general, a joint venture agreement that formed between the

business for a particular purpose, such as one campaign or individuals to share resources and

25
bring about increasing benefits and / or client base to increase. Establish joint ventures with

this mode of joint venture technology may be for the initial phase of a more permanent

business relationship.

Points to be consider while planning a joint venture technology. If you are planning a joint

venture, the careful plans for all your business contracts and the right strategy in accordance

with the law so that the channel to avoid further complications. The main focus is to create a

joint venture company to create innovative companies or joint-venture, which will help in

increasing the value of new business or to form a body that is able to manage the business.

The joint venture is focused technology partners to manage, they provide access to resources,

capital, resources intellectual property, technical resources and so forth. A contract must be

arranged a certain set of clear transfer of IP rights through the current as the nature of

Intellectual Property total assets are insubstantial.

When you make your contract, a joint venture technology, you must be careful to also

include the following aspects. Documents from the control and format of the joint venture

contract must jointly decide on the goals that must be achieved. The requirements for

completing these objectives must also be clearly stated in the agreement. The problem of

laws on tax issues and legalities related to the Anti must also be stated clearly. In short,

detailed information that is clear and the details relating to the special role in the joint venture

and your skills, etc. should be clarified as part of the joint venture technology.

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 CHAPTER:-6CASE STUDY

Case 1

Wal-Mart, Bharti End Their India Joint Venture; Companies To Operate

Independently

Wal-Mart Stores (NYSE:WMT) and Bharti Enterprises have called off their partnership in India

and have decided to independently pursue their separate businesses in the country’s retail sector,

the companies said in a joint statement on Wednesday.

According to the agreement, Wal-Mart will acquire Bharti’s 50 percent stake in their joint

venture in Best Price Modern Wholesale stores that run cash-and-carry operations serving local

businesses across India. Bharti will buy compulsory convertible debentures held by Wal-Mart in

Cedar Support Services, which operates the Easy day chain of retail stores.

“Bharti is committed to building a world-class retail venture and will continue to invest in Bharti

Retail across all formats. We believe that with our current footprint of 212 stores, we have a

strong platform to significantly grow the business and delight customers,” said Rajan Bharti

Mittal, vice-chairman and managing director of Bharti Enterprises, in the statement.

The breakup was not unexpected as recent statements by Scott Price, president and CEO of Wal-

Mart Asia, and Bharti's chairman, Sunil Bharti Mittal, had noted that the companies were

27
reconsidering the partnership. Local media reports citing sources also had said that Bharti was

growing wary of the partnership and was considering divesting in the joint venture.    

Bentonville, Ark.-based Wal-Mart started its wholesale cash-and-carry and back-end supply

chain management operations in India in 2007, along with Bharti Enterprises through their joint

venture, Bharti Wal-Mart Private Limited. The first store was launched in 2009 in Amritsar, in

the northern Indian state of Punjab.

“Given the circumstances, our decision to operate independently will be beneficial to both

parties,” Price said in the statement, adding that the company will “continue to advocate for

investment conditions that allow FDI (foreign direct investment) multi-brand retail in India.” 

Wal-Mart had plans to expand the wholesale joint-venture partnership to the country's growing

retail sector and had announced that Bharti would be a natural partner for retail operations, after

the Indian government allowed foreign retailers to own 51 percent of Indian operations in

September 2012.

However, ambiguity in the rules and tough pre-conditions on investment patterns by the

government have discouraged foreign retail players like Wal-Mart from entering the sector

despite the much-awaited relaxation in FDI rules. 

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Moreover, the partnership between Wal-Mart and Bharti seemed to be fraying in recent years as

corruption scandals and government inquiries into alleged malpractices by the companies hurt

their expansion plans.

Wal-Mart is facing a probe in India for allegedly violating the country's foreign exchange norms,

and has been accused of “clandestinely and illegally" investing $100 million in India’s retail

market through Bharti Enterprises from 2010.

In November 2012, Bharti Wal-Mart suspended its chief financial officer and other employees,

pending the outcome of an investigation into a bribery charge. Raj Jain, president and CEO of

Wal-Mart’s India unit was replaced by Ramnik Narsey as interim chief in June. The company

did not specify the reasons for Jain's departure.

Wal-Mart announced last November that the company was investigating allegations of corrupt

practices in foreign markets, including in India, as part of a worldwide review of its policies and

practices to ensure compliance with the Foreign Corrupt Practices Act in the U.S.

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Case2

The synergies in values, ethics and passion shared by Starbucks and the Tata conglomerate made

for the ideal partnership as the global coffee giant prepared for its entry into India.

At Asia Society India Centre's first members-only event, Tata Starbucks CEO Avani Saglani

Davda joined us for a coffee-tasting and discussion about the landmark Joint Venture (JV)

between Starbucks and Tata Global Beverages. She emphasized their focus on the "human

connection," sharing how they aimed for their stores to serve as a "third place" for customers —

apart from their homes and offices. Further, the venture invested in ensuring that both their

customers and their employees (whom they call their partners) are treated respectfully. For

instance, Starbucks was the first listed company to allow health benefits to its part-time workers.

The two JV partners also shared deep mutual respect, as demonstrated by India being the first

country where Starbucks allowed co-branding and sourced coffee locally. The deep-rooted

commitment to give back to society was also a major focus of the venture, she said. It supported

the Swastha School for special children in Coorg, where their coffee plantations are situated.

As freshly brewed Kenyan Coffee was circulated by the Starbucks team, Store Manager Siddesh

took the audience through Starbucks’ traditional four steps of coffee tasting — smelling (which

helps identify different flavors and aromas), slurping (which helps to locate the coffee over the

palate), locating and describing the taste.

Talking about competing chains and their strategy in India, Davda said that "success in any other

geography does not mark your success in India. When you enter a new market you have to

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respect the palate and what the consumer really wants. The three Starbucks pillars are quality of

coffee, the fantastic third space and the legendary experience." She also noted that the design of

the stores in India were unique, setting them apart from other Starbucks outlets around the world.

The store designers took care to weave the story of Indian culture into the third space setting, so

as to be inviting to Indians.

Davda signed off by stating that the "TATA Starbucks' goal is to provide consumers with a

distinguished experience, bring an iconic band and stay true to it and not assume that the

consumer is always going to be in love with us; and only if we earn their respect will we be able

to survive here.

Case3

Magneti Marelli S.p.A. and Hero MotoCorp Ltd. have signed a Joint Venture agreement aimed at

the production of power train systems for the two-wheeler market.

According to this agreement, Hero MotoCorp will hold a 60% share in the Joint Venture, with

the remaining 40% being held by Magneti Marelli. The construction of a JV’s  production plant

is planned by 2015, at a location in India to be defined shortly.

The JV will nevertheless be operational immediately, as during this initial phase activities will

focus on the technological aspect, with the two companies starting to cooperate in the design and

development of the first solutions and applications for motorcycles.

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The Joint Venture will be aimed mainly at the Indian market, and its solutions will be made

available both to the two wheeler production of the Hero company (the largest in India and in the

world), and to the entire two-wheeler market in the country (about 15 million vehicles sold in

2012 alone).

The main objective of the JV is to put together a portfolio of advanced solutions for the power

train control of two and three-wheel vehicles that, by taking advantage of the added value

provided by electronics, are able to raise the technological level of the solutions available until

today.

These technologies will make it possible to achieve better engine performances, with reduced

consumption and emissions, representing in fact a leap in the technological paradigm and thus

paving the way for a more sustainable mobility in compliance with future limits for polluting

emissions, in a country where a total of over 63 million two and three-wheel vehicles have been

sold in the last six years from 2007 to 2013(source: SIAM, Society of Indian Automobile

Manufacturers).

The scope of the agreement makes available to the JV Magneti Marelli’s advanced solutions in

terms of electronic engine management, including the “ride-by-wire” technology. Since this

technology allows electronic handling of the power requested of the engine, it optimizes its

operation, in addition to forming the technological base needed to enable future possible

solutions for hybrid engines associated with the transmission to be fitted on two-wheelers.

Since 2001, Hero has been the world’s largest manufacturer of two-wheelers. So far, it has sold

approximately 50 million motorcycles and mopeds, and currently holds a market share of 46%,

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with almost 7 million vehicles sold every year. In 2012, it acquired 49.2% of the equity capital in

the well-known motorcycle brand Erik Buell Racing.

“The scope of this agreement is - commented Eugenio Razelli, Magneti Marelli CEO - quite

significant for Magneti Marelli as our partner in this JV is the world’s largest manufacturer of

two-wheelers. The aim is to partner with Hero MotoCorp in order to equip with advanced Power

train solutions all Hero two-wheelers and most of the two wheelers circulating in a country

where current sales are already in order of 15 million per year. We are also proud to be able to

contribute to initiating a technological revolution in favor of sustainable mobility for two-

wheeled vehicles as well, on one of the most important markets in the world. ”

“It has always been my firm belief that the path to technological excellence is through self-

sufficiency and independence.- commented Pawan Munjal, Managing Director & Chief

Executive Officer, Hero MotoCorp -Therefore, over the past year, we have been forging multiple

alliances with globally-renowned design and technology firms, and the newly-formed

partnership with Magneti Marelli is yet another strategic move in that direction. This is our first

Joint Venture since charting our solo journey and as an immediate opportunity and focus area,

the new firm shall be taking up development and manufacturing of next-generation Fueling

Systems. This is one of the most important areas in various technologies involved in making of

better fuel-efficient, environment friendly modern engines. Fuel technology has undergone a

major shift over the past two decades. The advances in electronics and control technology, which

have become smarter and real time, have given a very useful tool in the hands of engine

designers to precisely optimize fuel supply for control of output performance, emissions, fuel

consumption and usage of certain fuel blends. ”

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Case4

Mumbai: Tata Motors Ltd and Italy’s Fiat Spa said on Wednesday that they are ending their

distribution agreement, while the manufacturing accord will continue.

Space crunch: Fiat cars on display at a Tata

Motors showroom in Okhla, New Delhi. Fiat says

its decision to part with Tata Motors was

prompted by increasing congestion in the

showrooms. Photo: Jasjeet Plaha/HT

The marketing agreement allowed the Italian auto

maker to use the Indian firm’s distribution network in the country. Distribution will now be

handed over to a separate Fiat group-owned company, the two said in a joint statement.

This is the second time that Fiat’s joint venture with an Indian partner has failed. A technical

collaboration and then a joint venture with Premier Automobiles Ltd went astray in the 1990s.

After two failed stints in India—one with Premier and a solo essay—the Italian company was on

the verge of pulling out of India but for Fiat chief executive Sergio Marchionne and Tata group

chairman Ratan Tata getting together in 2006.

Fiat joined hands with Tata Motors with the objective of using the latter’s expansive sales,

service and distribution network to gain access to one of the world’s fastest growing car markets.

It became evident in the first few years of the joint venture that the model was not working.

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Sales at Fiat India have been sputtering. In the fiscal ended March, sales contracted 23.87% to

16,073 units, according to the Society of Indian Automobile Manufacturers (Siam).

A competing product line-up made it increasingly tough for dealers to do justice to both Tata and

Fiat, an analyst at a global consulting firm said on condition of anonymity.

“Typically, dealers have a tendency to push those models that fetch them better margins.

Covertly, that was driving the dealer’s behaviour,” he said.

A Fiat India spokesman said the decision to go their separate ways was prompted by increasing

congestion in the showrooms. “Fiat customers have not been able to experience the brand,” he

said.

In the past year and half, both Tata and Fiat officials have on several occasions expressed

dissatisfaction over the accord not yielding the desired results and the companies planning to

revisit the venture.

In September 2011, Fiat announced plans to set up so-called Fiat Cafes—one each in Delhi and

Pune—to promote the brand. The company also said it had asked some of the Tata Fiat

dealerships to set up separate Fiat outlets. “The writing was on the wall,” said the consultant

cited above.

The manufacturing joint venture between the firms will continue, the companies said. This

includes using a common manufacturing plant in Ranjangaon near Pune to produce Fiat and Tata

cars in addition to engines and transmissions for both the Indian and export markets and a

recently announced contract to supply Fiat diesel engines to Maruti Suzuki India Ltd.

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In its five years of operations, the industrial joint venture has produced some 190,000 cars and

337,000 powertrains. It will continue with these manufacturing activities as they are outside the

purview of the new distribution agreement and supply cars and powertrains to Fiat and Tata.

Fiat India said it will start developing the new Fiat dealer network shortly.

The 178 existing Fiat-franchised Tata dealers in 129 cities will be encouraged to form the

foundation of the future network. Fiat will form a separate company that will assume

responsibility for all commercial and service-related activities from the current Tata-dedicated

team assigned to manage the Fiat brand.

Enrico Antanasio will head the new company, said Fiat’s spokesperson. Experts said it will take

the Italian car maker at least two years to establish its own network.

“They need to be more aggressive with new model launches,” said Puneet Gupta, analyst at sales

forecasting and market research firm IHS Global. “Only then will the dealers see financial

viability in setting up Fiat dealerships.”

Tata Motors dropped 3.82% to Rs304.65 on BSE on Wednesday. The benchmark Sensex fell

0.1% to 17,301 points. The announcement came after market hours.

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 CHAPTER:-7 CONCLUSION

Finding Joint venture partners has not been easy until now. Everyone knows

that joint ventures are the number one, fastest growing, most profitable form

of marketing strategy in the world, however building joint venture alliances can be time

consuming and unproductive if you don't know what to do or where to find them. More

importantly though, is the ingredient that makes a joint venture become profitable and

work and that is to actually have a joint venture partner to create a joint venture alliance

with.

A joint venture is a mechanism for combining complementary assets owned byseparate

firms. These assets can be tangible, such as machinery and equipment, orintangible, such as

technological know-how, production or marketing skills, brandnames, and market-specific

information. In an equity joint venture the partner firmstransfer all or part of their assets to a

legally independent entity and share the profits from the venture. Contractual arrangements

that do not involve shared equity control are sometimes referred to as non-equity joint

ventures; examples include licensing and management contracts, as well as supply

and distribution agreements. Shared ownership and contractual arrangements are also

frequently grouped together under the term “alliances”. In what follows the focus will be

on equity joint ventures, specifically international joint ventures involving partners

from different countries

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 CHAPTER: 8 BIBLIOGRAPHY

 http://voices.yahoo.com/10-reasons-start-joint-venture-2080922.html?cat=55

 http://voices.yahoo.com/the-different-types-joint-ventures-2080954.html?cat=17

 http://jacobkuttyta.hubpages.com/hub/Joint-Venture1

 http://www.magnetimarelli.com/press_room/news/magneti-marelli-and-hero-motocorp-

sign-joint-venture-india-sector-powertrain-systems

 http://www.livemint.com/Companies/JdjBupzYACCFrcGVxrLLlL/Tata-Motors-Fiat-

end-car-sales-joint-venture.html

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