Successful companies recognize that people`s skills are transferred, not through processes or contracts. If you don`t recognize it, it can be expensive. For example, a global consumer goods company held 50% of a partner`s share in a developing country; The resulting joint venture turned to the global partner to transfer some of its corporate and marketing know-how to the development partner`s underperforming beverage sector. The joint venture required the global partner two or three highly qualified people in branding and marketing in emerging countries. The mother offered very limited support from her gurus in developing countries; Instead, he sent a marketing manager who had spent most of his career in North America. In the absence of access to critical competencies, EC was unable to support the decline in the brand and was unable to cover half of the expected synergies, or about $450 million. The disadvantages of the interdependent model can be mitigated if the JV Executive Director is empowered to write performance reviews and make all recruitment and redundancy decisions; Whether all parties agree in advance on performance criteria; When a minimum service mission is set up within the company, usually for three years; and if the parents do not unleash themselves of audacity until this tour of the obligation is out. Once a list of shared services is complete, the launch team must develop transparent and honest methods of calculating transfer pricing. This is essential to maintain confidence on the way. A joint venture of 50 to 50 telecommunications companies depended on a parent company for 90 different common services. Two years after the completion of the joint venture, a strategic review showed that the partner distributed its overhead and other non-cost costs to the joint venture, thereby making substantial profits for itself, while hampering the company`s ability to set competitive prices and generate profits. Although the partners have renegotiated transfer pricing, the mistrust that has been created continues to weigh on audacity. Finally, the joint venture should be linked to the audit and business planning cycle of at least one parent, which will reduce the likelihood that important economic issues will lie between the cracks and require intervention at the 11th hour.
To better understand the challenges of joint venture creation, we and our colleagues in The Management Practices of Postmerger and McKinsey Alliance interviewed 50 executives directly involved in the creation of 25 joint ventures around the world. (Interviews were conducted in 2002 and 2003. These projects represented assets or revenues of more than $300 million, included some degree of operational integration, and covered a number of sectors: automotive, consumer goods, electronics, energy, financial services, pharmacy and telecommunications. The companies were based in the United States, Europe, Asia and emerging countries. Most of these JVs were between 2 and 5 years old to have a balance sheet, but young enough for executives to remember the original details. Our definition of an alliance includes a wide range of cooperations that include common risks, rewards and controls. These include joint ventures in which a separate entity is created; contractual agreements (with or without participation), such as exclusive marketing or distribution agreements. B; and joint marketing agreements. While this article focuses primarily on joint ventures, many of the results also apply to deep contractual alliances.