The case of Thai joint venture with Japanese partner in Business Building

Review of the Literature

Business in the 21 st century is increasingly done with moving boundaries. International partnerships will become standard practice, such as product life cycles shorten and immediate distribution become imperative. As his business is increasing globalization, alliances between multinational corporations are becoming increasingly popular. Cooperation between international companies can take many forms, such as, cross-licensing of proprietary technology, sharing of production facilities, co-financing of research projects and commercialization of their products that use existing distribution networks (Griffin and Pustay, 2005). These forms of cooperation are known as strategic alliances, trade agreements whereby two or more companies choose to cooperate for their mutual benefit. A joint venture is a specific type, and more formal strategic alliance.

2.1 Definition of international joint venture (IJV)

An international joint venture (IJV) is a special type of strategic alliance in which two or more companies from different countries come together to create a new business entity that is legally separate and apart from his parents. Joint ventures are usually established as a company and are the property of the founding parents in any proportion to negotiate. Although the property is unequally shared, many are owned equally by the parents (Berger, 1999).

Here is a definition adapted from Shenkar and Zeira (1987):

1 is a separate legal entity, organization and belongs entirely to none none / her parent's;
2 is jointly owned by his mother;
3 these parents are legally independent of each other;
4, the headquarters of at least one parent is out of the country in which the IJV operates.

As mentioned some IJVs are formed on a basis of equity, more flexible ways may depend on a cooperation agreement without involving the legal obligations of fairness. Some IJVs can have more than two parents. In general, most parents greater administrative complexity and the greater the problem of managing the project. Sometimes, both (or all) of the parents are outside the country IJV. For example, Coca Cola (Vietnam) was launched as an IJV between Coca Cola (USA) and a bottler Singapore, originally did not use all of Vietnamese managers, following the company needed to address cultural differences (Beamish, 1985).

Regarding the construction sector, a joint venture was seen as a tool to improve the performance of the construction process and outlines how they contribute to creating synergies and maximize the effectiveness of the resources of each participant (Barlow et al. 1997).

The Construction Industry Institute defines joint venture as a long-term commitment between two or more organizations in order to achieve specific business goals, maximizing the effectiveness of the resources of each participant. This requires changing traditional relationships to a shared culture without regard to organizational boundaries. The report is based on trust, dedication to common goals, and understanding of each other's individual expectations and values ​​(Barlow et al. 1997). To date, the joint venture is intended as a set of collaborative processes, which stresses the importance of common goals. The basis of the joint venture is a high level of trust and interorganisational the presence of mutually beneficial goals. Joint venture means a process that helps manage strategic planning to improve the efficiency of enterprises, and form a team with common goals (Barlow et al. 1997). The participants of a project can improve performance in terms of cost, time, quality, capacity building, fitness-to-end, and a set of series of other criteria, if they adopt more collaborative ways of working (Bresnen and Marshall 2000 ). Barlow et al. (1997) mentions six factors of success of the joint venture: building trust, teambuilding, the need for a high-level engagement, the importance of individuals, the strategic movement of key personnel, and the need for open, flexible communication. The authors quote from the same benefits as common in a relationship of joint venture: reduced costs, shorter delivery times, improved build quality, better work environment and organizational learning. Classification of joint venture focused on the duration of the cooperation between the partners. This thesis will be used as a case study to explore the scope and a native of these benefits in practice.

Two main types of joint ventures are found in the literature: strategic joint venture project and joint venture or long-term joint venture. Project is a joint venture partnership between organizations for the duration of a specific project (Barlow et al. 1997). At the end of the project, the report is finished and another joint venture can start the next project (Kumaraswamy and Matthews 2000). Welling and Kamann (2001) state that if these companies do not meet again in another project, the learning effect achieved on the particular project will be eliminated. Strategic joint venture is a relationship with a high level of cooperation between the partners (Barlow et al. 1997), which occurs when two or more companies use joint-venture on a long-term loans for more than a construction project, or some activity continues (Kumaraswamy and Matthews 2000). In this type of joint venture, the learning achieved in a specific project is more likely to be used in future projects. In the context of a strategic joint venture, it becomes a management philosophy that is expected to work continuously for each project and there are more expectations from members of the project team for a joint venture (Cheng and Li 2001). The type of TNC JV is the joint venture strategic partners where Thai and Japanese are focusing on the goal in the long term.

2.2 Joint Ventures Seeing as a foreign market entry and development strategy

Joint ventures are often seen as a second (or third) best option to supply a foreign market, is used only when government regulations (such as property and export controls, restrictions on payments of royalties, etc.) to prevent the formation of wholly owned subsidiaries, export, or license. In fact, there are serious problems that arise in the negotiation of planning, and management of international joint ventures. Despite these difficulties, it is widely recognized in the literature that there are important strategic and competitive advantages that may result from a joint venture successful, and such cooperation may be a first option, under certain circumstances (Kenichi Ohmae, 1985). Connolly (1984), for example, has argued that the activities of multinational companies of developed countries (capital, change, technology, management and marketing skills, etc.) and countries in developing businesses (lower costs, greater familiarity with local markets, etc.) are complementary, and that the combination of these activities result in a joint venture in mutual benefits. This can be seen in the case of TNC. Similarly, Contractor (1984) argued that the loss of control and the allocation of profits relating to equity joint venture is more than offset by the expertise and capital contribution of local partners, contacts with government officials, faster input in market risk reduction. Harrigan (1984, 1985) has argued that the joint venture should not be seen as a refuge or a sign of weakness. Rather, if properly organized, joint venture would be a source of competitive advantage, a means of defending existing strategic positions against forces too strong for a company to put itself or as a means to implement changes in strategic positions (diversification for example access to technology). The joint venture will allow each partner to concentrate resources on areas of expertise, while allowing for diversification in areas of business interest, but unknown. Overall, Harrigan (1984, 1985) concludes that joint ventures are important strategic weapon in meeting the challenges of global competition.

2.3 Reasons for forming the IJV

The partners (Thai and Japanese) could be a shared interest in forming IJVs that give both the opportunity to

5 create greater market power, by combining resources, (Bell, 1996)
6 reduce the risk of sharing the costs (investment and production costs are shared);
7 exploit economies of scale;
8 collaborate and avoid competition, which could lead to higher costs than those incurred by consenting to the IJV (the IJV is a covenant which restricts its ability to act independently, but also the limits of your partner), (Contractor and Lorange, 1988).

In general, however, most parents of IJVs offer several opportunities that arise from their different environments. A project could provide access foreign parent of a local market, and parents' access to local international market. According to (thailandoutlook.com), two companies in 1997, the titles of the Premier Group of Thailand and SBC Warburg, have formed a joint venture with Warburg designed to provide local expertise and with the premier international access.

Moreover, the foreign parent must meet the requirements of the host government to do business in the country (in this case, the Thai government). For example, a foreign company is allowed only to operate in the country if the property is shared with a local company. The IJV offers opportunities for foreign mothers to know the local market conditions and to gain access to local resources, including production facilities, labor and materials. For the parent local, these are opportunities for generating industries upstream and downstream. For example, the development of a paper mill IJV encourages local entrepreneurs to enhance registration services and invest in the production of paper. The benefits of local government to encourage foreign investment opportunities. Moreover, the foreign parent may be allowed to take the property only a minority, and must meet the conditions relating to local employment, technology transfer, the purchase of local materials, etc. (Chowdhury, 1992).

2.4 Factors influencing the success and failure IJV

The more that society depends on the strategic alliance, in order to achieve its strategic objective, the more invested in the success of the alliance. If this means investing TNCJV to find the ideal partner. Find the perfect partner takes time and commitment, the greater the importance the company gives this selection process, the greater the probability of success (Geringer 1991).

Hung (1992) study of Canadian companies operating in South-East Asia has found that "the difficulty most often cited is to get the right company partner, one who is reliable and compatible goals." Consequently, trust is one of the most important parts of the IJV formation. Factors of confidence and will be reviewed:

2.4.1 The trust between the parents

The project is more likely to succeed when each parent is confident that the other person is really committed to the project and will do its best to respect all agreements between them (Demirbag and Mirza, 2000).

When multiple partners trust each other, the easier it is for them to reach an agreement on internal arrangements:

1 by applying the same strategic planning priorities;
2 style of management and systems;
3 systems for communication between parents, parents and the IJV, the IJV context, and the environment
4 factors associated with corporate interests, goals, the impact of size, timing
5 assessments of IJV success and failure: evaluation of projects, both underway and at the time of termination.

(Demirbag and Mirza, 2000)

2.4.2 The distrust between the parents and the environment

The mistrust stems from

13 inadequate planning;
14 communication problems between parents (Thai and Japanese in this case)
15 large differences in national cultures and organizational parents;
16 a parent changing his attitude towards the project in response to its internal changes - for example, a new strategy, a new CEO;
17 a parent changing his attitude towards the project in response to changes in its business environment.

To take the last point: both parents work in its volatile business environment. Their local markets and competition are different. They are subject to different pressures local political, social and economic. These environmental differences make any alliance inherently unstable (Geringer, 1988).

According to the director Mikio Kunisawa Representative of Nishimatsu Construction (HQ Japan), TNC has had a full order book, including a heavy workload and the prospect of many new projects in 2005-2006. However, the situation at year-end is a bit 'different from his expectations, particularly in Bangkok Office Nishimatsu, TNC, and now faces a challenge to maintain the activity levels of previous years (2006). The main factor affecting business confidence is the continuing political instability in Thailand generally, between the reference and inconclusive general election result of government decisions on infrastructure projects and development (thailandoutlook.com). In light of this uncertainty, the indicator forecasts for economic growth in Thailand has been revised downwards. Another effect was a decline in business confidence within the private sector, reducing the planned investments in the industrial and real estate (thainishimatsu.com). This could provide the uncertainty between the parent and the environment they face.

These environmental factors of uncertainty, could be the reason to focus only on short-term alliances with highly specific goals. The initial alliance partners may use limited in order to verify the possibility of a greater commitment and build trust (Harrigan, 1985). This also has implications for communication. Each partner needs to communicate information about its environment and to develop awareness of others.

2.4.3 Confidence in the project

A project is successful when the project staff and trust them when people seconded from the two parents, develop a synergistic relationship. Before starting the project, a culture of shared project is promoted by staff mixing by parents in groups, they work together on the design. They exchange information technology and business non-critical (Harrigan, 1985).

The lack of trust arises when

18 staff to join the project ignorant of the needs and interests of their colleagues from the other parent;
19 local staff feel threatened by a stronger foreign parent;
20 Conflicts arise from human resources and technology transfer policies (one parent can not provide the expertise that is involved);
21 cultural differences are being exploited.
2.4.4 The trust between the project staff and their parents

A project is successful when the staff sent us feel confident of the support of their home. Distrust arises when the promised support does not materialize, or staff feel that their prospects for long-term career with the company are in danger. A project is also undermined when top management fails to communicate its purpose effectively within the organization. Subordinate levels they perceive it as a drain on their resources, and give him a little care (Kachara and Hebert, 1999).

2.4.5 similar commercial interests
Potential partners are more likely to collaborate effectively when they have common interests. Parents of successful IJVs have similar interests and belong to similar or complementary fields. When both contribute and learn from others, fruitful cooperation is possible. The companies themselves are formed industrial alliances when they hope to profit from discrepancies in technology, systems and markets (Kogut, 1988). In 1993, a joint venture parented by the Swiss food company, Nestlé, including alliances with Coca Cola (canned coffee drinks and tea), General Mills (cereals), and two companies of the People's Republic of China (a plant of coffee and cream, an infant formula milk powder and vegetable).

2.4.6 Compatibility of size
Incompatibility of the size of the parents is important when using its greater resources to dominate the project in its own interests alone. However, the development of the business over the Internet and other electronic media means that the business can expand (and contract) in a very short time, and the size of the extensive personal and physical resources is no longer an accurate guide to the financial power and knowledge firm (Kachra and Hebert, 1999).

The search for a direct foreign investment in Japan have discovered that the attitude assumed by the Japanese bureaucracy has been influenced by factors such as caring for an investor for his relationship with the government, the profitability of the IJV, the foreign parent commitment, time and place, and technology transfer issues. However, "the size of the investor does not seem to matter much" (Thawley, 1996).

2.4.7 Compatibility in times
Parents need to share a calendar. Suppose that the parents A and B are both ready to invest in development for five years. The project is set right. But the contradictions arise when a parent has the purpose of reinvesting the profits made during the initial period, while B parent wants a quick return on their investment (Li, 1995).

2.5 Culture influence IJV success and failure
2.5.1 Hofstede's cultural dimensions

Cultural distance between partners and its impact on IJV performance so far has been the variable most commonly review. The distance has been generally expressed multi-dimensional (based on Hofstede (1980) four dimensions cultural and an index developed by Kogut and Singh (1988)). Cultural similarity reduces the problems caused by cultural issues (such as different standards of behavior and productivity measurement and objectives related to performance) and should facilitate trust and cooperation between partners. Barkema and Vermeulen (1997) attempted to analyze in more detail the impact of culture on IJV performance. Using five different Hofstede's cultural dimensions - power distance, uncertainty avoidance, individualism, masculinity, and long-term orientation - the authors expected that there would be differences in the impact of various sizes. Differences in uncertainty avoidance are difficult to deal with, because it implies a difference in how people perceive the opportunities and threats in their environment and how they act on them (Schneider and Meyer, 1991). Top organizations avoid the uncertainty of the countries tend to respond to the uncertainties with the construction of a system of high formalization and hierarchy. In countries with low uncertainty avoidance people are more attracted to flexible, ad hoc structures which leave more room for improvisation and negotiation. Differences in uncertainty avoidance lead to differences in how partners perceive and respond to events in the environment of the IJV, which will probably bring up disagreements and disputes between partners, and have a negative impact on performance IJVs. Power distance and individualism directly bear on the internal integration and influence relationships with staff, such as the choice of forms of control, reward systems. Personnel management is usually one of the first activities to be left to the local partner. There is also evidence that multinationals do not transfer cultural values ​​related to power distance and individualism to their foreign subsidiaries (Soeters and Schreuder, 1988). So the tensions between the partners with differences along these dimensions can be avoided. Shenkar and Zeira (1992) suggest that both partners have "feminine" and "masculine" cultures may also benefit from the IJV. The aggressive attitude of a partner and the orientation relationship between the 'can complement each other and not clash. The foregoing discussion suggests that the differences to avoid the uncertainty would be more important than the other three dimensions. The empirical results of Barkema and Vermeulen (1997) supported the expectations: uncertainty avoidance and long-term orientation have had more negative differential impact on IJV survival of masculinity, while the other two dimensions (individualism and power distance ) had no effect. What about the Asian context we can say that all Asian cultures have potential quite similar cultural profile. This profile includes many levels and decision making, more risk taking, the greater emphasis of the group, and a greater concern for relationships (Swierczek and Hirsch, 1994). This can be applied to TNC where the share of Thai culture and Japanese, some similarities.

A culture can affect how you are willing to trust a possible joint venture partners. In terms of culture, the Japanese tend to be somewhat 'introverted in their ways. They generally are not receptive to outsiders. In conducting business with the Japanese, it is important to note that relations and group loyalty is key to success.

(Http :/ / www.geert-hofstede.com/hofstede_japan.shtml)

According Hofsted cultural dimension scores, the score of Japan is radically different from other Asian countries. Masculinity in Japan is the highest characteristic. The lowest ranking factor is individualism, which coincides with their high ranking in uncertainty avoidance. Japan is a more collectivist culture that avoids the risks and shows little value for personal freedom.

(Http :/ / www.geert-hofstede.com/hofstede_thailand.shtml)

In contrast, the lowest dimension of Thailand is individualism (IDV). A low score, such as Thailand, indicates the company is collectivist than individualist that this rating is even lower than Japan. You can tell that this was manifested in the first long-term commitment to 'group' member, is that a family, extended family, or extended relationships. Moreover, the main category different than the size of Japanese masculinity that places the lowest among Asian countries. This lower level is indicative of a society with less assertiveness and competitiveness, compared to that in which these values ​​are considered more important and significant. This situation also reinforces traditional gender roles within the population.

2.5.2 Compatibility between national cultures
Ones Culture also influences the perception of those environmental factors mentioned above, if your business interests are similar (or conflict), if your goals are complementary, if the differences in size are important, what timetable should apply. In theory, partners are more likely to agree on these points where cultures are compatible. That is, a joint venture formed by parents of similar cultures stands a better chance of success than those based on between dissimilar cultures (Wille, 1988).

2.5.3 Different organizational cultures
If the organizational cultures of the two parents vary widely, an alliance of success may not be possible. However, this is not always the case. In the situation of TNC, the organizational culture of the parent may be advantagous because the understanding of national culture affects performance.

When the talks aimed at bringing in a strategic alliance between Japan's Mitsubishi and Daimler-Benz of Germany was broken, the following report was made:

"Analysts say the match was tense from the start because companies have fundamentally different structures. Daimler-Benz, a Mitsubishi company much smaller, has traditionally had a close-knit management structure that has tended to define clear strategic objectives and move forward. Mitsubishi, an amorphous conglomeration of several large companies, has moved much more cautious with the internal factions often disagree on the broader policy ". (Yamawaki, 1995).

The companies were able to overcome the differences in their strategies, organizational structures and cultures.

The staff sent to the project by the two parents is more likely to work well together when their organizational cultures are similar. This does not mean that they should be identical - an impossible situation. Rather, there must be a sense of comfort about how the other does the business, the will to work together and learn, and need for shared solutions (Fedor and Werther, 1997).

2.5.4 As the IJV organizational culture affects the parent
Parenting an IJV project can influence the culture of the headquarters of the parents with the creation of new spirit of '"internationalism." This is when the personal benefit ADVANTAGOUS home by an influx of new ideas and technologies, and develop new knowledge of the opportunities offered to the environment.

And 'DISADVANTAGOUS when the flow of personnel to IJV (and the influx of substitutions) hinders the internal cohesion. A positive culture is weakened when the staff feels pressured by responsibilities for which they have training and experience. Proponents of the project are isolated. Planning and management of the IJV influences the organizational culture of the headquarters. In order to meet challenges and opportunities resulting from the planned parenthood, the headquarters streamlines and reorganizes its structures (Siddall et al., 1992).

2.6 Prospects motivational between Thai and Japanese
One motivation is the key determinants of their behavior. If the company can understand the reasons of the employee, may influence the behavior of their employees. To motivate others is one of the most important management tasks. It includes the ability to understand what motivates people to communicate, to engage, challenge, encourage, lead by example, to develop and coach, to get feedback, and to provide a just reward. According to (Find Ref), "The motivation is to cultivate human capital. The challenge is not the same job, but you, the one who creates and manages the work environment." However, to motivate people in different crop might be difficult if the level of motivation is not the same. Ref describes how different cultures may be perceived differently. Culture Scandinavian (Sweden, Norway, Finland and Denmark) place a high value on quality of life and social needs. European and Anglo-American cultures place a high value in terms of productivity, efficiency and self-fulfillment. The values ​​of Chinese culture activities collectivism and individualism more than community (Ref Same).

According to Maslow's hierarchy of needs, people have theorized that successive layers of needs, and that as each layer is less than satisfied, then the person moves to the next level. The following diagram explains how the model works:

(Maslow's hierarchy of needs Maslow's model, 1943)

The lowest layer is of physiological needs. And 'the need to eat, sleep, stay warm, use the bathroom, etc. The second level is the security (the need for physical safety and psychological, as dictated by the presence of the law and keep a job). The third layer is to love and belonging (being the need to be part of a family, group or banda). Some might say that this third layer is much more of a Japanese rule as part of a group seems to have priority over the achievement of higher levels. According to (Ref Japanese), it begs the question "How many times have you seen people very skilled as the Japanese deny themselves a full career because of their desire to remain with a few small business on the grounds that it is their 'family? ' "The Japanese always placed a high priority to their company. The fourth layer is that of self-esteem and status. This is where the high achievers living, and are able to stand on the market and professional. The fifth layer is the "discount". According to Wikipedia.com, gives the following description (excerpt): ". Self actualized people embrace the facts and realities of the world, rather than denying or avoiding them are spontaneous in their ideas and actions are creative .. they are interested in solving problems, which often includes the problems of others. "

The interesting point to make here is whether the Thai and Japanese have the same level in Maslow's hierarchy of needs. At TNC, different level of needs may bring the conflict in interactive situations, for example, between employer and employee Japanese and Thai, the model may be necessary to take in its applications across diverse cultures. Even if the culture of Thailand and Japan may be similar, does not mean that they would have the same desire or expectation.

Based on the literature review, the definition of IJV, and the reasons for forming the joint venture were presented. Factors, including cultural differences between Thai and Japanese, and motivational perspectives were explained. However, it is essential and vital to find out how these factors influence TNC employees based on their perception. In Chapter 4, the results and analysis of the interview will be examined.