Nonequity joint venture is a type of company partnership where some shares and controls are enjoyed more by one partner over the other. Some of the advantages include, partners are able to reduce the risk of losing their resources and capital and this therefore enables them to save more. Small companies also benefit since they are able to get the opportunity to work with established companies like Ford Motor. Through this Ford Motor is able to create job opportunities through their manufacturing developing and processing industries (Ni & Alon, 2010).
Ford motors through joint venture have been able to heavily invest in technological progressions. It has also helped the company grow its territories through partnering with several smaller companies. Its revenue to the government has also increased because they are able to get revenue from small companies. The capital needed by smaller companies to invest in technological improvement has reduced as a result of joint venture. This capital is used to advertise their products in the market in order to maximize their profits as they reduce their cost. The joint venture of Ford Motor Company has led to its progression and maintenance of the economy leading to more economic independence when it comes to families and individuals (Ni & Alon, 2010).
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One of the risks associated with Ford Motor Company in engaging in a nonequity joint venture is that partners may be having different objectives and goals. Ni & Alon (2010) insist that his can result to huge losses from disagreements among partners. The partnership may fail due to non-balanced investment, resources and distribution of resources. The business may also be at a risk of crumbling down due to poor leadership and effectiveness by the partner’s .Another reason exposing the business at a risk is the different cultures and behaviors of the partners. There is need for partners to learn their colleague’s cultures and respect them however much they may be conflicting.
Poor performance may arise due to lack of communication on the objectives and policies of the partnership. In case the partnership was formed in a rush such that the partners fail to understand the purposes of the venture, it may lead to its dissolution. Misunderstandings and poor work relations arise when the management of a company assumes and makes decision by himself and not involving the other party. In case of mistrust, it leads to friction among the partners therefore making others to opt out of the venture ( Nijmeier & Huijsman, 2014).
Discuss the risks that an international fast food restaurant, such as Subway, would have by operating abroad rather than just domestically. Include at least two factors or policies, and explain the impact of each.
Cultural risk is one of the risks an international fast food such as Subway would face by operating abroad rather than just domestically. Culture many at times influences individuals taste and preferences. For example, when Subway was started in Japan, the concept was originally changed to the extent that a subway customer from North America would not be familiar with the menu. It was sandwiches, but they had been changed from what was originally offered. With time, it has been made clear that the six-inch, foot long sandwiches and the original menu structure is what made Subway great (Yu & Titz, 2000).
Menu risks are not the only adoptions that Subway or McDonalds would have to face but also the demand in the size of the portion.McDoald’s for instance, offer small sized drinks, fries and even burgers. This practice has been followed by many other companies. George W. Church started Church chicken in 1952 in Texas, San Antonio. Its signature hand was the battered fried chicken and honey butter biscuits. Currently, over 1,650 locations in 25 countries around the world have customers enjoying the same taste of Mexican wrap or chicken. A big difference from the Church’s chicken is that they call it Texas chicken.
It was an important step to change the name in order to meet the cultural demand and religious norms of the international markets. However, the typeface, design and colors of the logo remained the same.
Political risk is the next risk faced by International fast food companies. International fast food companies need to examine carefully the political stability of their region of interest since the supply chains, production process, employee’s safety and customer purchasing may be affected by volatility. Examples include violent illegal removal of government power, change of government power, armed conflicts and nationalization of production facilities.
Different government agencies like the US department of countries warnings can be good sources to help evaluate economic and political risk. Companies such as Subway and McDonald should consider political insurance that has been made to help mitigate the financial needs that arise from political damage (Rothacher, 2004).
Next risk is that this companies have to become valued part of the local community to grow their brand and create favor in the market. Coca-Cola participates in different local projects and this way it is able to demonstrate its obligation to global market. They created 650 clean water installations in Egypt to provide members of the local area with portable water
References
Ni, L., & Alon, I. (January 01, 2010). U.S.-Based Fast-Food Restaurants: Factors Influencing the International Expansion of Franchise Systems. Journal of Marketing Channels, 17, 4, 339-359.
Nijmeijer, K. J., Fabbricotti, I. N., & Huijsman, R. (January 01, 2014). Making Franchising Work: A Framework Based on a Systematic Review. International Journal of Management Reviews, 16, 1, 62-83.
Yu, Z., & Titz, K. (January 01, 2000). Franchising opportunities in China for American fast food restaurants. Asia Pacific Journal of Tourism Research, 5, 1, 38-46.
Rothacher, A. (2004). Corporate cultures and global brands. Singapore: World Scientific Pub.
