The major strains on collaborative arrangements are due to five factors:
a.Collaboration’s importance to partners”One partner may give more management attention to a collaborative arrangement than the other does. If things go wrong, the active partner blames the less-active partner for its lack of attention, and the less-active partner blames the more active partner for making poor decisions. The difference in attention may be due to the different sizes of partners.
b.Differing objectives”Although companies enter into collaborative arrangements because they have complementary capabilities, their objectives may evolve differently over time. For instance, one partner may want to reinvest earnings for growth and the other may want to receive dividends. One partner may want to expand the product line and sales territory, and the other may see this as competition with its wholly owned operations. A partner may wish to sell or buy from the venture, and the other partner may disagree with the prices.
c.Control problems”By sharing the assets with another company, one company may lose some control of the extent or quality of the assets’ use. When no single company has control of a collaborative arrangement, the operation may lack direction. Studies show that when two or more partners attempt to share in an operation’s management, failure is much more likely than when one partner dominates. However, the dominating partner must consider the other company’s interests. For this reason, studies also show that joint ventures with an even split in ownership are likely to succeed because the financial ownership ensures that management will consider both partners’ interests.
Ford motor company manufactures or distributes automobiles across six continents. The company’s automotive brands include Ford and Lincoln. The company provides financial services through Ford Motor Credit Company. Under the leadership of CEO Alan Mulally, Ford Motor Company transformed their manufacturing operations to enable a complete turnaround of fortunes between 2008 and 2010. In 2010 ...
d.Partners’ contributions and appropriations”One partner’s capability of contributing technology, capital, or some other asset may diminish compared to its partner’s capability over time. In almost all collaborative arrangements, there is a danger that one partner will use the other partner’s contributed assets, enabling it to become a competitor.
e.Differences in culture”Companies with different cultures differ in how they evaluate the success of their operations. In addition to national culture, differences in corporate cultures may also create problems within joint ventures. For example, one company may be accustomed to promoting managers from within the organization, whereas the other opens its search to outsiders. One may use a participatory management style, and the other an authoritarian style. For this reason, many companies will develop joint ventures only
after they have had long-term positive experiences with the other company through distributorship, licensing, or other contractual arrangements.