ABSTRACT:
Petrochina, one of the largest companies in the world, has
established a joint venture with Ineos refining in 2011, with strategic motives to attain competitive advantage and core competence. From the context of corporate strategy and joint ventures, a joint venture is the best way to share and utilize the complementary assets from another company with low risk compared to any other process such as acquisitions. Using the resource based theories such as PESTEL and VRIN , the paper has derived that Ineos will contribute to build a core competence and competitive advantage through its distinctive capabilities. The several issues faced by the firm such as low market demand for oil products, threat of take over and complexities
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Also they have already
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laid the initial foundations in the Asian market after acquiring stakes in the Osaka refinery in Japan, Singapore Petroleum Co in Singapore and the energy company's agreement to form a new trading and refining joint venture (JV) in Europe with Ineos Group Holdings Plc of the UK. This will help the Chinese company to gain a foothold in the European market (Yan.Z, 2011). Ineos is an international player in the field of manufacturing petrochemicals, specialty chemicals and oil products. Its production network spans 60 manufacturing facilities in 13 countries throughout the world (Ineos, 2012).
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JOINT VENTURES IN THE CONTEXT OF OIL INDUSTRY
JVs afford unique opportunities to study howfirms assert property rights over jointly
used assets because parents clearly delineate control (Hege.U, 2009). JVs are more on contractual basis or take the form of an agreement which helps the parties involved to access each other's assets and expertise to achieve or exploit synergies. These are also called equity alliances. During 2010 and 2011, the number of mergers and acquisitions in the oil and gas industry was very high. Total transactions in the world during 2010 hit the highest with a value of $226 billion. The main reasons for JV's to be considered in this industry are capital intensive, high risk, access to technology, access to resources, supply chain optimization, market positioning and portfolio
Company has evolved to handle joint ventures, but not all of them turn into successes.
Joint ventures (JV) are a popular method of foreign market entry because they theoretically provide a way to join complementary skills and know-how, as well as a way for the foreign firm to gain an insider’s perspective on the foreign market. Since China began its market opening in 1978, joint ventures have been the most commonly used form of foreign direct investment (FDI), with about 70% of FDI in China in the 1980s and 1990s taking the form of joint ventures (Qui, 2005, p. 47). The Chinese company, as well as the foreign investor, has since 1978 been drawn to the joint venture form. Walsh, Wang & Xin (1999) note that from the Chinese
When a certain point is reached regarding a company’s success, a set of different opportunities arise and partnerships may unfold. However, with every possible strategy available, risks and benefits also come into play; without discarding any of them beforehand, every option is a strong candidate until a final decision is made. In this case study we will analyze the current business strategy pertaining
Selecting a business strategy that details valuable resources and distinctive competencies, strategizing all resources and capabilities and ensuring they are all employed and exploited, and building and regenerating valuable resources and distinctive competencies is key. The analysis of resources, capabilities and core competencies describes the external environment which is subject to change quickly. Based off this information a firm has to be prepared and know its internal resources and capabilities and offer a more secure strategy. Furthermore, resources and capabilities are the primary source of profitability. Resources entail intangible, tangible, and human resources.
In order for the strategy to be successful it should realistically assess the company’s internal resources. An internal analysis is used to identify the strengths of the company and identifies the weakness to overcome in the strategy. The internal analysis will help with understanding the internal issues that exist at StilSim by evaluating a value chain analysis, a resource analysis, core competencies and a stakeholder analysis.
Risk sharing is one of the circumstance why MNEs form JV, it is commonly practiced in industries that require high capital and where the cost of developing a product is very high (Zhou and Li 2008). IJVs allows to gain rapid entry into a new industry and to benefit from synergies to develop a new product or technology (Dr. Ananthram. 2016). For example NEC-AT&T.
The lesson learned from this is that sometimes it is easier and faster reach a new market via joint venture, even though the profit will be less, but the company can save a lot of money in studying the new market trying to understand the new culture and how they purchase and also it can minimize the risk because there is a national brand supporting the new international brand, which gives confidence and security to the customers.
Competitive strategy, after Porter, came to be defined as the strategy of a business unit which seeks to achieve sustainable Competitive Advantage (SCA). The literature on strategy deems the market-based view (MBV) and the resource –based view (RBV) as two approaches to giving businesses the competitive edge they need to compete in their industries. Aside from having competitive advantage as their ultimate goal, the two approaches are also similar in the sense that they both make use of particular tools and models in their undertakings. They also differ in numerous ways,
Moving ahead,in order to get the idea about company’s internal environment and its capacity to survive and prosper in the market(Strategic capability), I analysed the resources and competencies(Appendix 3) ,the value chain (Appendix 3),the Cultural Web(Appendix 5). To find out the influence of stakeholders on the company I applied Power/Interest to the company and finally analysis of strengths,weaknesses ,opportunities and threats to the company(SWOT Analysis-Appendix 7) provide with clear idea about the strategic position of M&S.
We found innovation, cost reduction and market conditions as key elements supporting a successful internal strategy and strategic alliance and diversification to be among the most widely applied strategies for a foreign market penetration and development, while fusions and licenses were the least preferred.
i. By creating a sourcing contract with the JV partner, one will minimize the risk of financial lose. Example: If there is a change in Renaults production goals.
It is because through the joint venture, the company is more familiar with the situation of the company there. The negative outcome is that the management system different between the company. So it is hard to make a decision making. It is because there is different opinion of each person.
1) Barney, J., (1991). Firm Resources and Sustained Competitive Advantage, Journal of Management, vol. 17 (1991), no. 1, pp. 99–120.
The initial market entry strategy implemented by Hyundai Korea was a joint-venture. However, after liquidation (1999), the new entry strategy for re-establishment was franchising. The aim of this paper is to show how Hyundai can reposition its operational strategy utilising a management
Joint ventures have further benefits. Joint ventures are based on sharing individual ability and resources for the purpose of achieving a mutually beneficial objective. Sony gains access to Ericsson’s market share and their network of infrastructure and handset technology. Ericsson can acquire Sony's experience on consumer electronics, fashionable designs and production processes. Hence, the joint venture overcomes Sony's low market share and strengthens Ericsson's ability of research and product development. Thus joint ventures resolve the opportunism issue with OEM, licensing and franchising.