[PM1473005] MANAJEMEN STRATEGICASE ASSIGNMENT :NORA-SAKARI : A PROPOSED JV IN MALAYSIARichard Ivey School Of BusinessThe University Of Western Ontario, 2006AGUS HERMANTO

[9112205310]HUSIN

[9113205316]ADISTRA WIDYANIE

[9114201305]DOSEN

F.A. HANDOKO SASMITA, MBA.PROGRAM MAGISTER MANAJEMEN TEKNOLOGIINSTITUT TEKNOLOGI SEPULUH NOPEMBER

SURABAYA

2015NORA-SAKARI : A PROPOSED JV IN MALAYSIA1. How important is the joint venture to Nora and Sakari?In this case, Nora is looking for partners who will work to ensure their ability to comply with the contract TMB, as well as the Sakari learn from and emulate the success of the model in the Malaysian market. The JV company will be the best destination for if they are able to reach the negotiations, Nora would benefit from the JV in terms of technology transfer. Sakari is one of the leading telecommunications companies in Europe. It will be a very valuable opportunity for Nora to learn from the experience of Finland and emulate their success to Malaysia.Although, Sakari was a relatively a small player in fixed networks, these networks were easily adaptable, and could cater to large exchanges in the urban areas as well as small ones for rural needs. Apparently, Sakaris smaller size, compared to that of some of the other MNCs, was an added strengths because Sakari was prepared to work out customized products according to Noras needs. Large telecom companies were alleged to be less willing to provide custom-made products. Instead, they tended to offer standard products that, in some aspects, were not consistent with the needs of the customers.Sakari has experience in the exporting market and they have modular based open standard technology which would be another key advantage Nora would be benefited from its Finnish counterparts. On the other hand, Sakari would also be benefited from the JV Company contract between Nora and Sakari because the venture would pave the way for Sakari to acquire knowledge and gain access to the market of south-east Asia. Sakari's main objective is to acquire knowledge of, and gain access to, South Asian markets for Telecom products would be fulfilled if the contract is successful. Furthermore, in Malaysia and Thailand, fixed network project were approaching contract stage therefore, for Sakari, it is imperative that Sakari established its presence in this region to capture the share in the fixed network market.

The other evidence that the Joint Venture (JV) will be beneficial for Sakari is that the large potential for telecom facilities was also evidenced in the low telephone penetration rates for most South-east Asian countries. For example, in 1999 there were only 20 phone lines per 100 people in Indonesia, Malaysia, and the Philippines. Whereas, there were 55 telephone lines per 100 people in United States, Canada, Germany, Finland, and Sweden.

Finally, Sakari would be benefited from the Noras advantage of local knowledge of Malaysia and Asian Market. Not only this but also Nora has strong government ties and they already has a contract in hand. Beside this, Nora has experience working with companies based in developed countries.2. If the joint venture was important, why have the negotiations failed to this point?Negotiations to date between Nora and Sakari have failed mainly due to a mutual ignorance of one another's cultural norms.One of the key reasons for failed to result in an agreement is that there is huge gap between what Nora and Sakari can sacrifice to successfully negotiate the contract with each other. Following are some example proving how far they are from the real contract. Sakari proposed an equity split in the Joint Venture (JV) Company of 49 percent for Sakari and 51 percent for Nora. Whereas, Nora proposed a 30 percent Sakari and 70 percent Nora Split.Sakari proposed to provide the JV Company with the basic structure of the digital switch where by the JV Company would assemble the switching exchanges at the JV plant and subsequently install the exchanges in designated locations identified by TMB.On the other hand, Nora proposed that the basic structure of the switch be developed at the JV Company in order to access the root of the switching technology.Sakari proposed a royalty payment of five percent of the JV gross sales while Nora Proposed a payment of two percent of net sales.3. Should Nora and Sakari renegotiate? If yes, how should they restructure the deal to reach a win-win situation?Yes, they should renegotiate, because Nora and Sakari is a successful company in the field of their respective businesses. Nora is one of the leading vendors of telecommunications equipment in Malaysia. Sakari can gain a lot of strength Nora and knowledge of the culture and the market. On the other hand, Sakari is one successful niche market players to supply the digital switch technology. Therefore, both companies have their own strengths and advantages over the other and both partners can learn and gain a lot from each other. Therefore, in my opinion, should the two companies have to compromise so that the contract can be realized. While talking about the restructuring negotiations, the following are the main areas that will be taken into consideration in the restructuring negotiations, namely :

Ownership : The first issue that must be restructured is about ownership and control of resources. In my opinion, Nora got a majority portion of the equity JV (60 percent to 40 percent for Nora and Sakari) because of two things: The JV will operate in Malaysia and not in Finland and Nora understand their culture better than Sakari, then the The second is that Nora has a competitive managerial strength and suitable to manage the JV. Therefore, it would be better if Nora holds a greater percentage than Sakari.

Technology : The second problem is that the technology transfer would be better if Nora Sakari accept this proposal. Every company wants to control the transfer of technology at the highest level. Therefore, Nora must let Sakari to keep the development of technology in their homes and receive the proposed assembly and installation plan of this Sakari.

Royalties : In my opinion, Royalties to be compromised as Nora because of financial stimulation drawn up by the manager Nora Nora indicated that the return on investment will be less than 10 percent of desirable if royalty rates exceeding three percent of net sales.

Arbitration : In my opinion, to arbitration a neutral location should be in addition to KL and Helsinki, so there is no companies feel like a benefit for themselves in terms of future disputes.

Salary and Perks : Salary and Perks should be administered in accordance with the conditions in Helsinki for both companies and their JV requires the expertise of Finnish experts who will work for Sakari. Therefore, salaries and benefits should be given according to the rules and rates in Helsinki. Therefore, it would be better if Nora agree with Sakari regarding Salary and Perks.

In conclusion, if the facts mentioned above reconsidered later Nora and Sakari Joint Venture agreement will probably be realized.4. How do you compare this joint venture project with other options available to the parties involved (e.g., licensing)?How companies expand their business abroad decide whether they should provide their technology license to a local company or form a joint venture with companies or acquiring it? Which of these choices will give them the most benefit?

An important feature of the model is that a company can switch from one setting another during the life of business. Initially the company can form a joint venture, but then one partner can buy other shares in the joint venture atapun turned into licensing.There are several factors in the decision, that is : the first factor is uncertainty about the absorptive capacities of the parties and how their ability to assimilate and apply new knowledge will grow over time. The second factor is the "friction", or difficulties in the transfer of knowledge of the company or assets, and the related incentive problems. The third factor is the cost associated with the "power of a scramble," when parties try to tip the balance of bargaining power in their favor during the operation of the business.

Meanwhile, there are some risks and disadvantages for licensing. The Company may lose control over the manufacture and marketing of goods in other countries. As an international market entry mode, the license may also be less favorable than other options because the back should be divided between the two parties. In fact, there is a risk that a foreign license can sell the same competitive after a license agreement expired. Risks and other issues involving choosing a partner, as well as all general uncertainty in doing business with international partners, including language, culture, political risk, and currency fluctuations. Alternatives for licensing including exports, acquisitions, establishing international subsidiaries, a wholly-owned franchises, and forming strategic alliances.Finally, there is the cost of switching from one another arrangement after the commencement of the initial effort. These costs generally arise from government policies in the host country, such as the level of foreign ownership limits.