Are American joint ventures with an overseas partner tantamount to embracing risk?
Which political risks might an organization guard against? What strategies might you put in place to mitigate political risks for your organization? Why?
How may large international firms take advantage of market imperfections? What are the firm’s main competitive advantages? Explain.
Solution Preview
Risks in Joint Venture:
American joint ventures with an overseas partner are
tantamount to embracing risk because there can be an imbalance in
the level of expertise, assets and investment, which is
incorporated into venture by both partners. In addition, there may
be a huge difference in cultures and management styles between
American partners and overseas partner in the early stages due to
poor integration and cooperation (Tarun, 2010). Apart from this,
differences in laws and regulations also create risks for an
American joint venture with an overseas partner. For example, in
1980, American Motors Corp. entered into a joint venture with
Chinese government to produce Jeeps in Beijing. However, the
Chinese government created many complications and problems that
affected the business operations of American Motors and reduced its
profits significantly (Wang, 2013).
Leadership in Risk Management Strategy:
The risk strategy affects the leadership’s need by raising
the requirement of better communication and flexible relationship
among the leaders of the firms. Leaders should be capable to make a
risk portfolio associated to the different risks such as political,
social, cultural, technological, management risk, etc. and develop
better risk management approaches to mitigate these risks (Wang,
2011). Additionally, leadership also needs to develop trust and
coordination among …
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