...SECTION IV: RECOMMENDATIONS Decision Criteria MABE’s decision criteria for evaluating their current position as part of a joint venture in Russia includes: * The joint ventures’ ability to generate future sales growth and substantial operating margin * The impact of Russia’s changing external environment on the joint venture and MABE as a whole * Other global opportunities for growth in emerging markets, including China and India OPTION 1. Continue Operations in Russia with the JV Cons: * The JV may have not yielded the results the venture intended on achieving, but the potential for earning increased profit exists. They will have to work hard for it to produce, as it should. * Amount of expenses currently incurred by MABE can be cut significantly but not at the current operational plan. Pros: * The venture currently has a 4 percent market share in stove sales, and a 2 percent market share in refrigerators and washing machines in operations in Russia. * Sales were at $70 Million in 2011, which suggests an increase in consumption and spending in Russia since the economic downfall of 2008. * The narrowing of the JV’s product line should produce better results than their previous expectations of providing a broad line of products able to serve the Russian market. * Strengthened management team within the past four years * Being fused within Fagor’s portfolio * Being within a such a vast geographical market. OPTION 2. Implement...
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...[pic] ConocoPhillips – Final Report MBA 808 – Moscow May 1, 2008 Scott Legler Erin Osborn Greg Whitehorn Introduction The ConocoPhillips and LUKOIL joint venture provides great insight into doing business in Russia. The Russian economy continues to grow as companies domestically and internationally find success in an emerging market once filled with corruption and instability. Through an analysis of the ConocoPhillips and LUKOIL joint venture one can see the opportunities available for those companies who are able to enter this market. ConocoPhillips provides lessons learned and a six-step approach for a successful joint venture business in Russia. ConocoPhillips also provides insight into many of the challenges still facing those who desire to do business in Russia. They prove that with a will to confront and determination to overcome these challenges, business in Russia can prove to be quite profitable. Background ConocoPhillips ConocoPhillips is the third largest energy company in the U.S. Based on market capitalization; it is surpassed in size only by U.S. oil giants Exxon Mobile and Chevron. ConocoPhillips is headquartered in Houston, TX and employees over 32,000 people worldwide in forty countries. According to its website “ConocoPhillips is known worldwide for its technological expertise in reservoir management and exploration...
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...BP in Russia Executive Summary This case study “BP in Russia: Settling the Joint Venture Dispute” goes into the major world energy companies and the formation of joint ventures. This case delves into the 50/50 international joint venture (IJV) formed between British Petroleum (BP) and a group of Russian investors, Alfa Group, Access Industries, and Renova known as AAR. This IJV was formed in September 2003 and was known as TNK-BP.1 TNK-BP’s CEO was Robert Dudley in May 2008. This is when the dispute between the British and Russian shareholders started to escalate. AAR thought that BP was treating TNK-BP as a subsidiary and not a JV. The escalation of the conflict got to the point where BP was seriously considering whether they should walk away from the IJV by selling its stake, acquire AAR’s stake or continue the IJV. This case analysis will explore BP and whether it was a good strategy to enter Russia and pursue an international joint venture with consortium AAR. Next the analysis will look at the evolution of the joint venture and examine the unique challenges faced by the international joint venture. Next the study will detail our recommendations regarding the AAR partnership, their implications and steps to implement this. Lastly the case will be updated to the present time. 1. Did BP pursue the right strategy to enter Russia? There are arguments both for and against BP’s decision to enter Russia. Perhaps the biggest disadvantage to BP’s strategy was...
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...MABE: Learning to Be a Multinational Strategic Management 75-498 Section 1 Professor T. Mao By group 10: Daniel Sgro 103442079 Elizabeth Oduwole 104078842 Mohammad Rafi Siddique 103606130 Si Shen 103552129 Table of Contents 1. Problem Identification…………………………………………………..…2 a. Key Issue……..………………………………………………………………...…2 2. Situation Analysis………………………………………………………..…2 b. External Analysis……...…………………………………………………………2 i. PESTEL………….……………………………………………………...….……2 ii. Industry………….………………………………………………………….……3 iii. Porter’s 5 Forces…..……….……………………………………………………3 iv. Diamond Model……………………………………………………………….…4 v. 1-2-3 Model………………………………………………………………………4 vi. CAGE Framework…………………………………………………………....…5 c. Internal Analysis………………...…………………………………….…………5 vii. VRINE……………….………………………………………………..…………5 viii. Value Chain…………..…………………………………………………………6 ix. Financial………………..……………………………………………..…………6 3. Alternatives & Recommendation…………………………………….……7 d. Alternatives………..………………………………………………………..……….……7 e. Recommendation………...…………………………………………...….…….………....7 f. Implementation………………………………………...………………………………...8 g. Contingency Planning……………………………………………………………………8 4. Appendices………………………………………………………….………9 h. Appendix A: VRINE Table…………………………………………………......……….9 i. Appendix B: Decision Matrix…………………………………………....…….…..……9 j. Appendix...
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...laws govern arbitration in the U.S.? In Russia? Monarch Associates entered into a joint venture with Vladir Unlimited. Before signing this agreement did both parties really understand what a joint venture was going to entail. According to Jane Mallor a joint venture is “a form of business organization identical to a partnership, except that it is engaged in a single project, not carrying on a business” (Mallor, 2013). “When individuals, partnerships, or corporations make a private agreement to finance, produce, and sell goods, securities, or commodities for a limited purpose and/or a limited time, they have formed a joint venture. Joint ventures are a popular way for developing nations to attract foreign capital. (2008, Kubasek). The benefits and risks associated with a joint venture can be both beneficial and/or destructive. Some benefits can be as follows: 1) access to new markets and distribution networks 2) increased capacity, sharing the risks with a partner 3) access to greater resources and technology Some risks associated with joint ventures are: 1) The objectives of the venture are not 100 per cent clear and communicated to all those involved 2) The partners have different objectives for the venture 3) Different cultures and management styles resulting in poor integration and cooperation of the parties involved. These are just a few of the benefits and risks for those who are interested in joint ventures. * In your opinion, in which...
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...move was risky but potentially necessary to in order to move itself to a better position within the market. By moving into Russia first through a joint venture with VNG Phibro hoped to gain access to a significant source of scarce input crude petroleum One of the main reason moving into new market is that a company has a specific expertise to share to allow it to gain a competitive advantage. While Phibro certainly had a capital to contribute to any venture its expertise in the oil industry was limited and it has been in operation only for less than ten years before it took on the White Night Project. This lack of expertise showed itself in the mistakes it made while entering the Russian market. First the company had trusted the Russian estimates of the available oil rather doing its own research. This was a costly mistake when it turned out that the estimates of available crude oil was too generous. Second the company entered into a contract that left it dependant of on its foreign partner. Phibro promised to provide capital to find the needed technology and services, while VNG would provide the feels and the infrastructure. This left Phibro with little control over how to work was implemented in Russia. It also left Phibro with a partner that was required to continue to selling oil to its traditional customers, which because of economic crisis in Russia could not afford to sell pay for the oil. Finally Phibro did not bring any other strategic partners into its agreement. Phibro...
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...Rus Wane Equipment Case Study Joint Venture In Russia Michael G Rutkowski Upper Iowa University Abstract Wane Machines Inc. engages in the manufacturing, installation, and maintenance of large scale heating and cooling equipment for office and apartment buildings. In February 1990 a joint venture was formed called Rus Wane Equipment with NLZ, a medium sized factory outside Moscow, that manufactured similar equipment, but of much lower quality. This case shows the difficulties that can arise if a company does not follow the organizational structure, management systems, and the human resources policies of the company. And how changing government legislation in a rapidly changing business environment like Russia, can have serious financial impacts and decline the advantages of a joint venture. This case shows the situations and difficult problems that can arise from a joint venture between Wane Machines, Inc and NLZ the Soviet partner company. Wayne Machines started in New York City and specializes in manufacturing, installing, and maintaining large scale heating and cooling equipment. The corporation is divided into four divisions that unite 50 companies in 160 countries. After exploring markets in Eastern Europe and the Soviet Union a Soviet-Belgian joint venture was formed in February 1990, called Rus Wane Equipment. Rus Wane established another joint venture with a St. Petersburg partner, to install and service its products in Russia. The market potential in the...
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...In 2003-5, BP and the AAR consortium led by three billionaires with Russian connections - Mikhail Fridman, Len Blavatnik, and Viktor Vekselberg - merged their Russian oil corporate assets - TNK, Sidanko, and Onako and their subsidiaries - under the umbrella of TNK-BP.2 This joint venture was established on a 50/50 basis, the operation of which required mutual joint decision making. The partners also signed a shareholding agreement on TNK- BP’s right of first refusal in relation to potential future oil and gas projects offered to BP or AAR in Russia and Ukraine. This agreement was subsequently used by AAR to stop the BP-Rosneft deal in international courts. Unfortunately, this was not the first time that BP had been unable to change the way it conducted its business in Russia. The first example occurred in 2007-8 when BP was reported to be keen on having Gazprom as a partner instead of AAR. This move would have transformed the TNK-BP joint venture into Gazprom-BP. This did not transpire. Second, in the spring-summer 2008, there was a turbulent ‘misunderstanding’ between BP and AAR, over the corporate governance and future strategy of their joint venture. This led to the removal of Robert Dudley from the helm 1 Shamil Yenikeyeff is a Research Fellow at the Oxford Institute for Energy Studies and a Senior Associate Member at the Russian and Eurasian Studies Centre, St Antony’s College, University of Oxford. Dr Yenikeyeff is the...
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...TNK-BP (RUSSIA) 2008 – (A07-09-0006) 1. Why did BP create TNK-BP? Are the partners equally committed and motivated to create a successful venture? 2. How has the JV performed? Has it met expectations? 3. Why has the JV experienced so many problems? 4. Does the Russian government have a specific agenda for the JV? 5. What options does BP have? What would you recommend? 1. In comparison with its competitors, the production growth of BP was constrained by its mature oil fields. As a result of the constrained production growth, BP’s financial performance was lagging behind compared to the financial performances of their competitors (e.g. ExxonMobil, Shell). Therefore, BP was aggressively looking for new oil reserves (p. 2). Russia was the world’s largest natural gas producer; the proven reserves were ranked 7th worldwide and there were huge opportunities for further exploitation. It seems like the Russian part of the joint venture is less motivated. They have done this deal to improve profits and to increase their benefits and potential growth. 2. For BP, the joint venture worked out quite well. As stated in the text: “TNK-BP accounted for nearly one-quarter of BP’s oil production.” If the joint venture comes to an end, this would have serious (financial) implications for BP. Also, in the period 2002-2006 the net profit grew from 1.5 million dollars to 6.4 million dollars. 3. One of the issues was that the partners were not in agreement as to the level of...
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...businessmen, whom were represented by the AAR, announced a strategic partnership which was designed to jointly hold their oil assets and the creation of TNK-BP in Russian and the Ukraine, on 1st September 2003. AAR’s holdings in TNK international, ONAKO, SIDANCO, RUSIA Pretrolum; whom held license for Kovytka and Verkhnechonsk fields), and Rospan field located in West Siberia, were all contributed towards TNK-BP. On the other hand BP’s holdings in SIDANCO, RUSIA Petroleum and its BP Moscow retail network, all contributed towards TNK-BP. BP and AAR reached an agreement to consolidate AAR’s 50% stake in Slavneft and into TNK-BP, in January 2014. ARR and Sibnett (now known as Gazprom Neft) previously joined Slavneft. Slavneft has operations in Russia and Belarus. Production increased to 1.69 million barrels per day of oil in 2009, compared to 1.642 million barrels per day of oil produced in 2008. Also in 2009, TNK-BP’s total proved reserves reach 329% in compliance with PRMS methodology (previously known as SPE). The average SEC LOF reserve ratio only accounted to 139%, over the past five years. TNK-BP acquired BP’s upstream...
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...INTRODUCTION 3 THE PROPOSAL 3 TALK TO ME INC. 3 THE RUSSIAN ENVIRONMENT 4 DOUBTS ABOUT THE PROPOSAL 5 DECISION ANALYSIS 5 What really happened 6 REFERENCES: 6 INTRODUCTION The present case study refers to Talk to Me Inc., a company specialized in telecommunications that examined back in 1995 whether or not to expand in the Russian market. The company’s background and action so far, as well as the environment of Russia played a catalytic role in making the decision of expanding in the soviet country. THE PROPOSAL The case begins with the proposal of the Russian Ministry of Communications to Talk to me Inc., known as the 50/50 project. The purpose of this project is to develop an entirely new telecommunications network in Russia and got its name from its goals. In particular, the 50/50 project’s aims were to connect 50 Russian cities, to establish 50 long-distance transit switches and 50 thousand kilometers of digital lines. The 50% of equipment required for the project would be manufactured in Russia and the 50% of the funding would come from Russian resources. This project was expected to last 10 years, with an estimated Budget of $40 billion. Among Talk to me Inc., the Ministry had also approached numerous other American telecommunications companies, such as AT&T and US West, as well as large European organization, for example Deutsche Telekom and France Telecom. TALK TO ME INC. BACKGROUND: Talk...
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...study, Danone formed an affiliation with Wahaha Group to get a better foothold in the expanding Chinese market. Cultural: In Spain and Italy Danone established relationships with local suppliers. In Eastern Europe Danone took over local suppliers to exploit growing demand for fresh dairy products. Fewer Chinese citizens have refrigerators to hold fresh dairy products. Administrative Danone rarely sends executives (or resources) to their joint ventures, but allows them to be autonomous. Danone and Wahaha (Chinese) joint venture Danone has been accused of trying to become a monopoly in the Chinese market. Human Resources The Danone Way Programme: Embodies Danone’s commitment to combining business success and attention to people and the community Human resource policies represent a dual commitment to success and social progress Partnerships and joint ventures allow Danone to access new markets and capitalize on consumer trends. Partnership with subsidiary Stonyfield to create Dannon Oikos Greek Yogurt. Acquiring local businesses and its joint ventures with Wahaha Group gained Danone entrance into the Chinese market. Organization Structure: Danone tailored its strategic plan to meet the needs of the local...
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...CASE 6.3 ELLY LILLI IN INDIA: RETHINKING THE JOIN VENTURE STRATEGY Summary: The case consists of two major pharmaceutical companies that joint to collaborate their research and pharmaceutical technologies to start a joint venture in India. Both have valuable resources that have benefited both companies during the joint venture. Now both are questioning if there is still any value in maintaining the joint venture in India and will be deciding what will be the best route to take. Ranbaxy Laboratories wants to be bought out, but Eli Lilly is worried of the financial implications of such move. There were two pharmaceutical companies that were looking for ways to expand globally to position themselves in a competitive advantage from their competitors. One was located in the United States, which was Eli Lilly and Company and the other one was located in India, which was Ranbaxy Laboratories. Research and development was crucial to Lilly’s long-term success. Ranbaxy Laboratories was a firm that was evolved into a serious research-oriented firm. With the change, in the government, India was attracting foreign investors in the pharmaceutical industry. Lilly decided to form the joint venture in India to focus on marketing Lilly’s drugs there, and a formal JV agreement was signed in November 1992. The main key issues of this case are as follow. The pharmaceutical industry had come about through both forward integration from the manufacture of organic chemicals and a backward integration...
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...Muhammad Faisal Shaikh SP11-MB-0101 Vision Create an exploration led and Sustainable cash generative oil and gas business Offering shareholders exposure to material Capital growth potential. By constructing a balanced portfolio of growth opportunities, Whilst retaining a strong balance sheet, we Are well placed to repeat the cycle of creating, adding and realizing shareholder value. 2012 Acquisition of Nautical Petroleum Nautical was an independent oil and gas exploration and production company. It had development assets in the United Kingdom North Sea (including interests in the Catcher, Kraken and Mariner fields) and exploration assets in the United Kingdom, Ireland and France. Acquisition of Agora Oil & Gas AS Agora was a private Norwegian company with non-operated, exploration, appraisal and developmental assets in the UK and Norwegian North Sea. Proposed $3.5 billion return of cash to shareholders announced Shareholders to receive £1.60/share dividend for each Ordinary Share. 2011 Simon Thomson becomes Chief Executive Part sale of shareholding in Cairn India to Vedanta Resources plc completed Cairn retains an approximate 22 per cent shareholding in Cairn India. 2010 Proposed part sale of Cairn India to Vedanta Resources plc Cairn announces the proposed part sale of up to 51% of its shareholding in Cairn India to Vedanta. Cairn's interests in Bangladesh acquired by Santos Santos acquires all of Cairn's assets in Bangladesh, including its interest...
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...Muhammad Faisal Shaikh SP11-MB-0101 Vision Create an exploration led and Sustainable cash generative oil and gas business Offering shareholders exposure to material Capital growth potential. By constructing a balanced portfolio of growth opportunities, Whilst retaining a strong balance sheet, we Are well placed to repeat the cycle of creating, adding and realizing shareholder value. 2012 Acquisition of Nautical Petroleum Nautical was an independent oil and gas exploration and production company. It had development assets in the United Kingdom North Sea (including interests in the Catcher, Kraken and Mariner fields) and exploration assets in the United Kingdom, Ireland and France. Acquisition of Agora Oil & Gas AS Agora was a private Norwegian company with non-operated, exploration, appraisal and developmental assets in the UK and Norwegian North Sea. Proposed $3.5 billion return of cash to shareholders announced Shareholders to receive £1.60/share dividend for each Ordinary Share. 2011 Simon Thomson becomes Chief Executive Part sale of shareholding in Cairn India to Vedanta Resources plc completed Cairn retains an approximate 22 per cent shareholding in Cairn India. 2010 Proposed part sale of Cairn India to Vedanta Resources plc Cairn announces the proposed part sale of up to 51% of its shareholding in Cairn India to Vedanta. Cairn's interests in Bangladesh acquired by Santos Santos acquires all of Cairn's assets in Bangladesh, including its interest...
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