Nora-Sakari: A Proposed JV in Malaysia Case Solution
Introduction and key issues
Nora is considered as a dominant player in Malaysia with respect to the telecommunications equipment, and is the leading supplier across this region. Moreover, Sakari is a Finland-based company, which is famous for the deployment and manufacturing of the broadband network infrastructures. Both the companies are operating in the telecom industry, and both companies entered into a bidwith the TMB in order to develop the telecom infrastructure.
Â Therefore, they were considering for the joint venture for the successful completion of the TMB contract, but it failed due to certain reasons. The joint venture was important for both companies as it could help both companies in achieving future objectives of growth and fulfilling the TMB contract, therefore, Zainal Hashim who is the vice chairman of the Nora Holding is considering that whether he should contact Sakari’s vice president or not as the plans of Nora Holdings were at stake with respect to this joint venture.
Why have negotiations so far failed to result in an agreement?
The negotiation failed between Nora and Sakari due to several reasons whereas, the main reason behind the failure of the negotiation was the cultural changes between the two region and the members of both teams as Noraâ€™s team members were used to deal with open people like the residents of US and UK whereas,the team members of Sakari were reserved and cold which was the hurdle in determining their behavior towards the deal.
Internal politics and two groups within Sakari was also the reason behind the failure of the negotiation as one group was supporting the joint venture by arguing that it is a potential opportunity for the entry into the Asia Pacific region whereas, the other group was opposing the deal by arguing the equity structure proposed by the government, which was a threat to Sakariâ€™s future objectives.
Conflict of interest between the joint venture and the United Kingdomâ€™s contract as both options were essential for Sakari in order to achieve future business and strategic objectives, however the resources were limited. Therefore, one option is toopt and the majority of the Sakariâ€™s negotiation team was supporting the UK contract due to the presence and familiarity of Sakari with the UK region. In addition to this,Equity ownership, Technology transfer issues, Royalty payment, Salary and compensation issues were the reason behind the failure of the negotiation.
Is the formation of the JV between Nora and Sakari the best option for both companies to achieve their respective objectives?
It is expected that the objective of Malaysian company is to manufacture the 4G mobile network equipment, as it is the most demanding equipment in Malaysia and neighboring countries. Hence, Joint Venture will provide first mover advantage to Nora to develop and manufacture the 4G equipment, and will also provide technological benefits as well. Similarly, Sakari could enter into the South East Asian market with the help of this joint venture.
In addition to this, the joint venture of both companies could help to satisfy the TMB contract on time, and it will also provide significant financial benefits to both companies along with the access and penetration into South East Asian market. Therefore, the formation of the JV between Nora and Sakari could be the best option for both companies in order to achieve their respective goals………………..
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