Case study: Creating chemistry – the AECI and Sasol joint venture in South AfricaIntroduction In addition to national culture, every firm has a distinct corporate culture. When different companies decide to come together to form a joint venture, they need to evaluate and determine how well they can deal with differences in their organisational cultures. This is because the attainment of a cultural synergy is a critical factor in developing mutual trust, which consequently contributes to the success of the venture. This case study analyses a case study of a joint venture between two chemical manufacturing companies in South Africa – AECI Limited and Sasol Limited.
The paper takes evaluates the key objectives that led to the formation of Polifin – the joint venture – and some of the cultural issues that emerged at the outset. It is obvious that because the two organisations had their own cultures, issues arose in integrating the two cultures to suit Polifin. The paper thus addresses what was done to resolve any issues at the start and how the managers dealt with the cultural issues in the long-term.
Finally, as the case study shows, any new organisation will face problems at the start especially if its founders have different cultural backgrounds. However, over time, a new culture is adopted as the issues arising are resolved. When this happens, there is a new way of doing things and as new employees come to the organisation, they are introduced to the existing culture, and as a result, the new culture totally replaces the previous ones. Objective of setting up the joint venture According to the case study, the compelling reason for AECI and Sasol to set up a joint venture was to combine corresponding manufacturing plans from the two corporations in order to benefit from the outcomes of internal transfer pricing and the synergism that would be created (Browaeys & Price, 2008, p.
269). The two companies also felt that the joint venture would lead to greater economies of scale, enhanced production scheduling, and would increase customer service. Importantly, the AECI and Sasol were of the opinion that the joint venture would eliminate the rivalry between the two companies by creating a monopolistic niche with the new company (Browaeys & Price, 2008, p.
269). The objectives of setting up the joint venture as highlighted by the two companies above are supported by a number of sources in literature. For instance, Pang (2004, p. 80) points out that to minimise risk, “a manufacturing firm scouts around for a suitable local partner who is compatible with the company’s objectives and business”. Sofat and Hiro (2011, p. 306) and Hladik (2002, p. 187) support this standpoint by arguing that firms in a joint venture synergise their resources and are hence able to combine their expertise and competencies.
Thus, in the resulting arrangement, the joint venture may enable both partners to put pool their rent resources in one entity so as to maximise returns on their investments by enhancing aspects such as research and development. It is notable that by combining their manufacturing capacities, the two companies reduced the risks associated with each of them individually and strengthened the production capacity of the new entity.