The paper "Culture an Overused Term and International Joint Ventures" is a wonderful example of a Management Case Study. Management of cultural differences in international joint ventures decides the success of such a partnership. The joint venture by Tesco into India presents an interesting case that requires careful implementation due to the diverse differences in culture. There a few common grounds that can be integrated while the rest will mean that the companies have to look for the best way of managing the joint venture without antagonizing each other.
Cultural compatibility between the partners has to be achieved. A unique culture that is different from both parent companies can be created and a middle-ground of operation for the joint venture (Barger, 2007). This report evaluates the joint venture between Tesco and Tata Group’ s Trent Hypermarket while assessing cultural compatibility between the two partners. Proposed Tesco’ s Joint Venture with Tata Group Tesco has suggested an equal joint venture with its existing partner in India, Trent, which is a Tata group company, to open stores in and Karnataka and Maharashtra. The decision of Tesco to invest in India was welcomed by Anand Sharma.
The ministry of commerce and industry promised to expedite clearance. The British retailer Tesco confirmed that it has signed a joint-venture with Tata Group’ s retailer in India for $138million. The world’ s third largest retailer, Tesco got its approval from the Indian Foreign Investment Promotion Board to enter formally India’ s $500billion retail sector through an agreement with Tata’ s Trent. Trent and Tesco will together operate 12 stores using the brands ‘ Star Daily’ and Star Bazaar’ across the western and southern regions of India.
The merchandise involved includes groceries and food, home-care and personal products, kitchen and home items, accessories and fashion (BBC. Com, 2013). Following the approval by the Board, Tesco entered into an agreement with Tata Group to come up with a 50-50 Joint Venture in Trent Hypermarket that operates the Star Bazaar in India. Tesco became the first global supermarket to invest in India following the lifting of a ban on Foreign Direct Investment by the government in September 2012. Tesco has been working with Tata India for a period of over five years prior to the agreement.
It supported the development of their Star Daily and Star Bazaar multi-brand retail stores through providing the franchise and wholesale agreements. Tesco is delighted to partner with the Tata Group in India. Tesco was the first global retailer to apply for a multi-brand retailing license when it opened up for 51% foreign direct investment in September 2012 and its proposal subsequently cleared in December. Initially, it was mandatory for foreign supermarkets to source about 30% of their products from Indian firms. The Indian government allows foreign companies five years in which to attain that target while allowing them the option to import goods from overseas (BBC. Com, 2013).
Foreign retailers are will be permitted to set up shop in cities not exceeding one million limit population that had been initially banned. Evaluation of cultural compatibility of partners Culture is very crucial when it comes to international partnerships. Culture is defined as the way of life of a particular society. It is the sum of moral norms, values and the actual behavior of a particular society that is passed from one generation to another (Culpan, 2002).
Companies’ internationalization in the global world has enhanced the significance of cultural biodiversity. The international joint venture is whereby two organizational cultures are joined together to conceive a third culture that is often inspired by any of the two-parent cultures or new culture is formed through the combination of various elements emanating from the parent cultures (Reuer & Tong, 2005; Yan & Luo, 2001). Partnerships like joint ventures are directly affected by culture at the organizational and national levels. The national culture where the joint venture has situated an impact on the organization and the subsequent management style that will be applied.
The operational success of a joint venture highly depends on the cultural compatibility of the individual partners. Forming and operating a joint venture needs more than cordial relations between different management teams of the partners (Pullman, Verma & Goodale, 2001). The perceived commitment and worthiness of the partner in a joint venture are also important considerations. Tesco has been working with Tata Group previously and can establish how it is committed to the deal.
Joint ventures do well in an atmosphere where there are inter-partner cooperation and forbearance but sometimes they are hindered by conflict and opportunism (Sinha, 2004).
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