Strategies for Joint Venture Success - Case Study Example

1.0 Executive summary: Gemcom's relationship with other service providers and suppliers is essential towards establishing its strategic approach and success within the market. In the video-based case, an ethical issue arises pertaining the relationship between the company and a Russian based company. Gemcom has been approached by a former employee of the Russian based company and asked to abandon the latter and pursue a relationship with a new company formed by this employee. As much as Gemcom is at liberty to explore competitive options, it would be deemed unethical to abandon their commitment with the Russian-based company when it still meets their needs even though with reduced capacity on grounds of solicitation. The cause of this dilemma is the self-initiative of the former employee of the Russian based company who took upon herself to develop her career further and opted to compete directly with her former employer. In addition, such open solicitation has been facilitated by a lack of restraint clauses between the employee and the former employer, which would have restricted her from pursuing former clients. Gemcom is presented with two major alternatives pertaining its current situation. The company may consider taking the offer as it is not obliged to remain under the current marketing service provider. As such, the company could terminate the contract with the Russian-based company and establish a new contractual relationship with the new company. Alternatively, the company could form a Joint venture with the Russian-based company instead of switching to the new company. Before changing the marketing company, Gemcom Software should ensure that there are no other contractual agreements established with the Russian-based company that are breached as this could expose the company to lawsuits. On the contrary, a joint venture promotes various advantages that would allow the company to prosper in the market. Joint venture formation is the most efficient solution that can be adopted by Gemcom software as it would reduce the cost of operation while promoting accessibility to specialized staff and new technology. The implementation of the joint venture process should involve alignment of the company’s business strategy with the objectives and expectations of the joint venture. Issues Ethical issue Like any other company, Gemcom Software Australia Inc.’s purpose in business is to achieve high profitability in its business operations. As such, the company is required to seek out the best service providers to enhance and propel its success. The first issue presented in the company involves termination of a contract as a result of reduced capacity of a company in Russia which initially provided marketing services to Gemcom Software. According to the senior vice president of Gemcom Software, the Russian company’s capacity has reduced as a result of most of the valuable employees leaving, an aspect that places Gemcom Software in a position that involves consideration of contract termination in order to seek a company that would meet their requirements in view of sustainable growth. It would be unethical if the contract is terminated on the basis of solicitation as that would breach the initial agreement made between the companies (Prenzler 2001). The Russian-based company has still not failed to deliver its services efficiently and thus there is no ground for termination of its services. Solicitation The former employee of the company in Russia left with the team that used to run operations within the company and have established a new company. With respect to creating a client base, the head of that company has approached Gemcom Software suggesting a new arrangement that would ensure business between them. Keeping in mind the competitive nature of the team, it is without doubt that the new company is capable of handling Gemcom's requirements effectively (Rowan 2012). As much as Gemcom Software has the liberty to seek business where it finds it favourable, some may question the ethics behind such a move (Rowan 2012). Causes The issues presented in the Video Based Case are as a result of various developments in the Russian-based company, which provides marketing services to Gemcom Software. First, a valuable team has left the company, led by an initial employee who was driven by self-interest towards establishing her own company. The move by the former employee to take on a new career pathway is well informed by her level of growth as facilitated by her initial position in the company (Callahan 2009). The issue of potential termination of the contract, in this case, is as a result of the reduced capacity of the initial company to handle business as required by the company (Callahan 2009). This was primarily a consequence of the departed competitive team, which leaves the company in a position that requires it to train a new team that would handle business. This may take a while, and thus Gemcom Software would consider seeking a business relationship elsewhere considering its current growth plans. In relation to the solicitation of Gemcom Software by the previous client of the Russian-based company, lack of contractual restraints between the initial company and its employees that would restrict them from soliciting employees from the client list after leaving the company could be termed as a major cause for the former employees’ move (Holland and Burnett 2005). As such, the law does not bar former employees of organizations from getting into contact with the clients of their former organizations and directly competing with their former employees as much as no confidentiality or restraint clauses are available and breached (Holland and Burnett 2005). Alternatives Switching marketing organizations One of the alternatives that Gemcom Software can pursue is to terminate the contract that is currently existing between them and the Russian-based company (Christen and Duncan 2009). It is in the best interest of the company to establish business relationships that would facilitate its growth. Regardless of the long-term relationship that they have initially had with the Russian-based company, reduced capacity to handle business by the latter forms justifiable grounds for contract termination by performance (Christensen and Duncan 2009). This would be in line with establishing that the current company, with which they are in business with, has reduced ability to handle the developmental marketing goals of Gemcom Software. Such a discharge of the contract can be by agreement, where Gemcom has to invite the Russian-based company towards reaching a consensus regarding the termination of the contract and emphasizing on the reasons that necessitate such an action (Christen and Duncan 2009). This would allow the company to enter freely into business with a company that has the potential to handle its business requirements such as the newly established company by the former employees of the Russian-based company. Such changes in the service providers would allow the business to reach its desired growth level with exposure to new approaches that would facilitate an increase in the customer base (Christensen and Duncan 2009). Joint Venture Another alternative to this issue is to form a joint venture with the current business partner to enhance investment in the business and facilitate an increase in capacity towards meeting the needed capacity to handle the business (Duncan 2012). With such a move, the business would reduce its cost of marketing through sharing the risk with the other business. In addition, this would facilitate access to new technologies and specialized staff, an aspect that would facilitate knowledge flow and form a basis for establishment of a marketing department within Gemcom in the future to avoid further outsourcing of the service (Duncan 2012). Decision Criteria Switching marketing organizations In line with termination of the contract that initially existed with the Russian-based marketing company, the discharge process is informed by an agreement between the parties, failure of which may lead to filing of a lawsuit by the Russian-based company's owner. Such a suit may be filed in regard to breach of contract, especially if the marketer still meets the requirements of their initial contract in terms of performance and ensures that all the deliverables are well adhered to (Callahan 2009). However, if the company falls below average in terms of delivering the initially agreed upon services, then Gemcom Software can terminate the contract by frustration or for breach (Callahan 2009). This would allow for free engagement into a different contract with the newly formed company. It is salient to note, that in case of solicitation, the solicitor is held liable and not the client (Callahan 2009). As such, if there were no initial contractual clauses that restrained the former employees of the Russian-based company from soliciting clients after they left the company, and if they have not been engaged in any form of breaching of confidentiality through the use of the list of clients from their former company or memorizing the list for further use, then they are free to contact and win over clients from their initial employers (Carper and McKinsey 2012). The client is under no obligation to any company to stay if not bound by a contract, but they are free to seek services from any company that provides a favourable package (Carper and McKinsey 2012). Joint Venture Forming a strategic alliance with the current marketer would be an effective move for Gemcom Software Company as it would enable a successful meeting of the company’s individual objectives (Duncan 2012). Such a venture would allow the marketing company to gain new capacity in terms of the resources offered by Gemcom Software, whereas the latter will be exposed towards expertise that can be later developed within the company to prevent future outsourcing of marketing services (Trost 2011). Gemcom would also be exposed to new technological knowledge in marketing and allow it to establish an up-to-date marketing approach that would facilitate long-term success. In addition, Gemcom will be able to access greater resources, especially in terms of specialized staff and state of the art marketing technology that would facilitate increased marketing (Duncan 2012). The business venture would enable risk sharing and thus prevent the company from facing the sole risk of increased investment with reduced return, which would have an astounding effect on the profit margin (Duncan 2012). Recommended Solution/s In response to this issue, formation of a joint venture with the initial Russian based company is the most effective solution that can be applied to the problem. This is a beneficial strategic move for both the companies as it would facilitate exposure to resources by the Russian company, and promote access to marketing staff and technology by Gemcom Software Inc (Trost 2011). As much as it takes more effort and time to establish partnership relationships with a different business, proper integration of management's styles and cultures would enable effective communication of objectives and ensure success for both the companies (Trost 2011). In addition, unlike partnership, Joint Ventures are highly flexible and thus can be established for a given period relative to a given set of objectives, after which they can be terminated (Trost 2011). This could allow Gemcom to establish further its in-house marketing strategy after facilitating knowledge and expertise flow during the venture. This is a more effective choice because it also handles the ethical problem of shifting from one organization to an organization that is owned by an employee of the former organization (Trost 2011). As such, Gemcom will be able to establish a greater relationship with the current customer and continue to satisfy the expectations and demands of its customers. Implementation and Implications In order to embark on a Joint Venture, it is important for Gemcom to review adequately its strategy so that the joint venture is the best way forward in achieving the aims of the business (Killing 2013). This would enable the company to establish its expectations from the venture. Studying how other businesses within the same industry employ Joint Ventures could also be important in determining the best approach especially in identifying the utilized skills (Killing 2013). A SWOT analysis of Gemcom Software would also be useful in determining its compatibility with the Russian based company. Considerations of employees’ perspective concerning such a venture is of importance too. After agreeing with the other company, it is paramount to establish the Joint Venture’s objectives and the required financial, asset, and employee contributions by each party. In addition, the intellectual property of individuals from either company should be considered and protected (Killing 2013). Establishment of a framework for the daily management of responsibilities, finances, and processes is significant too. Dispute resolution mechanisms should be established, and a proper criteria for termination of the Joint Venture laid. Both companies should establish non-disclosure or confidentiality agreements that would protect their confidential information (Carper and McKensey 2012). References Callahan, Michael T. 2009. Termination of Construction and Design Contracts. Alphen aan Den Rijn: Aspen Publishers. Carper, Donald, and John McKinsey. 2012. Understanding the Law. Mason, OH: South-Western Cengage Learning. Christensen, S. A., and William David Duncan. 2009. Sale of Businesses in Australia. New South Wales: The Federation Press. Duncan, W. D. 2012. Joint Ventures Law in Australia: 3rd Edition. Sydney: The Federation Press. Holland, James, and Stuart Burnett. 2005. Employment Law 2005. Bristol: Blackstone Press. 2005. Killing, Peter. 2013. Strategies for Joint Venture Success (RLE International Business). Abingdon: Routledge. Prenzler, Tim. 2001. Private Investigators in Australia: Work, Law, Ethics and Regulation. Research Project 15/99, Brisbane: Griffith University. Rowan, Solène. 2012. Remedies for Breach of Contract: A Comparative Analysis of the Protection of Performance. Oxford: Oxford University Press. Trost, Thilo. 2011. Joint Ventures: The Benefits and Perils - Why Some Are Successful and Others Fail. Norderstedt: GRIN Verlag. Read More