In globalisation, many organisations are participating in foreign markets, the joint venture is a good choice for many companies that each partner can bring complementary strengths to the table, resulting in a competitive advantage for the participants collectively. Partners in a strategic alliance can benefit from many aspects of a cooperative relationship: access to unfamiliar or untapped markets, risk sharing, economies of scale, shared technology, and decreased costs. The U.S corning and Mexican Vitro companies commit themselves to contribute equity for the new company, as well as share their technology and skills. In return, they share both profits or losses and control over this organisation. However, this kind of joint venture couldn??™t help them to penetrate quickly enough to create a competitive advantage in target market. And one of the most important in this issue is the culture difference between U.S and Mexico. In this essay, we are going to argue that Vitro and Corning shouldn??™t dissolve because cultural conflict is not fatal, since there are many solutions to overcome problems.
1 The most likely original rationale for Corning and Vitro to establish this JV is related to the marketing element. First, JV marketing allows both Vitro and Corning to leverage their marketing efforts for the promotion of their own products, by just simply tapping into another business customers. This can help the companies to gain access to wider markets and extend their marketing channels, with more opportunities to take their sales to the next level through increased exposure and endorsement. Second, JV marketing allows both Vitro and Corning to share distribution channels and methods to each other. This can help both companies to increase their efficiencies and competitiveness with reduced costs. Third, JV marketing allows Vitro and Corning to share advanced information about product development to each other. This can help both companies to create products faster with less effort, as well as allowing them to obtain each other??™s insider information and gain valuable skills in terms of product development. Forth, since this joint venture was established under NAFTA, so it can gain the advantage of NAFTA policy which is 20% reduced tariff on flat glass. The advantages include reducing sales cost and improving innovation investment. This has provided a favourable condition to encourage joint venture to compete with other companies in a more cost-efficient way
2 This logic may still hold because their joint venture can still gain benefits by combining their technology, lower labour costs and knowledge to deal with competitor in the U.S and Mexico markets. One successful example of international cooperation through joint venture was the cooperation between P.F. Changs China Bistro (US firm) and Alsea (Mexican firm). In this example, PFCB successful engage in South America market and achieve its goals such as increasing sales and reputation(http://www.businesswire.com/news/home/20110531006676/en/P.F.-Changs-Announces-International-Expansion-South-America). In addition, the financial advantages created by NAFTA policy and the nature of joint venture are also critical to maintain the original rationale of this JV. These advantages include: first, JV financing allows both Vitro and Corning to save money on business operating costs, advertising costs and hiring costs. Second, this can help both companies to create new business funding and credit lines, because the joint venture can access to external finance and lend more money from bank depend on its strong financial competency. Third, JV financing can help both companies to reduce the burden of debt and eliminate the risk of bankruptcy, because if two companies joint together, they will own more capital and the supervision of capital will be enhanced.
3) -Carry on enough market research before they start to corporate, in order to have better understanding of each others??™ culture and to minimize cultural and communication barriers.
-Exchange top level and middle level mangers. For example, Corning and Vitro can send few of their top managers and some middle level managers to Vitro and Corning periodically, in order to learn the business style and culture of each others??™.
-Each company should hire few managers whom can speak both English and Spanish or whom have both America and Mexico background. This can minimize the language barriers and cultural problems in some certain degree. As well-known that America and Mexico are neighbours, there are lots of Mexican migrations living in America and some of them are really well educated. Also, there are lots of high educated native Mexicans whom can speak advanced English in Mexico.
4 After two years cooperation between both sides, mounting problems began to surface, resulting in lower sales and profits for the company. The main problems include products cannot obtain a competitive advantage in target market immediately and the two sides in business ideas, judgments and enterprise markets has produced a series of collisions.
5 The essential reason for the situation is the enormous differences between Mexican and American cultures. The culture conflicts are mainly embodied in financial structure, governance, marketing and competition/cooperation. In terms of financial structure, America tends to apply low-uncertainty-avoidance. The noticeable traits include loose financial structure, less written regulation rules and less structured financial activities. Meanwhile, they encourage employees to bring into play freely and take responsibility. However, Mexico implements the theory of high-uncertainly-avoidance, they make a lot of financial rules and provide clear budget for the expenditure of the company. The main targets of them are to avoid financial risks and place a higher priority on balancing the revenues and expenditures. Therefore, the difference in financial structure leads to certain divergences of both sides on the issues of investment, the distribution of benefits and risk-taking, and exerts definite impact on the further expansion of the company and the absorption of capitals.
As far as governance is concerned, America is the country which has low power distance as the American people are more inclined to democracy and freedom. Therefore, the American companies chiefly adopt decentralized approach to manage. Their management structure is relatively loose and they have a small supervisory system that requires the involvement of lower middle class directors in decision making and sets higher requirement for the quality of grass-roots workers. By contrast, Mexico is a relatively laggard country, for this reason it has high power distance. As a result, their business policy applied the centralized way mainly, under which the overwhelming majority of decisions are made by the highest level and all the employees are only required to obey the instructions of superior, and its supervisory system is more rigorous. It gave rise to the relatively low management efficiency of Mexican companies and influenced the cooperation between two sides considerably, which missed some business opportunities and cast a shadow on the relationship between parties.
As the American companies possess more money and open society idea, individualism and unafraid of risks become their primary sales concept on the side of marketing. Their employees have a high level of subjective initiative and promote the products based on the market value primarily, and the upper levels of the companies are also willing to adopt their different opinions. Furthermore, their relatively loose management structures more embolden their employees to take risks and strive for higher profits. However, the culture of Mexico is more conservative. Therefore, they chiefly take the collectivistic selling concept. The subjective initiative of employees is comparatively low, and any decisions they made are required to be permitted by the upper level. In particular, their opinions are usually unaccepted because of the strict management system. As a consequence, the selling concept of the companies in Mexico is behindhand and lack of efficiency compared with those in America, and cannot dominate the competitive market. It is one of the important reasons why the cooperation between both sides deadlock.
Lastly, American companies tend to take part in the market competition actively and adopt the strategy of high masculinity in terms of competition/cooperation. They put earning, recognition and advancement first, and make estimate and preparation in advance for the potential opportunities in the future in order to enable them to adjust timely for the future changes. Nevertheless, the companies in Mexico prefer to take the relatively conservative low masculinity strategy, and are inclined to cooperate with other companies. Besides, they care for others and the society etc in addition to make profits. The conservative sales approach of Mexico Vitro, caused American Corning discontent, they think it will affect the development of company and employee initiative. But Mexico think American individualism will also cause many problems especially social problems; cooperation is the most effective management idea.