Should Companies Jointly Venture

by Sauvik Banerjee
MBA (International Business),
Leeds University Business School,
Asso. Manager, PwC Leeds.

Part - I

INTRODUCTION

According to Luis M. Camarinha-Matos (2002), New mechanisms of collaboration and organizational forms when backed by proper networking tools cut across traditional sectors and organisations and induce new business domains, which requires to construct each and every business as to being a part of a wider economic ecosystem and environment. The development of virtual enterprise/ virtual organization, although initially more technology driven, is gathering more and more credential of having a multi-disciplinary nature, namely from the socio-economic and organisational areas. New behavioural forms, new cooperation agreements and social contracts, new liability agreements and risk negotiation practices, new ways of generating value for common developments, and correspondingly new challenges on intellectual property and ownership identification are among the major trends being developed.

The 1990's saw an unprecedented wave of new ventures being announced with large corporations who followed the principals of Adam Smith and Henry Ford seeing their basic frame work being challenged by smaller companies which were leaner, meaner and technologically driven. Big was no more beautiful and from the ideology of having "any coloured Ford as long as it was black", corporations had to accept that the customer was god and had to tailor their products according to the customers requirement. Industry changed from being profit driven to market driven. It is not that profit was not important but the long-term strategy demanded a more customer centric focused strategy. In a bid to offer clients a one-stop shop for all their requirements corporates tried using their money power to buy out all and sundry. This paper shall look at the growth of collaborative strategies for organisations keeping in mind the structure and requirements of SME's and shall conclude with justifiable recommendations which could help in structuring and implementing joint collaborative working.

MERGERS AND ACQUISITIONS

Historically mergers and acquisitions have been the favourite vehicle as companies looked at inorganic growth to increase capacity and kill of potential competition, in the days of monopolistic and oligopolistic markets. This was followed by the dot com boom where companies with limited capital started boasting of staggering market capitalization and leveraged that to venture capitalists who in turn funded their expansion plans. These companies had only innovation as an asset base and future cash flow's as security. Unfortunately reality bit the market and the bubble burst but not without leaving a trail of destruction and huge losses, which had to be written of, as decision makers with a bias for buying out everything in sight ended up proving that their sight was indeed myopic.