International business entry mode

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The disadvantages are that we can easily loose the quality control of our products. Sometimes the distributor do not respect all the terms and declines the perceived value of your product, which will importantly decrease our competitiveness. It can also create a dependence of the distributor and a loss of autonomy and freedom. The distributor sometimes might not share his knowledge and methods. In some cases the margin of your product can decrease.

In our case it is not the best alternative we could have because our product is not a FMCG. It is costly to transport and it must also be installed. It is a whole infrastructure, this is why we should make the distributions ourselves in order to keep our product’s quality and performances at his best.

c- Joint Venture alternative:

The joint Venture alternative is an agreement between two companies to work together on a specific goal for a limited period. It is a form of contract with precise terms and conditions between two companies. This kind of method is used for big scale project that requires a big investment. Trough this association between companies they can share investment, risks, infrastructures, knowledge, technology and resources.

In the international context, companies, in order, to improve and facilitate their implementation in a foreign country, commonly use the joint venture. This alternative is used for countries that are not really accessible and which has a limited economic freedom.

Both companies keep their identities and share responsibilities. Trough this alliance, the foreign company obtains more relationship facilities with local governments and trade unions. It helps also to obtain new knowledge and target market experience

There are also some drawbacks. The companies have to share benefits and in some cases the project ends not profitable. This kind partnership requires a lot of investment and energy in a short time. The relationship between both companies has to be well established, reliable and sustainable, otherwise it can lead to the project’s failure. The managerial structure can also be affected and lead to misunderstanding and culture shocks. Sometimes if the partner is not trustable, he might steal your knowledge. Bad established joint ventures are the cause of big market share losses and loss of credibility.

Joint venture could be a good alternative for us. It is exactly what our company needs. We should be able to make a joint venture with the national Vietnamese energy company in order to penetrate the market easily and to decrease the number of our competitors.

- Joint venture Agreement: terms and conditions

In this case, we are talking about a Joint venture agreement and not a joint venture contract. That means that this following joint venture will be based on only offer and acceptance and no considerations and intentions. Firstly we have to establish the main purpose and objectives of this operational partnership. In fact, we will have to be very specific in this part, in order to explain clearly the role of each one and avoid any misunderstanding. In this case we are talking about the hydroelectric central project.

In other words we will have to identify the scale and scope of our future operations. We will have to be clear about all the activities it will include. Identify also the obligations of each one to clearly define the scope and responsibilities of this project. Ensure also the transfer of knowledge between companies also called intellectual property. Establish a level of due diligence. Furthermore we have to mention the duration of the contract that will be around 5 years renewable.

We will have also to mention the type of joint venture we will use in our case it will be a non-equity joint venture were the partnership is limited and takes into account all the regulations, liabilities, tax differentiation or even Labor employment. In the agreement, it is crucial to mention all the possible regulatory issues. It will define the level of ownership from each party and also identify specific industry regulatory related problems. Tax consideration should be mentioned to justify and establish tax objectives and how they are going to proceed for payment.

In this agreement, we should also mention everything that is operational related. Firstly we should specify our future internal strategy. That means that we should mention which departments and resources will be put together and used to ensure a good flow and co operation of information in order to be efficient. We should define the ability to access to the information. In addition, we should also define a confidentiality agreement that should respect the use of some really confidential information and ensure they will be no disclosure. We should also mention specifically the governance of this joint venture. In other words, establish the constitution conditions of boards and committee’s. That includes the management committee, the board of directors and the level of accountability. We should mention how they will co-operate inside the structure, composed by how many persons and the level of power they possess.

We should also include the budgets and resources that will be needed in order to make the project viable. That means that we should establish conditions to get the approval of annual business plan’s budget and how we are going to use it. We have to clearly establish the financial terms of both parties, that means, it will define how to use capital in both parties and resources, what will be the minimum and maximum investment and will there be a third party (such as the government or a bank debt).

Concerning the distribution, we have to ensure ourselves that we will be the only suppliers of this kind of energy. We will be deeply involved in the distribution because it is a costly product that needs to be installed by our experts. In every product sold we will have to be able to retrace it and supply them with maintenance. We will have to define together the transportation costs and installation costs which will be referred to the local standards.

One of the most important point that we have to mention in this agreement is the conflicts and exit terms. Concerning the conflicts, we will have to define who will take the liability of mediation and arbitration. In any case of dispute, how do we will proceed to find an arrangement with specific criteria. We should also mention how the law will be applied in extreme cases. Concerning exit terms, we should fix the period we have to prevent in advance in any similar case in order to establish the consequences. We should write the steps we have to execute in order