General Electric’s Joint Ventures

General Electric’s Joint Ventures General Electric’s Joint Ventures The reasons why General Electric has preferred joint ventures in the recent past as opposed to acquisitions or Greenfield ventures are described in this paper. In addition, the risks associated with joint ventures such as changes in political and legal environment and lack of congruency of objectives among partners are explained in the paper. Furthermore, the reputation of General Electric as a good partner is justified and the advantages of this reputation for attainment the company’s business objectives discussed.
Question 1
In the past General Electric preferred Greenfield ventures or acquisitions as compared to joint ventures because it needed to have full control of the business. As opposed to joint ventures where partner companies have significant power in making strategic decisions, acquisitions allow companies to have full control of management and resources (Hill, 2011). The preference for acquisitions by General Electric also resulted to the congruency of this strategy to its business philosophy. However with the changing business environment, the company has shifted to joint ventures as an entry mode into foreign markets.
Question 2
In the recent past, General Electric has preferred joint ventures as a strategy for entry into foreign markets. This is because of the bids for acquisitions have skyrocketed. With the 2008–2009 economic crises, the company would no longer afford risking spending large capital in bidding for acquisitions. As a result, General Electric feared that it could overpay for acquisitions which would cripple its economic position which was already affected by the 2008-2009 economic crisis. In addition, there are many companies with which General Electric would form joint ventures. Through joint ventures companies benefit from local business relationships, local expertise, political contacts and an already established market (Hill, 2011).
Question 3
Even though joint ventures provide an effective way through which companies share business risks, there are other risks associated with this mode of entry. These risks include possible changes in political and legal environment which would act out of favor with foreign companies. Additionally, the power that partner companies have in the process of making strategic positions would be overused. Additionally, the objectives of business partners may not be congruent in a joint venture (Hill, 2011). Furthermore, cultural differences and divergent management styles among partners in joint ventures are risks which would cause failure of success in the partnership. In order to reduce these risks, General Electric should do market analysis and ensure that the roles of each partner are clarified and agreed upon.
Question 4
The reputation that General Electric has as a good partner makes it a preferred company of choice for companies which envision making joint ventures. This reputation is also important for the company because it makes it to attain a superior position in the joint venture agreement. More importantly, being reputed as a good partner makes General Electric to develop a good image in the market and therefore business success. The loss of this reputation would have adverse consequences for the company such as failure of its joint ventures, inability to find a company to partner with and failure to meet its objectives for growth into foreign markets.
Question 5
The attractiveness of General Electric as a joint venture partner is attributed to the assets and expertise which it brings to the table. This includes effective management and manager development programs. Companies which envision entering joint ventures are attracted to General Electric because of the know-how and management techniques that they would access and gain from General Electric. This in return promotes the productivity of these companies. Additionally the capital and human expertise that General Electric brings into the joint venture makes it an attractive partner.
Conclusion
General Electric has preferred joint ventures as opposed to acquisitions or Greenfield ventures. This is because of the costly bids in acquisitions and the changing business environment. Additionally, joint ventures allow the company to access an already established market in a foreign company, distribution channels, political contacts and customer networks. However there are risks such as changes in political and legal environment and lack of congruency of objectives among partners which the company is exposed to in the formation of joint ventures. The reputation that General Electric has as a good partner is as a result of the assets that it contributes to the joint venture such as management techniques and capital and these make it to enhance its image within a foreign market.
Reference
Hill, C. W. L. (2011). Global Business Today. New York: McGraw-Hill/Irwin.