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Joint ventures, political risks and market imperfections

Are American joint ventures with an overseas partner tantamount to embracing risk? How is leadership's need for control affected by the risk strategy it employs for its overseas venture and its risk management core competencies?

Which political risks might an organization guard against? What strategies might you put in place to mitigate political risks for your organization? Why?

How may large international firms take advantage of market imperfections? What are the firm's main competitive advantages? Explain.

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Risks in Joint Venture:
American joint ventures with an overseas partner are tantamount to embracing risk because there can be an imbalance in the level of expertise, assets and investment, which is incorporated into venture by both partners. In addition, there may be a huge difference in cultures and management styles between American partners and overseas partner in the early stages due to poor integration and cooperation (Tarun, 2010). Apart from this, differences in laws and regulations also create risks for an American joint venture with an overseas partner. For example, in 1980, American Motors Corp. entered into a joint venture with Chinese government to produce Jeeps in Beijing. However, the Chinese government created many complications and problems that affected the business operations of American Motors and reduced its profits significantly (Wang, 2013).

Leadership in Risk Management Strategy:
The risk strategy affects the leadership's need by raising the requirement of better communication and flexible relationship among the leaders of the firms. Leaders should be capable to make a risk portfolio associated to the different risks such as political, social, cultural, technological, management risk, etc. and develop better risk management approaches to mitigate these risks (Wang, 2011). Additionally, leadership also needs to develop trust and coordination among ...

Solution Summary

This response discusses about American joint ventures with overseas partners and risk involved. Also, guarding against political risks is discussed. Further, it is explained how may large international firms take advantage of market imperfections.