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Autoliv QB A Proposed Joint Venture Case Solution

Solution Id Length Case Author Case Publisher
2627 2085 Words (7 Pages) Donald J. Lecraw Ivey Publishing : 97G007
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Qualibrand (QB) is an auto part manufacturing company based in the Philippines. Mr. Melchor Orosa, the general manager at QB is faced with a dilemma. He must decide whether to recommend or reject a proposed four-way joint venture to produce high-grade seatbelts in the country. The potential partners are SMACA (Philippines), Autoliv (Sweden), and Auto belt (Malaysia). The potential financial projection for the joint venture looks good but Mr. Orosa is concerned about the other aspects like the compatibility and communication gap between the venture partners leading to either the total failure of the venture or lagging behind the proposed operational and financial goals. The Potential Problems with the joint venture are:

  • QB has limited technical expertise to produce and distribute new products.

  • QB is not considering future objections and future goals.

  • Thailand, the potential market is already saturated.

  • QB is only evaluating the financial aspect of the venture.

Following questions are answered in this case study solution

  1. Evaluate the strategic fit between the proposed partners of the joint venture. How does this venture fit with the objectives of each of the partners? What skills and resources does each partner bring to the venture?

  2. Who is supplying the key resources to this venture? What is the relative bargaining power among the four partners?

  3. What problems, if any, do you see arising among the partners?

  4. What problems do you see arising from the JV’s external environment? In particular, what problems, if any, do you see in the JV meeting its sales goals? Why?

  5. What, if anything, can Mr. Orosa and QB do to address any potential problems that you see arising in the JV?

  6. Should QB go ahead and invest in this JV?

Case Analysis for Autoliv QB A Proposed Joint Venture Case Solution

1. Evaluate the strategic fit between the proposed partners of the joint venture. How does this venture fit with the objectives of each of the partners? What skills and resources does each partner bring to the venture?

Autoliv is one of the largest producers of seat belts in the world with subsidiaries in North and South America, Africa, Asia, and Australia. Autoliv has about 20 percent of the world market for "car occupancy restraining systems", such as seatbelts and airbags so they already have a world-level experience in seat belt manufacturing and distribution. This can come in handy to the joint venture and compensate for areas where other partners lag. On the other hand, Auto Industries produces a wide range of automotive components, such as sun visors, horns, mirrors, and door sidings so their technical expertise can create a real impact in the research and development phase of this project. Plus, they have prior experience which can help the JV counter unforeseen circumstances. It's JV's subsidiary, Auto belt, produced seat belts and airbags. It held about 70 percent of the Malaysian market so they're well aware of the market of their neighbor country which can help them gain a competitive edge over their rivals.  Moreover, Auto belt would provide JV with a senior engineer and source all capital equipment and material inputs from Malaysia. 

Moreover, SMACA, a company with a chain of automobile repair shops and car accessories is owned by the owner of Shoemart, the largest department store chain in the Philippines, and one of the "Taipans" of the Philippines. SMACA can be the distributor and retailer of the JV's products in the Philippine market. Furthermore, QB is a growing company within the Philippines with a great experience and knowledge of the local vehicle industry by car parts production so it's of great use to the JV. Lastly, this venture will allow all the partners to expand their markets and business by entering a growing and comparatively less competitive market and allow them to specialize in what they have been doing. 

2. Who is supplying the key resources to this venture? What is the relative bargaining power among the four partners?

For the type of seat belt that the JV would produce, the patent will be provided by Autoliv's subsidiary in Australia. Autoliv, as a world leader in seat belt technology, through its subsidiary in Australia will supply the basic product technology. As they are providing the basic raw material they can have a relatively higher bargaining power among the partners in a joint venture. On the other hand, Auto belt had agreed to supply a senior engineer to supervise production and training, provide industrial marketing skills, and prepare the JV for ISO certification. At the recommendation of this engineer and Auto belt, the capital equipment, and all materials inputs would be sourced in Malaysia through the Auto belt as well. Moreover, Auto belt already has a network of competent suppliers and experience in quality control in sourcing them. So as a large producer, it could order the components in bulk at lower prices and pass on these savings to the JV. Furthermore, SMACA (Phil.) with a big operation in car repair and car accessories distribution and retail network in the Philippines will provide distribution in the aftermarket. Lastly, Qualibrands, which produces OEM "soft trim' components: car seats, door trim, trunk mats and gear shift levers have experience selling to the Japanese and Korean assemblers.

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