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Studds Nolan Joint Venture Case Solution
The meetings between the two parties open up three options for the company. The first option is to continue this joint-venture with Nolan and try to develop a sense of trust between the parties. The second is to forgo the mission to expand to international markets and continue exporting to international markets for profit generation and covering the lost demand in the Indian market. The third option is to break off the joint venture agreement with Nolan and consider other companies for joint-ventures. All of these three options will be assessed based on its pros and cons, and the best alternative will be suggested for the company.
Following questions are answered in this case study solution
Following the most recent meetings between the Studds and Nolan management teams, what are the options open to Studds regarding its course of action?
Should Studds get into international markets? What are its strengths and weaknesses and toward which type of market should it go?
What are the component characteristics of a joint venture which condition its success? Evaluate the Studds-Nolan relationship on the basis of those characteristics.
Case Analysis for Studds Nolan Joint Venture
The first alternative is to continue the joint-venture agreement and develop and implement plans for the development of trust between the parties once again. This would mean continuing meetings and compromise on the demands of the Nolan management. This would include deciding the place for the jurisdiction of the joint-venture agreement. Furthermore, it would mean organizing expenses of the company in a way that they are justifiable and necessary. The pro of this would be that the company would get a way into the international market. The joint venture with a developed company would help it to gain experience and result in the company being sustainable in the international market. It will also enable the company to develop a brand image that is lacking for the company in the international markets. Furthermore, the company’s culture would be affected positively by the culture of Nolan that is significantly organized and developed. It will help the company to develop a culture that is sustainable in the international market.
The cons of this option, however, is that if the company is unable to resolve problems, the joint-venture could be called off at a later time which is probable because of the cultural clashes and the lack of trust that cannot be fully restored. This would have a negative impact on the image of the company as the problems are uncovered. Also, the perception of Indian products and Indian companies would be reinforced in the international markets, and the sales of the company would suffer. Also, it would mean lost investment that the company would have put in the joint venture.
The second alternative is to forgo the idea of expanding into the international markets because of the clash in the Indian and the other cultures. This would not mean cutting off the exports because they comprise of a significant sale value for the company. The pros of this would be a compulsion for the company to develop a position in the Indian market. The company could base its competition on price that would drive out other competitive companies from the market. Also, the marketing efforts would create a positive brand image of the company in India and lead the consumers to purchase and preferring Indian products rather than perceiving them low-quality resulting from low prices.
The cons of this situation are that the company will not be able to increase its sales in the international market. The high level of competition from Italian and Japanese firms would result in them driving out the company from the international market that would be complemented by the minimal marketing internationally. Also, it would result in overall lower sales for the company since the consumer trend in India is towards low-priced helmets.
The third alternative is to look for other companies for such agreements. The pros of this situation are that the company will keep in consideration the prior experience with Nolan and carefully develop a relationship with the new firm. This experience would allow it to develop the relationship based on trust and stating all of the challenges that the company might face because of the adverse implications of the company being Indian, governed by Indian laws, norms, and social factors. Another pro is that the company will be able to look for companies that have a culture similar to Studds, which will reduce the threat of the cultural clashes.
The cons of this situation is that the called off the agreement with Nolan would make the other companies resist getting into agreement with the company. Also, the other companies also belonging to other companies would have cultural clashes as well.
The suggested alternative is to call off the agreement at this point when the threat of the position of the company being adversely affected is low. This is because the agreement has not been announced and the customers will not know about this agreement and its causes that they would if the agreement were broken off at a later date. The other companies should be approached with a joint venture and the experience with Nolan should be used to develop a relationship of mutual trust with the other company.
2. Should Studds get into international markets? What are its strengths and weaknesses and toward which type of market should it go?
In the Indian market, Studds was faced with a challenge. This challenge was that of a declining market share preceding the obligation that motorcyclists faced wearing helmets because of the compulsion of the law. The company had started in the Indian market when the market for motorcycle helmets was low because of the motorcycle, as a mode of transportation not being very commonplace. As the market grew, cheaper helmet producers presented a competition for the company. Furthermore, the mandatory use of helmets changed the consumer behaviour to shift towards cheaper helmets. They did not prefer expensive helmets that a brand like Studds produced. However, in order to maintain the brand identity, the company could not decrease the quality of its products. Given the situation and the opportunity in the helmet market internationally, Studds should get into the international market. The increasing demand for helmets in the international market and the decreasing demand for branded and expensive helmets in India require the company to expand internationally.
One of the weaknesses that Studds has that challenges its expansion into the international market is the company belonging to India. In the international market, Indian products did not have a very good reputation in terms of quality. Another weakness is related to the development of a brand. Because of the company belonging to India, the company had previously exported to international markets with different names. These different names had affected the brand image that would have been strong if it were marketed under the same brand name. Furthermore, there had been no marketing efforts in international markets because export to other countries had not generated substantial sales to fuel marketing activities. Also, the weakness was the competition from established companies of Taiwan and South Korea in the international markets. Studds was not developed in the international markets so that it did not have any specific demand established for the product, whereas, the companies from Taiwan and South Korea had had a demand established. In Canada, one of the most promising markets had a market that was held by Italian and Japanese companies that held a significant share while Studds’ share was only a meager 5% of the market compared to 55-60% and 15-20% respectively of the developed companies.
One of the major advantages that Studds enjoyed in the international market was the low labor costs in India.
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