New Joint Venture

8/9/2019 New Joint Venture

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What is it?

A joint venture (JV, sometimes 'J-V') is a legal entityformed between two or more parties to undertake aneconomic activity together. It is a term more restricted tothe US and the 'new' countries on the world map such asIndia and China.

The JV parties agree to create, for a finite time, a new

entity and new assets by contributing equity. They thenshare in the revenues, expenses, and assets and "control"of the enterprise.


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Merger Types : HORIZONTAL AND VERTICAL MERGERS

HORIZONTAL MERGERSy Merger of two or more companies producing similar goods or offering similar

services.y This type of merger occurs frequently as a result of larger companies

attempting to create more efficient economies of scale.y

This type of merger best defines the Sony Ericsson company. Eachcompany has products which perform in the same segment mobilecommunications.

VERTICAL MERGERS

y A merger between two companies producing different goods or services for one specific finished product. Merger of a vendor and a customer.y By directly merging with suppliers, a company can decrease reliance and

increase profitability. An example of a vertical merger is a car manufacturer purchasing a tire company.

y One such merger occurred between Time Warner Incorporated, a major cable operation, and the Turner Corporation, which produces CNN, TBS,and other ro rammin .


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Characteristics of joint venturesy Limited scope and durationy Generally involve only two firmsy Involve only small fraction of participants' total

activitiesy Each participant offers something of valuey Joint production of single productsy No sharing of assets/information beyond venturey

Need not affect competitive relationships


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Continuedy Joint property interest in subject matter of venturey Right of mutual control or management of enterprisey Right to share in cash flows of the enterprisey Limited risk


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Joint Ventures in Business Strategy

Goals/objectives of joint venturesy Risk sharing

Each participant diversifies riskReduces investment cost of entering risky new areaRealizes benefits of economies of scale, critical mass,learning curve effects sooner


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y Knowledge acquisition learning experience forboth partners

Shared technologyShared managerial skills in organization, planning,and controlSuccessive integration joint venturing as a way tolearn about prospective merger partners

y Entry into new, expanded, foreign marketsAugments financial or technical capabilitiesReduces riskForeign country may require joint venture with localpartner


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y Financing to raise capitalShare investment expenseSmall company has product idea but no cash

Joint venture with large company that has cash todevelop producty D istribution/marketing

To obtain distribution channels

To obtain raw materials supply


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X

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Sony : HISTORY

The foundation of Sony dates back to 1946. On May 7,Masaru Ibuka together with Akio Morita set the rootsof Sony Corporation.

At first the name of the company was "TokyoTelecommunications Engineering Corporation".

In 195 the company changed its name to "Sony


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ABOUT SONY

"Sony" comes from a combination of two words: "SONUS", which inLatin means "sound" and "SONNY", which denotes a small size.

The company first started producing recording tapes in 195 whichfollowed with the production of television.

Sony was listed in New York Stock Exchange in 197 .

Sony Corporation is a leading manufacturer of audio, video, game,communications and information technology products for theconsumer and professional markets. With its music, pictures, computerentertainment and on-line businesses, Sony is uniquely positioned tobe a leading personal broadband entertainment company in the world.


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ABOUT ERICSSON

Founded in 1 76 as a telegraph equipment repair shop by Lars MagnusEricsson, it was incorporated on August 1 , 191 .

In 1 7 Ericsson began making and selling his own telephone equipment.

At the start of the 199 s, Ericsson became a leader in the area of mobiletelephony.

Ericsson is shaping the future of Mobile and Broadband Internetcommunications through its continuous technology leadership. rovidinginnovative solutions in more than 14 countries, Ericsson is helping tocreate the most powerful communication companies in the world.


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Sony Ericsson

The mobile telecommunications market is an arena of intense competition. The merger between Sony andEricsson was an attempt to combine the strength of both

companies to form a more effective global competitor,especially against rivals Nokia and Motorola. Thehorizontal merger has allowed the two companies toperform more effectively in the world market.


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THE MOTIVATION FOR THE MERGER - GLOBAL COMPETITION

" By combining the complementary strengths of Ericssonand Sony, the new company was uniquely positioned tobecome a world leader in telecommunications, as theindustry moves rapidly toward Mobile Internet.

Sony brings vast experience in consumer electronics andentertainment - music, pictures and games - and Ericssoncontributes with our mobile technology lead and theworld's largest customer base among mobile operators.This was the ideal partnership for the growing market of 3G and Mobile Internet.


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The mobile phone industry was fast moving toward multi-media broadband and poised to grow significantly in theyears to come.

Millions of customers would require mobile handsets thatcan handle rich content such as movies, pictures andgames smoothly and effortlessly, regardless of their location.

Sonys collaboration with Ericsson, the undisputed leader inthe global telecommunications industry, holds significancefor creating an ubiquitous value network that is alwaysconnected, on demand and interactive.


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" The alliance was been seen as an attempt to resuscitate thecompanies' languishing mobile phone units and a serious bid torival market leaders Nokia and Motorola. "

"

According to the International Data Corp (IDC), Nokia lead with a30.8 percent market share globally, with Motorola a distantsecond at14.6 percent. Ericsson was in third spot with 10percent. "

In year 2000, 70 million cellular units were sold in the AsiaPacific (excluding Japan). Nokia also lead the region with a 30.6percent market share and close to 21 million handsets sold. Sony,on the other hand, was not one of the top five while Ericsson'smarket share dipped 7.4 percent in 2000 compared with the

previous year, according to IDC."


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SONY ERICSSON MOBILE COMMUNICATIONS

"

Sony Ericsson Mobile Communications was established in 2001 bytelecommunications leader Ericsson and consumer electronicspowerhouse Sony Corporation. The company is equally owned byEricsson and Sony.

The company"

offers mobile multimedia consumer products for peoplewho appreciate the possibilities of powerful technology. By creating anenticing brand and taking the lead in bringing new ways of usingmultimedia communications while mobile, Sony Ericsson can createcompelling business opportunities for its operator customers.

On September 11 2001, Sony Ericsson disclosed its new brand nameand logo. The new brand name was Sony Ericsson and wasaccompanied by a symbol in a warm, organic green color. Together they represent the companys vision and ambition and what SonyEricsson does for its customers.


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SONY ERICSSON MOBILE COMMUNICATIONS

Sony Ericsson Mobile Communications began operations on October 1with a capitalization of US$250 million each.

The joint venture will kicked off with 3,500 employees in product,marketing and sales.

Sony Ericsson announced its first joint products in March 2002 andnow has a full product portfolio covering all target groups. Through thecombined strengths of Sony and Ericsson and by its strong consumer-focused and applications-led strategy, the company is a leading player in the mobile communications industry.


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According to the Company ress Release (April 24, 2 1): The Motivation for the Merger wasGlobal Competition .

According to the International D ata Corp (I D C), Nokia lead with a 3 . percent marketshare globally, with Motorola a distant second at 14.6 percent. Ericsson in third

spot with 1 percent.

Sony, on the other hand, was not one of the top five while Ericsson's market sharedipped 7.4 percent in 2 compared with the previous year, according to I D C

Sony Ericsson A Case Study


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In October 2 1, telecommunications leader Ericsson [Sweden] and consumer electronicspowerhouse Sony Corporation [Japan] merged into Sony Ericsson Mobile Communicationswith a capitalization of US$25 million each.

Sony Ericsson merger was Horizontal merger - Merger of two or more companies withsimilar product lines. Each company has products which performed in the same segment

mobile communications.

The joint venture kicked off with 3,5 employees in product, marketing and sales.

Mission to establish Sony Ericsson as the most attractive and innovative global brand in themobile handset industry through combining Ericsson s strong position within mobiletechnologies and Sony s expertise in consumer electronics.

The vision resulted in a concrete aim for producing the best possible mobile solutions.

The joint venture was not considered hostile, considering the 50:50 dichotomy, insteadit was task oriented and equal.

Continued


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By utilizing each other s assets, knowledge and possibilities, they focused on creatingnew technological solutions for a global market, and developing products combined by

fun and function .

Sony Ericsson Mobile Communications is a global provider of mobile multimedia D evices.

The products combine powerful technology with innovative applications for mobile imaging,communications and entertainment.

The net result is that Sony Ericsson is an enticing brand that creates compellingbusiness opportunities for mobile operators and desirable, fun products for end users.

Ericsson and Sony equally own Sony Ericsson, who announced its first joint products inMarch 2 2.

Economically, it is a paying corporation since 2 3 when they managed toturn the company s deficits into profit.

Continued


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The year of 2 4 showed to be extraordinary profitable and further raised themarket-shares of the company.

In early 2 5, Sony Ericsson announced a large number of new phones, networking productsand accessories moving the product portfolio significantly forward.

Today, Sony Ericsson is established as one of world s leaders in design and innovationwithin its sphere of activities, and considered the fourth-greatest telecom company in the

world.

Sony Ericsson, now has a full product portfolio covering all target groups. Through thecombined strengths of Sony and Ericsson and by its strong consumer-focused and applications-led strategy, the company is a leading player in the mobile communications industry.

Further


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On analyzing their success, it is important to consider the importance of the strongcompetition within the telecom industry.

Without its primary competitor Nokia, Sony Ericsson presumably had not reached such highstandards.

Today, the company employs approximately 5, employees worldwide. It undertakesproduct research, design and development, marketing, sales, distribution and customerservices. Global management is in London, and Research and D evelopment is inSweden, Japan, China, the US and the U K.

Conclusion

New Joint Venture

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