Joint entrepreneurial activity and its legal forms. Joint forms of entrepreneurial activity

This strategy for a company’s entry into a foreign market is based on combining its efforts with commercial enterprises in a partner country in order to create production and marketing capabilities. In contrast to exports, in joint ventures (JBAs) a partnership is formed, as a result of which certain capacities are created abroad.

International marketing uses four types of SOPs:

• a) licensing;
• b) contract manufacturing;
• c) contract management;
• d) jointly owned enterprises.

Licensing is one of the easiest ways to enter a foreign market. “The licensor enters into an agreement with a licensee in a foreign market, offering the rights to use a manufacturing process, trademark, patent, trade secret, or some other value of value in exchange for a royalty or license payment. The licensor gets access to the market with minimal risk, and the licensee does not have to start from scratch, because he immediately gains manufacturing experience, a well-known product or name.”

As examples of successful licensing operations, F. Kotler cites the activities of the Gerber company, which in this way introduced its baby food products to the Japanese market. Another example is the international marketing activities carried out by the Coca-Cola company, which provides licenses to various enterprises in different parts of the world, or rather, provides them with trading privileges, since the concentrate necessary for the production of the drink is provided by the company itself.

However, licensing also has potential disadvantages in that when licensing a firm has less control over the licensee than over its newly created enterprise. Moreover, in the event of a major success of the licensee, the profits will go to him and not to the licensor. As a result, by entering the foreign market in this way, the company can create its own competitor.

The second type of SPD strategy is contract manufacturing, i.e. concluding a contract with local manufacturers for the production of goods. Sears, in particular, used this method when opening its department stores in Mexico and Spain, finding qualified manufacturers there who could produce many of the goods it sold.

This method of entering the foreign market also has disadvantages. By using it, the company has less control over the production process, which is fraught with the loss of potential profits associated with this production. However, contract manufacturing gives a company the opportunity to expand its activities in foreign markets faster, with less risk and with the prospect of entering into a partnership with a local manufacturer or purchasing its enterprise.

Another way to enter the foreign market, related to the SPD strategy, is contract management. With this method, the company provides the foreign partner with “know-how” in the field of management, and he provides the necessary capital. In other words, the company does not export goods, but rather management services. This method was used by the Hilton company when organizing the work of hotels in different parts of the world.

This method of entering the foreign market is characterized by minimal risk and income generation from the very beginning of activity. Its disadvantage is that in order to enter the foreign market, a company needs to have a sufficient staff of qualified managers who can be used to greater benefit. It is also inappropriate to resort to this method in the case where independent implementation of the entire enterprise will bring much greater profits to the company entering the foreign market. In addition, contract management for some time deprives the company of the opportunity to develop its own enterprise. Finally, another way to penetrate a foreign market is to create a joint ownership enterprise. Such an enterprise is a combination of foreign and local capital investors to create a local business enterprise that they jointly own and operate. There are different ways to start such an enterprise, for example, a foreign investor can buy a share in a local enterprise, or a local firm can buy a share in an existing local enterprise of a foreign company, or both parties can jointly create an entirely new enterprise. A joint ownership venture may be necessary or desirable for economic or political reasons. In particular, when entering a foreign market, a firm may not have sufficient financial, physical or managerial resources to undertake the project alone. Another possible reason for preferring a jointly owned enterprise is that this is the only way a foreign government allows goods of foreign production to enter the market of its country. The described method, like others, is not without drawbacks. Partners from different countries may disagree on issues related to investment, marketing and other operating principles. For example, many American firms, when exporting capital to certain countries, seek to use the earnings to reinvest in expanding production, and local firms in these countries often prefer to withdraw these proceeds from circulation. American firms play a large role in marketing, while local investors often rely solely on sales organization. In addition, the creation of jointly owned enterprises may make it difficult for a multinational company to implement specific production and marketing policies on a global scale.

Joint entrepreneurial activity is one of the most important forms of regulation of intercompany market relations. It ensures that firms operating internationally adapt to changing conditions and market demands. Joint business activities usually take the form of joint ventures, research collaborations, and the exchange of licenses for new products and technologies. The main emphasis is on creating joint ventures.

The creation of joint ventures (JVs) is implemented at the level of direct interaction between cooperating partners, who are legal entities under the laws of the countries they represent. Cooperation between participants in joint ventures has its own characteristics:

· connection of property and formation on its basis of the initial capital of a joint venture;

· joint management of the processes of enterprise development, production and sale of products and services produced by it;

· joint bearing of enterprise risks;

· division of part of the profit of the joint venture between partners on the terms regulated by the regulations of the host country;

· long-term cooperation;

· complexity of interaction between partners in all key areas of activity;

· unification of the strongest individual elements.

JVs are created and operate in the territory of the host country on the terms and in the legal form determined by the legislation of that country. In international practice, there are various legal forms of joint entrepreneurship, which determine the features of the organization of the joint venture being created and the degree of responsibility of its participants for the obligations of the enterprise. The most common organizational and legal forms of a joint venture are a joint stock company, a full liability company, and a limited liability company. In addition, joint ventures may vary depending on the ratio of shares of local and foreign partners in the authorized capital of the enterprise.

Production sharing agreement: concept, subjects, production sharing, conclusion procedure.

This agreement is an agreement under which the Russian Federation grants to a business entity (hereinafter referred to as the investor), on a reimbursable basis and for a certain period, exclusive rights to search, explore, and extract mineral raw materials in the subsoil area specified in the agreement, and to carry out related work , and the investor undertakes to carry out the specified work at his own expense and at his own risk . The agreement defines all the necessary conditions related to the use of subsoil, including the conditions and procedure for dividing produced products between the parties to the agreement.

The produced products are subject to division between the state and the investor in accordance with an agreement, which must provide for the conditions and procedure for:

Determination of the total volume of products produced and its value.

Determination of the part of the produced products that is transferred to the ownership of the investor to reimburse his costs for performing work under the agreement (hereinafter referred to as compensation products). At the same time, the maximum level of compensation products should not exceed 75 percent, and for production on the continental shelf of the Russian Federation - 90 percent of the total volume of production

Transfer by the investor to the state of the part of the produced product or its value equivalent that belongs to it in accordance with the terms of the agreement;

Receipt by the investor of manufactured products that belong to him in accordance with the terms of the agreement.

In some cases, the division of produced products between the state and the investor in accordance with the agreement may be carried out in a manner different from that described above.

The agreement may provide for only one method of division of production. The agreement cannot provide for a transition from one method of production division to another, as well as the replacement of one method of production division with another.

Another general direction for entering the foreign market is to join forces with commercial enterprises of the country - partners in order to create production and marketing capacities. Joint business activities differ from exports in that a partnership is formed, as a result of which certain production facilities are created abroad. What distinguishes it from direct investment is that an association with a local organization is formed in the partner country. There are four types of joint ventures.

Licensing. This is one of the easiest ways to involve a manufacturer in international marketing. The licensor enters into an agreement with a licensee in a foreign market, offering the rights to use a manufacturing process, trademark, patent, trade secret, or some other value of value in exchange for a royalty or license payment. The licensor gets access to the market with minimal risk, and the licensee does not have to start from scratch, because he immediately receives production experience, a well-known product or name. Through licensing operations, Gerber introduced its baby food products to the Japanese market. The Coca-Cola Company carries out its international marketing activities by granting licenses to various enterprises in different parts of the world or, more precisely, by providing them with trading privileges, since the company itself provides the concentrate necessary for the production of the drink.

A potential disadvantage of licensing is that the firm has less control over the licensee than over its newly created enterprise. In addition, if the licensee is very successful, the profits will go to him, and at the end of the contract the firm may find that it has created a competitor.

Contract manufacturing. Another activity option is concluding a contract with local manufacturers to produce goods.

The disadvantage of contract manufacturing is the company's less control over the production process and the loss of potential profits associated with this production. At the same time, it gives the firm the opportunity to expand operations faster, with less risk, and with the prospect of partnering with or purchasing a local manufacturer.

Contract management. In this case, the company provides the foreign partner with “know-how” in the field of management, and he provides the necessary capital. Thus, the firm does not export a product, but rather management services. This method is used by Hilton to organize the operation of hotels in different parts of the world.

Contract management is a way to enter a foreign market with minimal risk and generate income from the very beginning of activity. However, it is not advisable to resort to it if the company has a limited staff of qualified managers who can be used with greater benefit for itself, or in the case where independent implementation of the entire enterprise will bring much more profit. In addition, contract management for some time deprives the company of the opportunity to develop its own enterprise.

Joint ownership enterprises. A joint ownership enterprise is a combination of foreign and local capital investors to create a local business enterprise that they jointly own and operate. An overseas investor can buy a stake in a local business, a local firm can buy a stake in an existing local business of a foreign company, or both parties can work together to create an entirely new business.

A joint ownership venture may be necessary or desirable for economic or political reasons. The firm may lack the financial, physical, or managerial resources to undertake the project alone. Or perhaps co-ownership is a condition of foreign government entry into their country's market.

The practice of joint ownership has certain disadvantages. Partners may disagree on investment, marketing, and other operating principles. While many American firms seek to use earnings to reinvest in business expansion, local firms often prefer to withdraw these proceeds from circulation. While American firms play a larger role in marketing, local investors can often rely solely on sales organization. Moreover, cross-ownership may make it difficult for a multinational company to implement specific production and marketing policies on a global scale.

Direct investment. The most complete way for a company to get involved in activities in a foreign market is to invest capital in creating its own assembly or manufacturing enterprises abroad. As the firm gains experience in exporting and the foreign market is large enough, manufacturing facilities abroad offer clear benefits. First, the firm can save money through cheaper labor or cheaper raw materials, through incentives provided by foreign governments to foreign investors, through reduced transportation costs, etc. Secondly, by creating jobs, the company provides itself with a more favorable image in the partner country. Third, the firm develops deeper relationships with government agencies, customers, suppliers and distributors in the host country, which makes it possible to better tailor its products to the local marketing environment. Fourth, the firm retains full control over its investments and, therefore, can develop production and marketing policies that will meet its long-term objectives on an international scale.

The legislation of a number of countries suggests that the presence of a foreign company in their market is possible only by concluding a contract with local firms for the production of goods in these countries. Even industrialized countries sometimes put pressure on exporters to establish joint ventures abroad.

Joint venture activity is the combination of some aspects of the production and marketing of goods and services with foreign companies. For example, the Dutch company Philips works with the Japanese companies GVC and Sony, owns the German company Grundig, and cooperates with the French company SIG-Alcatel.

Joint ventures (JVs) are created on the basis of licensing, production contract, management contract and joint (fractional) ownership.

Licensing gives a foreign company the rights to the production process, trademark, patent, etc. in exchange for commission payments (royalties). A license agreement may also represent rights to intangible property for an indefinite period. Such property can be: formulas, processes, diagrams, etc. The use of licensing when creating a joint venture has economic, strategic and political motives.

Economic motives are that the licensor reduces the risk of creating production abroad, given the small sales volume, the danger of a competitor improving the product, and limited resources. Large firms with diversified production, revising their product range, focus their efforts on the strengths of their activities, which provide high profits. They abandon products and technologies that are not of interest at the time. This is the strategic motive behind the licensing agreement. But the company can change its strategy and terminate the contract, especially since their terms are short.

Political and legal motives underlie a licensing agreement when there are restrictions on foreigners acquiring property in the licensee country, whether or not protecting foreign property. By transferring the rights to the object of the licensing agreement, the company loses control over its assets. There is a need to provide for the following points in the license contract:

1) the conditions for its termination if the parties do not comply with the established requirements;

2) methods for checking the quality of goods and services;

3) obligations for expenses on creating a distribution system;

4) geographical boundaries of the use of assets;

5) conditions for the use of innovative technologies based on knowledge transferred under a license agreement;

6) confidentiality of information under the license agreement.

In practice, there is a wide range of terms and amounts of payments under a license agreement. The terms of the licensing agreement are influenced by both factors specific to the agreement (exclusivity of the license, limitations on production volume, quality requirements, novelty of technology, etc.) and factors specific to the market (state licensing rules, level of competition among suppliers of similar technologies, political, business risks, etc.).

The price of the licensing contract is determined by both the licensor and the licensee in order to agree on the amount of payments. In this case, an upper and lower price limit is set. The upper price limit is calculated based on an assessment of the licensee's weighted average profit from using the technology and an assessment of the licensee's costs of purchasing the same technology from competitors or the costs of developing it independently.

The price floor usually takes into account the licensor's estimate of the costs of direct technology transfer or the zero-win price. Determining the cost of a license agreement is a very important point, since it is a contribution from one of the JV participants to the authorized capital and management resources.

In international business, a joint venture is a partnership in which the partners share ownership, control over production and the income received. Partners can be: two foreign companies trading in a third country, a foreign company and a government organization (enterprise), or a foreign company and a local one.

An increasing number of firms are trying to enter international business quickly by forming strategic alliances with competitors, suppliers and customers. In a typical strategic alliance, two or three firms invest equal shares in a joint venture or sign agreements to share marketing, research, or production costs.

Fractional ownership It is used in different countries, but it is more developed in those industries where the need for capital expenditures and additional external resources is higher. The local government can also exert pressure on those foreign firms that have a strong influence on the economy of the recipient country.

The main reasons for creating a joint venture on a shared basis are as follows:

1) expand its activities in the geographical area;

2) prevent competitors from taking a dominant position in the market;

3) achieve a maximum increase in sales volume;

4) pressure from the government to share ownership with local shareholders;

5) reduce the severity of public and official criticism of the foreign company.

Many firms operating as a joint venture decide in advance who will own the controlling stake. If this issue is not resolved, then the company may lack clarity in choosing areas of activity.

Management contract – an agreement under which one company sells management services for managing an enterprise (equipment) to another company located abroad.

The need for a management contract arises in situations where:

1) foreign investments are expropriated by the recipient country, and the former owner is offered to continue managing the enterprise while local managers are trained;

2) new commercial projects provide that the contracted company sells both its equipment and services for its management;

3) management in order to improve the efficiency of the enterprise.

From the recipient country's perspective, the management contract eliminates the need for direct investment as a means of obtaining management assistance. For a service firm, contracts help avoid the risk of loss of capital when returns on investment are low and capital costs are prohibitive.

Production contract – an arrangement in which a firm enters into agreements with firms in a foreign market to produce products in that country. The company usually conducts marketing through foreign commercial subsidiaries. Such agreements are common in book publishing.

turnkey contracts- an arrangement under which one company designs, builds and trains personnel to operate the equipment of a foreign company. In reality, all the purchasing company has to do is “turn the key” to start the equipment.

Deciding on market entry methods

Having decided to engage in sales in a particular country, the company must choose the best way to enter the chosen market. She can stop at export, joint venture or direct investment abroad 10 . Each successive strategic approach requires greater commitment and greater risk, but also promises greater returns. All these strategies for entering the foreign market are presented in Fig. 92 indicating options for possible actions in each specific case.

Rice. 92. Strategies for entering foreign markets

Export

The easiest way to enter into activities in a foreign market is to export. Irregular export This is a passive level of involvement where the firm occasionally exports its surplus and sells goods to local wholesalers representing foreign firms. Active export occurs when a firm sets out to expand its export operations in a specific market. In both cases, the firm produces all its goods in its own country. They can offer them for export in both modified and unmodified form. Of the three possible strategy options, exporting requires minimal changes to the firm's product mix, structure, capital expenditures, and program of operations.

A firm can export its goods in two ways. You can use the services of independent international marketing intermediaries (indirect export) or carry out export operations yourself (direct export). The practice of indirect export is most common among firms just starting their export activities. Firstly, it requires less capital investment. The company does not have to acquire its own sales apparatus abroad or establish a network of contacts. Secondly, it is associated with less risk. International marketing intermediaries are domestic merchant-exporters, domestic export agents or cooperative organizations who bring their specific professional knowledge, skills and services to this activity, and therefore the seller, as a rule, makes fewer mistakes.

Joint business activity

Another general direction for entering a foreign market is to join forces with commercial enterprises in a partner country in order to create production and marketing capabilities. Joint business activities differ from exports in that a partnership is formed, as a result of which certain production facilities are created abroad. What distinguishes it from direct investment is that an association with a local organization is formed in the partner country. There are four types of joint ventures.

LICENSING. This is one of the easiest ways to involve a manufacturer in international marketing. The licensor enters into an agreement with a licensee in a foreign market, offering the rights to use a manufacturing process, trademark, patent, trade secret, or some other value of value in exchange for a royalty or license payment. The licensor gets access to the market with minimal risk, and the licensee does not have to start from scratch, because he immediately receives production experience, a well-known product or name. Through licensing operations, Gerber introduced its baby food products to the Japanese market. The Coca-Cola Company carries out its international marketing activities by granting licenses to various enterprises in different parts of the world or, more precisely, by providing them with trading privileges, since the company itself provides the concentrate necessary for the production of the drink.

A potential disadvantage of licensing is that the firm has less control over the licensee than over its newly created enterprise. In addition, if the licensee is very successful, the profits will go to him, and at the end of the contract the firm may find that it has created a competitor.

CONTRACT MANUFACTURING. Another activity option is concluding a contract with local manufacturers for the production of goods. Sears used this method to open its department stores in Mexico and Spain, finding skilled local manufacturers who could make many of the products it sold.

The disadvantage of contract manufacturing is the company's less control over the production process and the loss of potential profits associated with this production. At the same time, it gives the firm the opportunity to expand operations faster, with less risk, and with the prospect of partnering with or purchasing a local manufacturer.

CONTRACT MANAGEMENT. In this case, the company provides the foreign partner with “know-how” in the field of management, and he provides the necessary capital. Thus, the firm does not export a product, but rather management services. This method is used by Hilton to organize the operation of hotels in different parts of the world.

Contract management ¾ is a way to enter a foreign market with minimal risk and generate income from the very beginning of activity. However, it is not advisable to resort to it if the company has a limited staff of qualified managers who can be used with greater benefit for itself, or in the case where independent implementation of the entire enterprise will bring much greater profits. In addition, contract management for some time deprives the company of the opportunity to develop its own enterprise.

JOINT OWNERSHIP ENTERPRISES. A joint ownership venture is a combination of foreign and local investors to create a local business enterprise that they jointly own and operate. An overseas investor can buy a stake in a local business, a local firm can buy a stake in an existing local business of a foreign company, or both parties can work together to create an entirely new business.

A joint ownership venture may be necessary or desirable for economic or political reasons. The firm may lack the financial, physical, or managerial resources to undertake the project alone. Or perhaps co-ownership is a condition of foreign government entry into their country's market.

The practice of joint ownership has certain disadvantages. Partners may disagree on investment, marketing, and other operating principles. While many American firms seek to use earnings to reinvest in business expansion, local firms often choose to withdraw these proceeds. While American firms play a larger role in marketing, local investors can often rely solely on sales organization. Moreover, cross-ownership may make it difficult for a multinational company to implement specific policies in production and marketing on a global scale.

Direct investment

The most complete form of involvement in activities in the foreign market is the investment of capital in the creation of their own assembly or production enterprises abroad. As the firm gains experience in exporting and the foreign market is large enough, manufacturing facilities abroad offer clear benefits. First, the firm can save money through cheaper labor or cheaper raw materials, through incentives given by foreign governments to foreign investors, through downsizing; transport costs, etc. Secondly, by creating jobs, the company provides itself with a more favorable image in the partner country. Third, the firm develops deeper relationships with governments, customers, suppliers, and distributors in the host country, allowing it to better tailor its products to the local marketing environment. Fourth, the firm retains complete control over its investments and can therefore develop production and marketing policies that suit its long-term international objectives.