One strategy is forming a joint venture. I have another example just recently in
ID: 463982 • Letter: O
Question
One strategy is forming a joint venture. I have another example just recently in the news. Drones are very popular right now. AVAV is a drone company that has developed a very interesting technology for high altitudes that can remain airborne for over a week. However their contract was recently canceled by the government. They decided to partner with Lockheed Martin and combined their technologies. This deal makes sense because Lockheed is already in the market and currently build systems to communicate with and command drones. They have a market cap of over $50 billion and is viewed by the government as a much more reliable supplier than AVAV which has a market of only $700 million. Together their partnership makes sense. The larger company has the cash and stability and the smaller company has the novel technology. This is a joint venture because they are both keeping their separate identities but working together.
WHAT ARE YOUR THOUGHTS ON THIS? EXPLAIN!
Explanation / Answer
The success of Joint Venture depends upon drawing synergies from the complementing strengths and competencies of the joint venture partners to generate competitive advantage in the marketplace. The present case is a very good example of two joint partners having complementary strengths. AVAV being a small and new company, has the flexibliity and novelty to be innovative and ceate new technologies. Lockhed Martin on the other hand, being an old old and established big company has the credentials, capabilities, experience and the scale to make the innovations commercially feasible on a large scale as well it has the reputation, which makes customers perceive it as a more reliable company than AVAV. When both work as joint venture partners, they can leverage on their complementing strengths and create a compelling proposition for customers. However, there could be challenges in managing relations with each other, because of the relative size, scale and repuation of each company. The larger company might have a greataer bargaining power over its smaller partner. If these two JV partners are able to take care of these issues and manage the relationship well, then their JV partnership would be successful.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.