Furniture
By: sumit.chordiya • Research Paper • 1,336 Words • May 8, 2011 • 2,178 Views
Furniture
India, a land of wonders, has always been known for its splendid and elegant timberwork. It has been India's tradition of manufacturing good quality furniture through small-scale handicrafts as also through large companies. The concept of standardization of lifestyle, interior designing, quest for comfort and architecture have got an added value thereby making furniture industry a great platform for art, style, technology and beauty (Shivcreations, 2010). Since then, the furniture industry in India has glorified and is currently the second largest establishment after agriculture (Paoletti, 2009). Globalization and media have added to the growth of industry. The furniture sector in India has been predicted by the consultants to report growth larger than the global average for the next ten years. It is estimated that Indian furniture market is worth Rs. 3,50,000 million (Paoletti, 2009). With this perspective in mind it is established that foreign investors have a great scope in the Indian furniture market.
Canada, being the 5th largest exporter of furniture in the world, has an export-oriented industry (Buisson, 2011). A Canadian Furniture Company wants to expand its business by internationalizing the firm to serve the global market. India seems to be a very good option for Canada since India provides low costs labor, high quality timber products and domestic market with increased consumption. Being responsible for expanding the company beyond Canada, one must critically evaluate the ways of penetrating the Indian market, which however requires an ample amount of groundwork and endurance. One must spend time and investigate about the knowledge of institutional environment (Hamel, et al., n.d.). The company must have a proper knowledge of local markets, needs and necessities of population, cultural difference, weather conditions, etc. to expand its business. The entry modes are considered as "frontier issues" in international business (Wind & Perlmutter, 1977). Of all the existing entry modes into the foreign market, Joint ventures are most widely practiced form of business organization in emerging economies (Vaupel & Curhan 1973). Even Fortune 500 companies of the developed countries are involved in such type of entry mode (Janger, 1980; Harrigon, 1985). Joint venture accounts for the establishment of an organization that is being handled mutually by two or more companies that work independently otherwise (Hill, 2011). International Joint Venture is an important strategy of the business world globally (Beamish & Banks 1987). It is used as competing tools within multi-domestic and global domain (Porter & Fuller, 1986; Harrigon, 1988). The key of joint venture is selecting an ally or partner who will help the firm in achieving the goals, may that be access in the market, costs sharing or access into the critical core competencies.
A Bangalore based Beer Company which is serving the local Indian market from many years, having a very strong hold in their local market, is willing to share the foresight of the organization for resolution of the treaty. The proposal of joint venture is suggested to the Canadian company by a trusted contact thereby being advantageous. The idea of forming a Joint Venture with such a native reliable company will serve innumerable advantages for Canadian company. First of all, it reduces the burdens and risks associated with the local issues and company can concentrate on the needs of local consumers for various products (Hill, 2009). Secondly, handling various political issues, senior government officials and distributers becomes the responsibility of the Indian company (Hill, 2009). Securing the working license is again the job of the Indian company. Joint venture allows specialized staff, most recent technologies from both the companies to merge, thereby gaining new expertise and opting an innovative way to depart from non-core businesses (Hill, 2009). Local partners awareness of the host country's culture, viable conditions related to business, language, different political systems, and business systems, technological know-how, marketing proficiency and acquaintance for striving in India would help the firm succeed in the international market (Hill, 2009). The firm is again benefited since the risk and development costs are received equally by both the partners. Various researches have been carried out suggesting that joint venture are not subjected to high risk of being taken over by government or other unfavorable government policies and if they do, the local partners are capable of standing against government interferences (Hill, 2009).
Though a joint venture serves innumerable merits, there are certain demerits of the venture that also must be taken into consideration before company actually forms it. By virtue of joint venture, the entire control goes into the hand of Indian company that can be misused resulting in