Nora-Sakari: A Proposed Jv In Malaysia Harvard Case Solution & Analysis

Nora-Sakari: A Proposed Jv In Malaysia Case Study Solution

Recommendation

The joint venture is the best move for both Sakari and Nora Holdings. Since, the objective of Nora Holding is to acquire knowledge and understanding in digital switching technology, whereas the objective of Sakari is to gain access and penetration into the market and acquire Southeast Asia. Additionally, the objective of the joint venture is to commission and manufacture(Fourth generation) 4G mobile network equipment in order to fulfill the needs of the Malaysia telecom industry and neighboring countries as well. A joint venture is beneficial for both companies because they could easily accomplish their objectives. Nora could enjoy the first-mover advantage to develop and manufacture the 4G equipment.

Since Sakari is comparatively small in size it would be able to access the market and would be able to get prepared to offer customized products. Nora, on the other hand, would be benefited from the transfer of technology. In addition, Nora Holdings would be able to would improve its competence in marketing, hence seize the market share and generate revenues. Shortly, entering into the JV would reap many benefits for both parties in the future. The joint venture between two companies could Nora Holdings to satisfy the TMB contract in a timely manner.

There are some key areas that should be closely looking while restructuring negotiation. The key areas are as follows;

Technology

It is to notify that Sakari did not agree on sharing its knowledge on the switching technology whereas Nora Holdings was contemplated to be a part of a joint venture to acquire complete information and knowledge on switching technology. In the process of renegotiation, Sakari should give access to some information to Nora Holdings, which would deal successfully.

Ownership of equity

Secondly all, the power control and the ownership of equity should be considered in the renegotiation. Nora Holdings should pose a greater proportion of equity of joint venture (40% for Sakari and 60% for Nora Holdings) for many reasons such as; the joint venture would be operated in Malaysia rather than Finland and Nora have enough knowledge and understanding of the culture better than Sakari, another reason is that Nora Holdings have suitable as well as manageable forces to better manage the joint venture operations, so it would be beneficial if Nora would hold more stake of ownership as compared to Sakari.

Arbitration

The arbitration should not be the major reason for not entering into a joint venture. The neutral location should be selected other than Helsinki and KL. Each company should compromise and select any other location.

Pros

• Lead to win-win outcome and interest of both parties
• Encourage a healthy and positive relationship between Nora Holdings and Sakaraas it is the best surety for the long-term agreement
• The negotiation process is party-oriented, no substantial-conclusion would be drawn if either each of two parties is not satisfied with the outcome of the renegotiation
• A large amount of profit could be actualized by both parties

Cons

• Possibility of failure of renegotiation
• Likelihood of impasse when no productive outcome could be accomplished by each party, hence lead to walkout situation
• The situation of impasse could lead to a strained relationship between Nora Holdings and Sakara
• Both parties would have to make implementation plan an essential part of the overall process of renegotiation
• Renegotiation requires additional costs to cover the expenses incurred in the future related to renegotiation.

Walk away

Nora Holdings could opt for making a deal with any of its prior partnersfor the TMB deal and cancel the negotiation agreement with Sakara. The advantages and disadvantages of renegotiation are discussed below;

Pros

• Nora Holdings could find the right partner which would be highly willing to offer custom made and standard products which would be consistent with the customer’s needs.
• Nora Holding would find the partner with similar interest in the field of perks and salaries, hence making it easier to strike a deal for Nora

Cons

• Ending deal with Sakari would require Nora Holdings to start all over from scratch. It would take considerable effort and time to assess and find the most suitable partner for the TMB contract.
• The shortage of time mightimpactthe choice of partner Nora Holding could make for the TMB contract.
• Possibility of not reaching an agreement with the newly selected partner during the phase of negotiation
• The solution offered to Nora Holdings other than Sakariis not compatible, acceptable and customized at all.
• NEC and Samsung are not feasible options for Nora Holdings as they have already failed in the process of bid

Salaries

The perks and salaries should be given in accordance with Helsinki because of the reason that both Nora Holdings and Sakari would need Finland experts who would be working for Sakari. So, the salaries and perks should be given as per the rate and rules of Helsinki.

Royalty

A fixed-rate of royalty should be considered in renegotiation. In case Sakari would be accountable and obliged to financially supports one of the plants, 4 percent of royalty would be received by Sakari. It is proven by financial simulations that if the rates are more than 3 percent, the desired Return on Investment of 10 percent would be hampered. Additionally, according to Nora Holdings, Sakari would gain side advantages from the technology in japan which was more advanced as compared to Sakari’s technology, which in turn tends to justify the rationale behind keeping rates of royalty below 3 percent.

Conclusion

Due to the fact that the contract between companies had not yet reached, the vice-chairman of Nora Holding SdnBhd – Zainal Hashim is now concerned about the commitment his company has made to Telecom Malaysia Bhd (TMB), now he is considering to find the partner to provide the technology and try to reconcile with Sakari.A joint venture is beneficial for both companies because they could easily accomplish their objectives. Nora could enjoy the first-mover advantage to develop and manufacture the 4G equipment.Lead to win-win outcome and interest of both parties. The renegotiation would result in many benefits such as; encourage healthy and positive relationship between Nora Holdings and Sakara as it is the best surety for the long-term agreement, the negotiation process is party-oriented, no substantial-conclusion would be drawn if either each of two parties are not satisfied with the outcome of the renegotiation, renegotiation requires additional cost to cover the expenses incurred in future related to renegotiation and a large amount of profit could be actualized by both parties.

Appendix A

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