Disagreements Between Two International Companies - Case Study Example

 OVERVIEW Jobek do Brazil's, a Brazil-based multinational fabricate of leisure furniture and hammocks, worldwide joint venture with its US accomplice, Hatteras Hammocks, is confronting an emergency. Jobek has constantly kept up an attention on environmental issues and the wood it uses to produce its hammocks to originate from guaranteed sources. The proprietors of Hatteras have not been unmistakably worried about environmental issues and their customers have been substantial chains, for example, Wal-Mart and their concentration has been low costs. Assist they have not completely watched their terms of concurrence with Jobek by purchasing less expensive hammocks that produced using uncertified wood items from China. The IJV keeps Jobek from straightforwardly pitching to US retailer sand merchants. The solution for this issue is end the organization which is less demanding said than done. Jobek doesn't have the accounts to purchase out Hatteras and Hatteras is basically not willing to consult and negotiate with Jobek. 1.How would you evaluate the IJV between Jobek and Hatteras? In my opinion, IJV just like a marriage between two independents international companies to cooperate in developing new business plan. In other word, the culture among international company must compatible to each other’s. In this case, Jobek was not choosing the right strategic partners for the alliance. The wood used to make its hammocks came from certified source; a fact that the company has used to gain a competitive advantage. Jobek ‘s culture was not compatible to the Hatteras. Jobek had always concerned with the environment protection. However, Hatteras had never been concerned with environmental matters and more focus low price strategic. Jobek had adopted a strategy to enter international markets that little or nothing in common with Hatteras strategy. The misalignment of both company culture hinders the company performance and that relationship will not sustainable in long run business. Second, Hatteras was pursuing the low price strategy. Hatteras used the uncertified wood to produce the furniture and distributed the products Jobek brand reputation. Consequently, this IJV had damaged the Jobek ‘s reputation and lost sales. As a conclusion, IJV will not always benefit the both independents international companies but also can have the disadvantage toward both companies. 2.What was the international market strategy of Jobek? And of Hatteras? The international market strategy of Jobek is to align itself with the green cause while the strategy adopted by Hatteras is capitalistic in nature. The strategy that used by Jobek had cause the Global companies have to go through many pressure to adopt the environmental path to sustainability. They have few certificates that used to support this social responsibility label such as ISO series, international reporting standards (such as the Global Reporting Initiative [GRI]), and certifications in specific areas and sectors (such as those granted by the Forest Stewardship Council [FSC]). ISO series is a set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. They are not specific to any one industry and can be applied to organizations of any size. Global Reporting Initiative (GRI) is an international independent standards organization that helps businesses, governments and other organizations understand and communicate their impacts on issues such as climate change, human rights and corruption. The Forest Stewardship Council (FSC) is an international non-profit, multi-stakeholder organization established in 1993 to promote responsible management of the world's forests. The FSC does this by setting standards on forest products, along with certifying and labeling them as eco-friendly. The achievement of Jobek's international hammock sales has depended vigorously on public awareness of the organization's FSC certification. The other reason is the products nearby relationship with Latin American culture. So, part of the strategy is to sell a particular life style – a life spent in indolence, in the warm tropical regions, and of beaches surrounded by palm trees. Jobek has successfully exploited the idea of the Brazilian way of life through this product. The strategy adopted by Hatteras is capitalistic in nature. Although they know the importance of the environment and sustainability but in reality, the customer will only wish to get a good bargain. So in order to fulfill customer’s needs and wants, they are willing to trade with companies and countries which produce low-cost hammocks using wood that is not certified. It will increase the purchasing power of the customers. 3.What are the differences between the concepts of corporate social responsibility used by Hatteras and Jobek? Corporate social responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders. CSR has a very broad concept that addresses many and different topics such as human rights, corporate governance, health and safety, environmental effects, working conditions and contribution to economic development. The main goal of CSR is to drive change towards sustainability. (Financial Times, 2018). CSR activities can be evaluated by three models, namely, industry-based considerations, resource-based consideration and institution-based consideration. Industry-based considerations Industry-based considerations comprise five forces which are rivalry among competitors, threat of potential entry, bargaining power of suppliers, bargaining power of buyers and threat of substitutes. The differences between Jobek and Hatteras according to five forces are as follows:- Jobek Forces Hatteras High Rivalry among competitors High High Threat of potential entry Low High Bargaining power of suppliers Low Low Bargaining power of buyers Low High Threat of substitutes High Resource-based considerations Resource-based considerations is mainly focus on VRIO framework, namely, value, rarity, imitability and organizational. The differences between Jobek and Hatteras according VRIO framework is as follows: Jobek Framework Hatteras High Value Low Low Rarity Low High Imitability High High Organizational Lower Institution-based considerations Institution-based considerations consists of the formal and informal institutions. Formal institution includes the law and entry requirements of the joint venture whilst the informal institution includes the belief and values of the collaboration between the joint venture partner. Below are the differences between Jobek and Hatteras under the institution-based consideration. i) Social and Environmental Certifications FSC Chain-of-Custody Certification It traces the products from forests through the supply chain and verify that the material is kept separated from non-certified material throughout the chain. Besides, it ensures that the certified products are coming from responsibly managed sources. (FSC United States) Jobek Insists on using certified (sustainable) wood to make the hammocks. Jobek owned the FSC Chain of Custody Certificate which is granted by the Forest Stewardship Council (FSC). This certificate add value to Jobek’s products through the green seal and a high quality. However, the FSC-certified woods are very expensive as the certification cost is pay by the contracting company. Hatteras Hatteras is focusing on the low price. Therefore, it preferred the uncertified wood products as it no need to go through the annual audits and inspections which will increase the cost of the woods. Besides, because of the few number of certified wood supplier as compared to the demand put the buyer in disadvantage as the supplier impose payment conditions unilaterally. ii)Culture Hofstede Dimension (Long Term Orientation) This refers to how much society values long-standing as opposed to short term traditions and values. Jobek Jobek is a German company based in Brazil which see everything from long term perspective. Thus, it emphasized on the sustainability of the wood and therefore insists on using certified wood to make hammocks. Hatteras On the other hand, Hatteras company which is from American see everything from short term perspective especially the competitive price and the profit earned without using certified wood to make the hammocks as it will increment the cost. Source: Hofstede Insights (Long term orientation) iii)Joint Venture Agreement Jobek Since Jobek had little working capital so they sell 49.5% to Hatteras. In return, Hatteras will transfer production to Brazil expand the factory and infrastructure over there. Hatteras Hatteras became the largest hammock producer after acquired Pawleys Island, the oldest hammock manufacturer in United States. The competition Hatteras faced is reduced when both company establish a partnership as Jobek began to take part in trade fairs in the US and Chicago which can broke their monopoly. In 2002 and 2003, the dollar currency was strong, thus it is cheap for Hatteras to produce the product at Brazil (1 dollar=almost 4 reais) and it stressed on the low price. Besides, Hatteras have exclusive right to distribute Jobek’s product in United States under the Jobek do Brasil name to strengthen the image with the Latin hammock made of fabric which differentiate it. 4. Based on your evaluation, what should Jobek do? One of the alternatives that Jobek can consider is the legitimate. Hatteras purchasing lower-estimated lofts from China is an unmistakable infringement of the terms of its concurrence with Jobek. Lawyers ought to likewise investigate the agreement between the two organizations particularly on the issue of profits and losses, and exit provisions. Ordinary, the minimum prerequisite will incorporate conditions on the best way to deal with the wander and how to share profits and losses. Accomplices in a joint venture are required to watch guardian obligations and loyalties. This expects them to collaborate and carry on in a way which serves the best advantages of the cooperation. Administration experts would exhort any organization from utilizing the legitimate choice as it is costly and can set aside long opportunity to determine. Therefore, Jobek could consult with Hatteras before propelling a lawful offense. The other choice is go into a cooperation with another comparable disapproved of organization. In any case, that would mean weakening its stock esteem which may bring about engaging Hatteras, leaving Jobek defenceless. Another alternative is permit business as usual to proceed. This may turn out to be expensive since Jobek cannot bears to not getting any profit. Be that as it may, then again, this may constrain Hatteras to rethink its union with Jobek and look for an exit from its assention. 5.Describe Jobek’s current competitive environment. What changes do you foresee in the future? How do you think they will influence Jobek? The trend competitive environment affected by increasing the suppliers’ bargaining power, competition’s strong intensity and improving the bargaining power of buyers. It tends to improve the consumers’ inclination to look for cheaper alternatives due to the Global Financial Crisis in 2008 and the threat of emerging economies. There is a high possibility of USA legislation is on the edge of change to work hand in hand with environment sustainability. The knowledge gained from the IJV can lead to the employment of different business strategies. Due to the previous experience, it may lead Jobek to the probability of market re-entry. In the future, Jobek should buy back their shares and give another attempt to re-enter the USA market as a luxurious and environmentally and friendly producer of hammock. Next, it should have stay up date with market research on countries with increasing disposable income. As in 2015, Jobek do Brasil has halted its cooperation with Hatteras Hammock. It is still consuming exclusive woods with FSC certificate and making high quality hammocks. In addition, the company has replaced DuroCord with JobekCord which is much more beneficial than previous material as it would not easily get fade and soil as well as mold-resistant and UV-resistant. On the other hand, after the acquisition of Pawleys Island, Hatteras Hammock Inc. began to perform its business under the name of The Hammock Source. Moreover, the manufacturer had replaced in Brazil partnership with Real Deal Brazil. (Chris Choh, n.d). Conclusion The partnership or joint venture between a Germany company based in Brazil which is called Jobek and an American company named Hatteras will come to the end because of the problem such as the cultural perspective. German see everything from a long-term orientation whilst the American see the thing from a short-term orientation which can cause the dilemma or conflict to the partnership. Besides, Jobek is emphasized on the sustainability of the environment by using the wood certified by the Forest Stewardship Council whilst Hatteras is focusing on the short-term basis which is the competitive low price with uncertified wood. Other than that, the partnership is seem more beneficial to Hatteras as compared to Jobek. As Hatteras got the exclusive right to use the Jobek do Brasil name to strengthen the image with the Latin hammock made of fabric which differentiate it with other United States hammock. On the other hand, Jobek had to sell 49.5% of the shares to Hatteras in order to get the working capital and in return with the infrastructure. However, due to the exchange rate worsen the operations are completely idle. Thus, it is not easy to form a partnership and it is important to have a partnership which is mutually benefit. References Chris Choh. (n.d). IBS Jobek do Brasil. Retrieved from http://www.academia.edu/12372309/IBS_Jobek_do_Brasil al Times. (2018). “Definition of Corporate Social Responsibility”. Retrieved from http://lexicon.ft.com/Term?term=corporate-social-responsibility--(CSR) FSC United States. Chain of Custody Certification. Retrieved from https://us.fsc.org/en-us/certification/chain-of-custody-certification Hofstede Insights. Country Comparison Long Term Orientation. Retrieved from https://www.hofstede-insights.com/country comparison/germany,the-usa/ Read More