Joint Venture Agreement between Italian Winery and EVOO Bottlers - Case Study Example

Legal Memo (Students Name) (Institution) LEGAL MEMORANDUM To: From; Date: Re: Joint Venture Agreement between Italian Winery and EVOO Bottlers Dear Client Reference is made towards establishing the best arrangement and relationship between Italian Winery and EVOO Bottlers which can strategically position the products of Italian Winery into China market among other potential markets. This comes in the wake of intense challenges concerning under pricing and mixing the product of the company with those of other players making Italian Winery less competitive in the market. Besides, it stems from the need of the company’s management to have a suitable way through which it can maximize its oversight and management of the production, labeling, packaging and marketing of the products. The best thing which can work between Italian Winery and EVOO Bottlers is the establishment of a joint venture which possibly brings together the management and the functional strategies of the two companies for improved efficiency. The establishment of a Joint venture requires bringing together of different aspects of management between the two companies, pooling together of resources, bringing together the expertise and functional areas of both Italian Winery and EVOO Bottlers. Besides, it requires a process which guarantees to the sign of contractual agreements and getting to agree on the specific common roles to be performed. Italian Winery has sufficient financial guarantee to carry out the process. Therefore, this paper is to offer and advice on the legal processes required to carry out the joint venture formalization, the documents necessary in the agreement and the kind of contracts which befits the parties into this agreement The establishment of a joint venture between Italian Winery and EVOO Bottlers EVOO Bottlers is a company which is responsible for packaging the products of Italian Winery and making them available in foreign markets. Packaging is essential in this market since the legal environment within which all players operate under strict regulation to have legal and quality products with correct labeling. Italian Winery can monitor the production of wine. However, it presently lacks the potential and the capacity to package and label the products for ready marketing. Besides, it lacks the necessary network establishment of how it can easily gain the China market among other foreign markets. On the other hand, EVOO Bottlers is highly specialized in carrying out bottling of wine products and also has networks in the China Market. The inability of Italian Winery to manage the packaging has made it suffer from fraudulent businesses. Besides, it has made the products of the company any less competitive due to the plague of underpricing (Boersma et al., 2003). 1.Nature of the contract that forms the joint venture The establishment of a joint venture which is proposed in this case requires the ability of the firms involved to bring together their resources and expertise towards producing and packaging the wine. The only significant production process which is deficient in Italian Winery is the ability to package and brand its product to the market. The first level of agreement, therefore, needs to be concerned with agreeing on the production elements to join. Presently, these two companies perform different tasks. Italian Winery is concerned with production while EVOO Bottlers does much of packaging (bottling) and marketing functions. Therefore, the first element of agreement concerns the fusion of bottling functions of EVOO Bottlers and the production roles of Italian Winery. The formation of joint ventures is legal and clearly provided for in the law. However, the law sets out procedure which needs to be followed, the kind of documents relevant for this purpose and the objectives of coming up with the joint ventures. These will be captured in this advice. The other contractual agreement necessary in constructing concerns brings together both the management bodies of EVOO Bottlers and Italian Winery. Joint ventures are normally run by one unit of management which comprise of selected members from both the defunct two companies. The agreement, therefore, is to the selected members of both the companies to be included in the top and functional management areas. As a matter of fact, the construction of a single body to manage the affairs of the joint venture will contribute positively in offering direction to the affairs of the company. Italian Winery and EVOO Bottlers need to dissolve their previous management bodies. After dissolution, they need to come up with a single management unit to oversee all the process of the company. It’s the various members of the two companies to decide on which people to establish the managerial body. Ordinarily, the two companies contribute equally in proposing representatives to the single management unit fronted in the company. This helps to have equal and collective participation of members of the two companies in running the affairs of the new company. 2. Legal Process Both Italian Winery and EVOO Bottlers currently exist as separate entities which carry out different roles. All of these two companies are in existence legally. Therefore, they have legal documents and instruments which brought them into existence and put them into practice. The first step towards bringing the two companies into a joint venture is to dissolve the existing entities. This implies that both Italian Winery and EVOO Bottlers need to be dissolved and be reconstructed. The process of dissolution means that both the companies cease to exist as separate entities. Instead, they join as one body that forms a particularly agreed production. It implies that the legal documents which created the two separate entities be rescinded and the companies join to form a new body (Pothukuchi et al., 2002). One essential aspect of this formation concerns the establishment of particular reasons behind the dissolution of the former companies and the subsequent formation of a new joint venture. All the objectives and reasons are normally stated in the legal documents which are used in the creation of the joint venture. The first stage of the legal process requires the two companies to give notices to the members of the intention to form a joint venture. At this stage, the members are allowed to make decisions as to whether they need to be part of the new venture or opt to pull out their membership. Essentially, this is done through writing to all members and is normally followed by a meeting to affirm and ratify the decision. The ratification of the need to dissolve is further sent to the registration body of companies. The Act which creates the companies requires that all entities intending to form joint ventures need to understand the reason behind such formations and also state the consent of members in a case of a public company. Once this information has reached the regulating body, then the dissolution can begin. The process of dissolution includes but not limited to offsetting the outstanding creditors (Boersma et al., 2003). 3. Legal documents The process of forming a successful joint venture between any parties requires the inclusion of important documents. Usually, the parties to this agreement underscore the need and objectives to come together for the purpose of achieving a common end. Both Italian Winery and EVOO Bottlers need to come up and develop a Joint Venture Contract Form. The form details some elements that help in defining their agreement. For example, it contains the reason behind the formation of the joint venture, the continuations and the ratio of returns to the joining parties, the management to the new formation, the names and objectives of the new formation among other important details. All these are put together and signed in the presence of an advocate who further authenticates the relevance of the new outfit. The other legal document which needs to be presented by both Italian Winery and EVOO Bottlers is the contract terms and conditions. The basis of forming the joint venture is generally to bring together the two companies so that they have a formidable business front to compete actively. This agreement is undertaken under the purview of different terms of conditions. For example, members need to agree on the amount contributed by each party to the deal and consequently the ratio of distributing the earnings. Besides, the contract also needs to detail the period within which the joint venture is expected to be relevant. The advice for the formation of this joint venture is to ensure that all the requirement documents from both the parties are availed and a new agreement form formulated and authorized. Studies reveal that some joint ventures have been barred by the law from proceeding due to non-compliance with the legal procedures and necessary documents required by the law. Therefore, this agreement will only be effective if the two companies seeking to maximize their potentials come up with the requisite legal documents and successfully draft them before a lawyer. 4. Why the need of a Joint venture between Italian Winery and EVOO Bottlers? The current situation depicts Italian Winery as a company which is specialized in the production of wine. It has production units and can take care of growing the olives in its well managed olive groves. Besides, the company can determine the quality of its EVOO production since it especially manages the entire production process. However, Italian Winery is deficient of one crucial stage of production. This is referred to as bottling and packaging stage. Therefore, the company has been using the expertise and the services of external bottling companies such as Italian Packers so as to enabling the products to reach the desired market. This has however been detrimental to the quality and profitability of Italian Winery. The case study reveals that Italian Packer bottles all the products from different production units in Italy under its brand name. There has equally been the possibility of fraud related to mixing the different quality brands bottled by Italian Packer as well as undervaluing or under pricing the products. Therefore, Italian Winery seeks to find a way of bypassing Italian Packer and being able to manage its bottling and packaging procedure alone (Pothukuchi et al., 2002). The following are some of the reasons for which this paper suggest Joint Venture as a solution to Italian Winery As a way of managing the packaging process EVOO Bottlers is one of the successful bottling companies as revealed in the case study. The companies dealing with EVOO Bottlers have had the advantage of their products retaining their identity as well as reaching the desired markets. The only way through which Italian Winery can bypass the activities of Italian Packer is to have the bottling and packaging services under its domain. This is only possible when the agreement underscores a joint venture with EVOO Bottlers. The advantage with the joint venture agreement is that both the parties will be seeking to maximize profitability potentials. This will give room to Italian Winery to carry along its quality EVOO Production into the market without compromising the quality. The activities and potentialities of EVOO Bottlers will be easily harnessed and utilize when it comes to a joint agreement with Italian Winery (Zhang & Zou, 2007). For purposes of retaining the quality Italian Packer who has been the company in charge of bottling and packaging the products of Italian Winery has been mixing the EVOO Products from different companies. It normally takes the products in tankers and bottles them under its brand name. Therefore, the EVOO production from different players is normally put together and bottled under one brand name. This normally kills or undermines the quality of any company whose products are better than the rest of competitors. Italian Winery decries this procedure since it has been seeking to maintain its quality without being compromised by mixing produce with those of other companies. When the two companies enter into a joint venture, then only the products of Italian Winery will be bottled by EVOO Bottlers under and agreed brand name between the two companies. This implies that the quality will not be compromised since the entire joint venture will be in charge of growing the olives, producing the wine, bottling and marketing the final produce. As a result, it will be easy to sell the ideal brand name and the brand product for the company without any possible compromise (Killing, 2012). For purposes of maintaining the ideal pricing Pricing is one of the challenges which Italian Winery has been facing since the products were under bottling and packaging by EVOO Bottlers. One of the yardsticks for determining to price is the quality of a particular product or service. Therefore, the lower the quality, the lower the pricing, and the greater quality products normally attract higher pricing. This implies that Italian Winery which is determined to promote the high-quality brand of EVOO Production into the market is under compromise when the products are mixed and bottled together by those from other companies. The ultimate price charged by Italian Packer for the products its presents to the market attract a lesser value as compared to what the product would have attracted if bottled separately. The best way to manage under pricing, in this case, is through engaging in a joint venture with a bottling company. Italian Winery will be under supervisory of the quality if its comes together with EVOO Bottlers in the production and packaging of the EVOO production. Mostly, the joint venture formation will easily ensure that the high quality of their products is carried separately into the market. This will enable them regulate and control the quality attached to the products and therefore prevent underpricing (Zhang & Zou, 2007). For purposes of exploiting the China markets One of the concerns of Italian Winery is on how it can propel its products to reach the Chinese markets. Presently, it requires a distribution or marketing network with established links and networks into the Chinese market. EVOO Bottlers is one of the desirable packaging and marketing agencies which has proper networks in the China market. One of the ways through which Italian Winery can potentially benefit from the expansive networks of EVOO Bottlers is a joint venture which ensures that the products can be accessed into Chinese markets and beyond. The relevance of achieving a joint venture will be for purposes of achieving a cheap and reasonable mans of presenting the EVOO Production by Italian Winery into China. Normally, companies require market expansion for purposes of enhanced profitability and competitive edge. It will be instrumental for Italian Winery to have access into China since the market is less congested and equally appreciated and accepted the EVOO products. Besides, the use of joint venture with EVOO Bottlers will help Italian Winery reach the China market in a less expensive way as compared to using other channels of distribution. This, therefore, presents one of the relevance of having a joint venture in this case (Killing, 2012). For cost-saving purposes Joint ventures are deemed as less costly business agreements suitable when parties need to benefit from the production potentials of others in the market. Italian Winery has a production unit and is also in charge of growing the olive in the sole-managed olive groves. However, it lacks the capacity, machinery and the man power to carry out packing of the products into the market. On the other hand, EVOO Bottlers have a packaging and bottling company. This company receives products from different producers and engages in bottling and destruction of the bottling products. However, it lacks a production unit where it can produce its brands of wine. Therefore, Italian Winery needs the machinery, expertise and effort of EVOO Bottlers to help in packaging and bottling of the products. This option is relatively less costly as opposed to putting up a bottling plant all together. Besides, EVOO Bottlers will need this agreement as a cheaper option compared to construction a production plant all together (Zhang & Zou, 2007). Financing the agreement The process of formulating and successfully implementing a joint venture requires the application of financial resources. For example, putting together the production resources and hiring staff to help in production processes need financial resources. Besides, a joint venture requires that both parties contribute equally so as to have a firm resource base in the process of production and marketing o the products. Both Italian Winery and EVOO Bottlers will need to have an outlay of financial resources especially at the initial stages of establishing the agreement. In many cases, such agreement is financed by the merging parties. Both the parties continue significantly in the process without relying on much ion external sources (Killing, 2012). Italian Winery and EVOO Bottlers will need to have an agreeable contribution portfolio or ratio to enable them has equal contribution into the scheme. Suppose the two parties have less sufficient resources, then they need to seek the assistance of external financial services such as loans to enable them to complete the forming of the joint venture. This document shall remain confidential. However, the structure provided can be shared between the parties for approval and I am free to assist in case of any inquiries. References Boersma, M. F., Buckley, P. J., & Ghauri, P. N. (2003). Trust in international joint venture relationships. Journal of Business Research, 56(12), 1031-1042. Killing, P. (2012). Strategies for joint venture success (RLE International business) (Vol. 22). Routledge. Zhang, G., & Zou, P. X. (2007). Fuzzy analytical hierarchy process risk assessment approach for joint venture construction projects in China. Journal of Construction Engineering and Management, 133(10), 771-779. Pothukuchi, V., Damanpour, F., Choi, J., Chen, C. C., & Park, S. H. (2002). National and organizational culture differences and international joint venture performance. Journal of international business studies, 33(2), 243-265. Read More