Background: AberdeenDoric Limited specializes in maintenance support services to the oil industry. It has entered into a joint venture with a company in Trinidad and Tobago, Carnival Oilco. Each party brings unique resources to the joint venture (the JV). Carnival Oilco has contacts in the local industry, but does not have the specialized expertise to benefit fully from these. On the other hand, AberdeenDoric Limited [ADL] has the expertise, but no local contacts. Gene R. Barrett recommends that joint ventures should be the vehicles of choice for a small American company entering an overseas market. (Barrett 58).
ADL's business consists of a highly trained workforce who also works with specialized technical equipment. ADL's due diligence shows that Carnival Oilco (Carnival) is a much smaller company than ADL. ADL is aware that Carnival overstated its financial strength, but ADL does not consider this falsification a serious impediment to the joint venture. More specifically, ADL does not consider this misrepresentation to be a deal breaker.
Joint ventures are widely used by companies to gain entrance into foreign markets. Foreign companies form joint ventures with domestic companies already present in markets the foreign companies would like to enter. The foreign companies generally bring new technologies and business practices into the joint venture, while the domestic companies already have the relationships and requisite governmental documents within the country along with being entrenched in the domestic industry. This clearly describes the scenario under review between ADL and Carnival.
However, ADL must realize that alliances and joint venture with unevenly matched partners are more complex that alliances between companies more evenly matched in terms of size, experience, and financial strength. Strategic alliances, which combined the subsidiaries of different corporations, seem to point a route towards the multi...