Who Is Up for Another Round of Joint Ventures?Thursday, September 13, 2012 7:32
An interesting conversation this week with a friend, Chinese/ employed in large MNC, about the future of business in China.
Started with a general conversation about the barriers that foreign (industrial) firms have been facing recently in realizing the ROI they had planned on for their investments in China. For some, like GE, the failure to achieve the expected ROI has resulted in a dynamic where China has faded the front line (replaced by Australia and Brazil), and this was a dynamic that many of Chinas SOEs feel would result in more JVs.
That as firms, primarily industrial firms, struggled to penetrate the Chinese market, they would grow open to JVs where local partners (SOEs) would be responsible for managing clients and government connections… and the foreign firm would be responsible for product development and IP. the catch being the requirement that foreign firms would be required to localize IP.
Which opened up what I felt was the most interesting questions… Would firms roll the clock back and start all over again? Would they open up their IP for access to the market? Or… would firms begin to exit?
Questions that have no answers, but unlike 3-4 years ago when China was the only market that was providing positive growth figures for many firms, there are now questions about China’s short/ medium term trajectory and other countries that are seeing positive growth in markets like Brazil.
Which is to say that China, even for all it’s promise, is perhaps not as compelling as it once was depending on the industry, timing of the cycle, and whether or not the firms felt like they had heard that song before.
JV 2.0? Is it right for all firms?
Things that make you go hmmm..