[PM1473005] Manajemen Strategi

JOURNAL REVIEW

[PM1473005] MANAJEMEN STRATEGI

CASE ASSIGNMENT :
NORA-SAKARI : A PROPOSED JV
MALAYSIA

IN

Richard Ivey School Of Business

The University Of Western Ontario, 2006

AGUS HERMANTO
HUSIN
ADISTRA WIDYANIE

[9112205310]
[9113205316]
[9114201305]

DOSEN
F.A. HANDOKO SASMITA, MBA.

PROGRAM MAGISTER MANAJEMEN TEKNOLOGI

INSTITUT TEKNOLOGI SEPULUH NOPEMBER
SURABAYA
2015
NORA-SAKARI : A PROPOSED JV IN MALAYSIA
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1. How important is the joint venture to Nora and Sakari?

In this case, Nora is looking for partners who will work to ensure their ability to comply
with the contract TMB, as well as the Sakari learn from and emulate the success of the
model in the Malaysian market. The JV company will be the best destination for if they
are able to reach the negotiations, Nora would benefit from the JV in terms of technology
transfer. Sakari is one of the leading telecommunications companies in Europe. It will be a
very valuable opportunity for Nora to learn from the experience of Finland and emulate
their success to Malaysia.
Although, Sakari was a relatively a small player in fixed networks, these networks were
easily adaptable, and could cater to large exchanges in the urban areas as well as small
ones for rural needs. Apparently, Sakaris smaller size, compared to that of some of the
other MNCs, was an added strengths because Sakari was prepared to work out
customized products according to Noras needs. Large telecom companies were alleged to
be less willing to provide custom-made products. Instead, they tended to offer standard
products that, in some aspects, were not consistent with the needs of the customers.
Sakari has experience in the exporting market and they have modular based open standard
technology which would be another key advantage Nora would be benefited from its
Finnish counterparts. On the other hand, Sakari would also be benefited from the JV
Company contract between Nora and Sakari because the venture would pave the way for
Sakari to acquire knowledge and gain access to the market of south-east Asia. Sakari's
main objective is to acquire knowledge of, and gain access to, South Asian markets for
Telecom products would be fulfilled if the contract is successful. Furthermore, in
Malaysia and Thailand, fixed network project were approaching contract stage therefore,
for Sakari, it is imperative that Sakari established its presence in this region to capture the
share in the fixed network market.
The other evidence that the Joint Venture (JV) will be beneficial for Sakari is that the large
potential for telecom facilities was also evidenced in the low telephone penetration rates
for most South-east Asian countries. For example, in 1999 there were only 20 phone lines
per 100 people in Indonesia, Malaysia, and the Philippines. Whereas, there were 55
telephone lines per 100 people in United States, Canada, Germany, Finland, and Sweden.
Finally, Sakari would be benefited from the Noras advantage of local knowledge of
Malaysia and Asian Market. Not only this but also Nora has strong government ties and
they already has a contract in hand. Beside this, Nora has experience working with
companies based in developed countries.
2. If the joint venture was important, why have the negotiations failed to this point?
Negotiations to date between Nora and Sakari have failed mainly due to a mutual
ignorance of one another's cultural norms. One of the key reasons for failed to result in an
agreement is that there is huge gap between what Nora and Sakari can sacrifice to
successfully negotiate the contract with each other. Following are some example proving
how far they are from the real contract. Sakari proposed an equity split in the Joint
Venture (JV) Company of 49 percent for Sakari and 51 percent for Nora. Whereas, Nora
proposed a 30 percent Sakari and 70 percent Nora Split.
Sakari proposed to provide the JV Company with the basic structure of the digital switch
where by the JV Company would assemble the switching exchanges at the JV plant and
subsequently install the exchanges in designated locations identified by TMB. On the
other hand, Nora proposed that the basic structure of the switch be developed at the JV
Company in order to access the root of the switching technology.Sakari proposed a royalty

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payment of five percent of the JV gross sales while Nora Proposed a payment of two
percent of net sales.
3. Should Nora and Sakari renegotiate? If yes, how should they restructure the deal to reach
a win-win situation?
Yes, they should renegotiate, because Nora and Sakari is a successful company in the field
of their respective businesses. Nora is one of the leading vendors of telecommunications
equipment in Malaysia. Sakari can gain a lot of strength Nora and knowledge of the
culture and the market. On the other hand, Sakari is one successful niche market players to
supply the digital switch technology. Therefore, both companies have their own strengths
and advantages over the other and both partners can learn and gain a lot from each other.
Therefore, in my opinion, should the two companies have to compromise so that the
contract can be realized. While talking about the restructuring negotiations, the following
are the main areas that will be taken into consideration in the restructuring negotiations,
namely :
Ownership : The first issue that must be restructured is about ownership and control of
resources. In my opinion, Nora got a majority portion of the equity JV (60 percent to 40
percent for Nora and Sakari) because of two things: The JV will operate in Malaysia and
not in Finland and Nora understand their culture better than Sakari, then the The second is
that Nora has a competitive managerial strength and suitable to manage the JV. Therefore,
it would be better if Nora holds a greater percentage than Sakari.
Technology : The second problem is that the technology transfer would be better if Nora
Sakari accept this proposal. Every company wants to control the transfer of technology at
the highest level. Therefore, Nora must let Sakari to keep the development of technology
in their homes and receive the proposed assembly and installation plan of this Sakari.
Royalties : In my opinion, Royalties to be compromised as Nora because of financial
stimulation drawn up by the manager Nora Nora indicated that the return on investment
will be less than 10 percent of desirable if royalty rates exceeding three percent of net
sales.
Arbitration : In my opinion, to arbitration a neutral location should be in addition to KL
and Helsinki, so there is no companies feel like a benefit for themselves in terms of future
disputes.
Salary and Perks : Salary and Perks should be administered in accordance with the
conditions in Helsinki for both companies and their JV requires the expertise of Finnish
experts who will work for Sakari. Therefore, salaries and benefits should be given
according to the rules and rates in Helsinki. Therefore, it would be better if Nora agree
with Sakari regarding Salary and Perks.
In conclusion, if the facts mentioned above reconsidered later Nora and Sakari Joint
Venture agreement will probably be realized.
4. How do you compare this joint venture project with other options available to the parties
involved (e.g., licensing)?
How companies expand their business abroad decide whether they should provide their
technology license to a local company or form a joint venture with companies or acquiring
it? Which of these choices will give them the most benefit?
An important feature of the model is that a company can switch from one setting another
during the life of business. Initially the company can form a joint venture, but then one
partner can buy other shares in the joint venture atapun turned into licensing.
There are several factors in the decision, that is : the first factor is uncertainty about the
absorptive capacities of the parties and how their ability to assimilate and apply new

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knowledge will grow over time. The second factor is the "friction", or difficulties in the
transfer of knowledge of the company or assets, and the related incentive problems. The
third factor is the cost associated with the "power of a scramble," when parties try to tip
the balance of bargaining power in their favor during the operation of the business.
Meanwhile, there are some risks and disadvantages for licensing. The Company may lose
control over the manufacture and marketing of goods in other countries. As an
international market entry mode, the license may also be less favorable than other options
because the back should be divided between the two parties. In fact, there is a risk that a
foreign license can sell the same competitive after a license agreement expired. Risks and
other issues involving choosing a partner, as well as all general uncertainty in doing
business with international partners, including language, culture, political risk, and
currency fluctuations. Alternatives for licensing including exports, acquisitions,
establishing international subsidiaries, a wholly-owned franchises, and forming strategic
alliances.
Finally, there is the cost of switching from one another arrangement after the
commencement of the initial effort. These costs generally arise from government policies
in the host country, such as the level of foreign ownership limits.

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