Globalization has made it possible for multinational companies (MNCs) to invest in foreign countries. Besides, multinational companies can now enter into joint ventures with foreign companies. Numerous reasons lead to the multinational companies entering into joint ventures with foreign companies.
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One of the reasons is an access to the international market. MNCs access foreign markets through joint ventures with foreign companies. Another reason why MNCs enter into joint ventures with foreign companies is to promote innovation. Despite an increase in the number of multinational companies seeking for partners in foreign countries, a cross-cultural conflict remains the biggest hurdle that frustrates the majority of the joint ventures.
One of the joint ventures thwarted by cultural conflicts was between Corning Inc. and Vitro. This paper will discuss the challenges that the joint venture encountered. Additionally, it will describe how the companies have overcome the challenges and continue enjoying productive relationship.
Corning Inc. has to decide whether to work with international companies based on two key reasons or not. One of the reasons that makes the company enter into joint ventures with foreign companies is to access international markets. The key strategic predisposition that encouraged Corning. Inc. to form an alliance with Vitro was its desire to access the Mexican Market.
For many years, Corning. Inc demonstrated that, the need to access foreign markets was one of the factors that prompted it to look for joint ventures with foreign companies. The same happened between Corning and Vitro. Corning perceived the joint venture as an exciting opportunity to help it to penetrate the Mexican market. Corning. Inc believed that the joint venture would help it to increase its sales volume in the Mexican market.
Another strategic predisposition that made Corning.Inc seek for a joint venture with Vitro was the need to introduce its technology into the Mexican market. Organizations may have technological ideas but fail to implement them because of the inability to access a market that requires the technology. In such a case, organizations try to look for partners in markets that require their technology. Corning has always used joint venture to introduce new technology to the market.
For instance, it formed an alliance with Mitsubishi to help it introduce coating technology to the market. The same case applied to the joint venture between Corning and Vitro. Corning thought that it would introduce novel technology by exploiting Vitro’s technological expertise to the market. The two companies complemented each other, consequently, Corning believed that, by working with Vitro, it would be able to introduce novel technologies at a lower cost.
One of the factors that hinders joint ventures between multinational companies is cross-cultural conflict. Multinational companies ought to understand cultural practices of their possible partners prior to joint ventures. One of the reasons why the companies ought to consider cultural practices of their potential partners is that, understanding the cultural practices would help companies to achieve their goals.
For instance, if the potential partner practices teamwork and employee empowerment, a company may use the practices to achieve its objectives. The main reason why the joint venture between Corning and Vitro failed was the failure to understand each other’s cultural practices.
While Corning applied aggressive marketing strategies, Vitro’s strategies were less aggressive. Therefore, Corning felt that Vitro was not committed to marketing its brand; it was too slow in marketing. On the other hand, Vitro felt that Corning was too fast in its marketing strategies. The two companies could not collaborate in marketing since Corning felt that Vitro was abdicating its duties. Had they understood each other’s marketing strategies, they would have come up with a common strategy that satisfied each company.
Another reason why MNCs need to understand the cultures of their potential partners is that it helps to streamline operations within the two companies. Understanding how each company approaches its operations helps in job allocation between the companies in a joint venture.
For instance, one of the companies might be good in research and development, while the other one is good in production or marketing. To achieve the objectives of the joint venture, each company would assume responsibilities in areas that suit its cultural practices. Besides job allocation, understanding cultural practices of a potential partner helps to create trust between the partners.
Each partner gets an idea about why the other one behaves in certain ways. One of the reasons why the joint venture between Corning and Vitro failed was the lack of trust between the companies. Both companies did not trust each other’s decision-making style. Each company felt that its style is better than that of the other company, leading to conflicts between them.
Had the companies agreed to remain in the alliance, they would have required coming up with strategies to address their conflicting cultures. Corning would have required studying and understanding of theVitro’s culture, and vice versa. This would have helped the two companies to understand why they behave differently.
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To avoid further conflicts, the two companies would have ended up sharing duties according to their capacities. For instance, Corning would have assumed the marketing responsibility, as it uses an aggressive strategy that can help to increase the sales volume.
In addition, the two companies would have come up with decision-making mechanisms that are open and transparent. Decision making process is critical to any business. The success of any business depends on the decisions it makes. Hence, the two companies would have agreed on the method of the decision-making process to apply. This would have made the companies trust one another thus, working together to accomplish their common goals.
The two companies would have continued, distributing each other’s products even after the joint venture failed. This would have helped them to increase their sales volume. Corning and Vitro do not produce competing products. In fact, they complement each other.
Therefore, it would never reach a point that the two companies would compete. The companies would increase their sales volume and diversify their markets by distributing each other’s products. Besides, it would help to cut down on operations cost as each company would not require establishing a new business in the foreign market.
The public statement concerning the failure of the joint venture might affect the relationship between Corning and Vitro negatively. After the two companies had realized that the joint venture could not work, they agreed to abolish it, but keep continuing distributing each other’s products.
However, the public statement by Mr. Loose tainted the image of Vitro Company. Such a statement might compromise the trust that Vitro Company had on Corning, therefore, forcing Vitro to cut-off all ties between it and Corning, including the distribution of Corning’s products.