GB528 Unit 9 Implementation Plan Example

Structure, Reporting Line and Five Measures for a Venture in Indonesia: A Unit 9 Implementation Plan

[Student Name]

Purdue University Global

GB528: Global Strategy

Unit 9 Implementation Plan

[Instructor Name]

[Date]

The paint maker, its venture, its partner and every figure are composite and illustrative; the company law feature described and the sources cited are real.

Exhibit 1: The Organization

The venture is an Indonesian limited liability company, owned 60 percent by Ohio Valley Coatings and 40 percent by the partner. Indonesian company law requires a two-tier board: a board of commissioners, which supervises and advises, and a board of directors, which manages the company day to day.

Board of commissioners: five members. Ohio Valley nominates three, including the chair, who is Ohio Valley's Asia Pacific president; the partner nominates two.

Board of directors: four members. Ohio Valley nominates the president director and the finance director; the partner nominates the sales director; the technical director is nominated by Ohio Valley with the partner's agreement.

Reporting line: the president director reports to Ohio Valley's regional office in Singapore, which oversees the Rayong concentrate plant and the company's other Southeast Asian sales, and through it to the international division in Louisville.

Bartlett and Ghoshal (1989) argue that a transnational firm needs subsidiaries with real responsibility, linked to regional and global units for shared resources. The Singapore line gives the venture a regional manager who knows the market and connects it to the Rayong plant and purchasing.

Exhibit 2: Decision Rights

Product formulation and the tinting system: Ohio Valley's technical function, with the venture's technical director consulted.

Annual budget and capital spending above $1 million: board of commissioners, requiring at least one partner-nominated commissioner's approval.

Pricing to shops and trade promotions: board of directors, led by the sales director within limits set in the budget.

Expansion to new islands: board of commissioners.

Hiring of senior managers: president director, with the sales director's agreement for sales roles.

Technical complaints and product changes: technical director, with the Karawang application chemist proposed in the value chain audit.

Exit, sale of shares or new partners: shareholders, under the joint venture agreement.

The plan gives the partner real authority over selling and a veto on large spending, and keeps formulas, tinting and the venture's leadership with Ohio Valley.

Bamford et al. (2004) observe that joint ventures often fail when decision rights are unclear and the partners' representatives have to negotiate every decision. Writing them down at launch, with the partner's agreement, avoids that.

Exhibit 3: The Measures Scorecard

The president director is held to five measures, reviewed quarterly by the board of commissioners.

Market share: decorative paint share in Java and Sumatra, from about 1 percent at launch toward 6 percent in five years.

Revenue growth: quarterly revenue against the business plan.

Gross margin: blended across premium and economy lines, with a target of 38 percent by year three.

Days to resolve technical complaints: from first report to diagnosis, with a target of five working days.

Share of tinting machines under venture contracts: the proportion of machines in shops owned by the venture and placed under its own agreements with shop owners, with a target of 100 percent.

The fifth measure carries over the main risk from the partner evaluation. The partner, which lost a paint distribution business once and may want its own, could build its strength by controlling relationships with shops. Machines owned and contracted by the venture keep those relationships with the venture, and measuring the share makes any drift visible to both owners. Hamel (1991) warns that alliance partners compete to learn from each other, and that the partner who learns faster gains bargaining power over time. Measuring who holds the shop relationships is a simple way to see whether that race is shifting.

Exhibit 4: The Eighteen-Month Timeline

Months 1 to 3: incorporate the venture, appoint both boards, hire the president director and finance director, sign the license for formulas and the tinting system, and begin plant construction at Karawang.

Months 4 to 9: complete the plant, start exposure testing of tropical formulations, develop the local color palette, recruit the field marketing team and place the first 1,000 tinting machines in partner-served shops on Java.

Months 10 to 12: begin production and launch the premium and economy lines on Java, open the direct technical service line and start the painter program in West Java.

Months 13 to 18: expand to Sumatra, place a further 2,000 machines, extend the painter program and hold the first full-year review of the scorecard with the board of commissioners.

Staffing the Venture

The venture will need about 450 employees by month 18: about 200 in the plant, 120 in warehousing and depots, 80 in field marketing and painter programs, and 50 in management and support. Most should be hired locally. Ohio Valley will second three managers for the first two years, the president director, the technical director and a plant manager, each paired with an Indonesian deputy who is expected to take over the role.

Risks

The main risks are delays in plant construction or licensing, which would push back launch; disagreement between owners on prices or expansion, which the decision rights and board structure address; and slow acceptance of the brand, which the scorecard will show within two quarters of launch. The reporting line through Singapore could also slow decisions if the regional office is stretched, so the president director should have direct access to Louisville on technical issues.

References

Bamford, J., Ernst, D., & Fubini, D. G. (2004). Launching a world-class joint venture. Harvard Business Review, 82(2), 90-100.

Bartlett, C. A., & Ghoshal, S. (1989). Managing across borders: The transnational solution. Harvard Business School Press.

Hamel, G. (1991). Competition for competence and interpartner learning within international strategic alliances. Strategic Management Journal, 12(S1), 83-103. https://doi.org/10.1002/smj.4250120908