Global education at local cost, context and ethos

A Project Report

On

“JOINT VENTURE of Max New York life Insurance and Tata DoCoMo”

In partial fulfillment of the requirement for the award of the

Under Graduate Diploma In

Finance Management

Submitted To:-

H.L.CENTRE FOR PROFESSIONAL EXCELLENCE

AHMEDABAD- September-2015

Submitted by:-

DEEPALI DHINGRA

UGDBMF

Roll No-04
 SYNOPSIS

I declare that the project entitled “JOINT VENTURE” submitted by me as a part of my

curriculum for the award of

Diploma in Business Finance at H.L. Centre of Professional Excellence,

is the original work done by me and has not been submitted previously anywhere.
 CONTENTS

Sr. No. Description Page no.

1 Synopsis

2 Meaning of joint venture

3 History of joint venture

4 Types of joint venture

5 Advantages and Disadvantages of joint venture

6 Steps in formation of joint venture

7 Max new york life Insurance company ltd.

8 Tata DoCoMo

9 Conclusion
 JOINT VENTURE

Meaning of Joint Venture:

“Joint Ventures and Alliances can deliver more shareholder value than Mergers and
Acquisitions can, but getting them off the ground can trip you up in unpredictable ways”

--- Harvard Business Review

A joint venture takes place when two parties come together to take on one project. In a joint venture,
both parties are equally invested in the project in terms of money, time, and effort to build on the
original concept. While joint ventures are generally small projects, major corporations also use this
method in order to diversify. A joint venture can ensure the success of smaller projects for those that
are just starting in the business world or for established corporations. Since the cost of starting new
projects is generally high, a joint venture allows both parties to share the burden of the project, as
well as the resulting profits.

Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short,
both parties must be committed to focusing on the future of the partnership, rather than just the
immediate returns. Ultimately, short term and long term successes are both important. In order to
achieve this success, honesty, integrity, and communication within the joint venture are necessary.

A contractual agreement joining together two or more parties for the purpose of executing a
particular business undertaking. All parties agree to share in the profits and losses of
the enterprise.

• Shared contribution of equity

• Shared authority, control and responsibilities

• Shared Revenues & Losses

• Shared Assets
 History of Joint Ventures
 A study published in Harvard Business Review in 2002 reveled that a whopping 47% of joint
ventures fail!!

 Reason cited are:

 Wrong Strategies
 Incompatible Partners
 Weak Management
 Unrealistic or inequitable Deals

The Real Reason

 Mistakes done at the Launch Phase!!

 Companies fail to commit sufficient resources during the launch phase

 Lack of attention during the Launch Phase

I Strategic Conflicts between partners

I Governance gridlocks

I Missed operational Synergies

“Launch Phase : between signing memorandum of understanding to first 100 days of operation”

Joint Venture Challenges

 Building and maintaining a strategic alignment between partners

 Creating a joint governance system

 Managing the economic interdependencies between the parent firm and the joint venture

 Building the organization of the JV

 Putting together a good management team

 Deciding on all potential issues prior to operational launch
Strategic Alignment

 Each firm will have its own goals, market pressures, share holder’s expectations etc.

 These issues must be analyzed and discussed in detail before the launch of JV

I Which Market Segment?

I Cash Flow Management – Reinvest or Pay Dividends?

 The Goals for the JV must then be set such that it is in line with the goals, expectations of the
parent Companies

I E.g : Apple-Motorola-IBM PowerPC venture

I Verizon-Vodafone venture to Create Verizon Wireless

Why Joint Venture?

 Reduce Competition
 Obtain or retain a Strategic Resource
 Profitably utilize Byproducts
 Overcome Market Entry Barriers
 Prevent Entry of New Competitors
 Share Investment Cost and Risk

Types of Joint Ventures

 Consolidation Joint Venture

 Value comes from combining existing businesses

 Skills Transfer JV

 Value comes from transfer of some critical skills to other partner

 Coordination JV

 Value comes from Leveraging the complementary Capabilities

 New Business Jv

 Value comes from creating new growth by combining existing business

Capabilities
 Advantages of a JV
Participating in joint ventures has the following advantages:

1. Helps an organization to enter in to new markets or new product lines

2. Access to increased resources and improved expertise & technology

3. Helps to build credibility with a particular target market by choosing a well established and
credible partner in that market

4. Reduces risk involved in business due to sharing of losses and expenses.

5. Exiting from the business in case of failure is easier as compared to solely owned businesses.

6. Partners in Joint Ventures get preference in buying out the shares of other partners and take
over the company.

Disadvantages of a JV
Entering into Joint Venture agreements may pose certain threats or disadvantages to the participating
organizations:

1. It is time consuming and difficult to set up a Joint Venture and poses many challenges.

2. The objectives of the JV may not be clear and understood by all if the partnering organizations
do not state and communicate them clearly.

3. Differences in the cultures and management styles of the organizations may lead to a lack of
cooperation and coordination.

4. Lack of thorough research and feasibility studies in the beginning of the JV may lead to failure of
the JV.

5. The individual partners may not treat the JV as an integral part of their business and may lead to
lack of attention being given to the JV

6. There can be an imbalance in levels of expertise, investment or assets brought into the venture
by the partners
 Steps in formation of Joint Venture

 Planning
 Partner Search
 Feasibility Study
 Incorporation

Planning a JV

The Planning Stage involves decision making on the following issues:

1. Specify the Goals and Objectives

2. Determination of the product and market

3. Market Analysis

4. Technology Decisions

5. Financial Requirements

6. Foreign Exchange analysis

7. Human resource and skill requirements

8. Revenue Predictions

9. Cost benefit Analysis

10. Personal SWOT Analysis

Partner Search

The following considerations have to be made while selection partners for JV

1. Financial resources of the prospective partners

2. Technological know how and capabilities

 3. Presence in the target market

4. Organizational culture and management style

5. Type of organizational structure adopted

6. Credibility study

7. Ranking of the prospective partners based on above mentioned criteria

8. Selection of partners for the feasibility study

Feasibility Study

 Predication of the culture and structure of the Joint Venture

 Analysis of partners comfort with and adaptability to the new technology and culture of the JV

 Analysis of the authority, responsibility and financial gains and loss sharing among the prtners

 Market analysis and viability of the JV

 Analysis of the sustainability of the JV in times of uncertainty

 Cost Benefit Analysis

 Environmental Analysis of the JV in the market

 Growth Predictions

Incorporation

A JV can be brought about in the following major ways:

• Foreign investor buying an interest in a local company

• Local firm acquiring an interest in an existing foreign firm

• Both the foreign and local entrepreneurs jointly forming a new enterprise
Critical Success Factors in a Joint Venture

1. Good communication, cooperation and coordination among partners

2. Common goals and shared vision among partners

3. Dedication towards the success and long term sustainability of the JV

4. Proper sharing of profits and benefits among partners

5. JV should work towards the benefit of all the partners

6. Proper planning and research prior to the incorporation of the JV

Factors hindering the success of a JV

1. Lack of understanding between the partners

2. Lack of patience and motivation among partners

3. Entry of a wholly owned subsidiary of a partner in the same business and market (E.g.. Hero
Honda)

4. Benefits lower than the expectations

5. Operational Difficulties due to geographical location of the partners

6. Differences and conflicts between partners on various issues.

7. Incompatibility of the culture and management styles of the partner organizations.

 MAX NEW YORK LIFE
INSURANCE COMPANY LTD.

A JOINT VENTURE BETWEEN

NEW YORK LIFE

AND

MAX INDIA LIMITED.

 Max New York Life Insurance
Max New York Life Insurance Company Ltd. is a joint venture between New York Life; a
Fortune 100 company and Max India Limited; one of India's leading multi-business corporations.
The company has positioned itself on the quality platform. In line with its vision to be the Most
Admired Life Insurance Company in India, it has developed a strong corporate governance
model based on the core values of excellence, honesty, knowledge, caring, integrity and
teamwork. The strategy is to establish itself as a Trusted Life Insurance Specialist through a
quality approach to business.

Incorporated in 2000, Max New York Life started commercial operation in 2001. In line with its
values of financial responsibility, Max New York Life has adopted prudent financial practices to
ensure safety of policyholder's funds. The Company's paid up is Rs. 1,432 core.

Having set a Best in Class Agency Distribution Model in place, the company is spearheading a
major thrust into additional distribution channels to further grow its business. The company has
multi-channel distribution that includes the agency distribution, partnership distribution, banc
assurance, distribution focused on emerging markets and alliance marketing through employed
sales force. The company currently has 33 banc assurance relationships, 14 corporate agency
tie-ups and direct sales force at 14 locations. Max New York Life has put in place a unique
hub and spoke model of distribution to deepen rural penetration. The company has 39 (9 hub
office 30 spoke offices) offices dedicated to emerging markets in Punjab and Haryana. Max New
York Life offers a suite of flexible products. It now has 35 products covering both life and
health insurance and 8 riders that can be customized to over 800 combinations enabling
customers to choose the policy that best fits their need. Besides this, the company offers 6
products and 4 riders in group insurance business.
The company currently has more than 13,295 employees.
 COMPANY PROFILE

Max New York Life Insurance

“Max New York Life wants people to view insurance as a

financial protection and wealth creation instrument and not
just a tax-saving tool.”

Max New York Life Insurance Company Ltd. is a joint venture between New York Life, a
Fortune 100 company and Max India Limited, one of India's leading multi-business corporations.
The company has positioned itself on the quality platform. In line with its vision to be the most
admired life insurance company in India, it has developed a strong corporate governance model
based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. The
strategy is to establish itself as a trusted life insurance specialist through a quality approach to
business.

New York Life is a Fortune 100 company that has over 160 years of experience in the life
insurance business. Max India Limited is a multi-business corporate dealing in Clinical
Research, IT and Telecom Services, and Specialty Plastic Products businesses.

Max New York Life Insurance started its operations in India in 2000. It is the first life insurance
company in India to be awarded the IS0 9001:2000 certifications. Max New York offers
customized products tailored to suit individual's needs. With its various Products and Riders,
there are more than 400 product combinations to choose from. Today, Max New York Life
Insurance has a network of 57 offices spread over 37 cities all over India.
In line with its values of financial responsibility, Max New York Life has adopted prudent
financial practices to ensure safety of policyholder's funds. The Company's paid up capital is Rs.
657 crore, which is more than the norm laid down by IRDA.

Max New York Life has identified individual agents as its primary channel of distribution. The
Company places a lot of emphasis on its selection process, which comprises four stages -
screening, psychometric test, career seminar and final interview. The agent advisors are trained
in-house to ensure optimal control on quality of training.

Max New York Life, one of India’s leading life insurance companies, expanded its presence in
the southern region by opening its first general office in the city of Mysore. Max New York Life
now has established a countrywide network of 172 offices and representatives across 120 cities
in India. The company has over 25,300 agent advisors, who are widely considered the best in the
business. Max New York Life aspires to be the "life insurance brand of first choice" amongst
Indian consumers.

“Max New York Life wants people to view insurance as a financial protection and wealth
creation instrument and not just a tax-saving tool. Since the launch of our operations, our focus
has always been on providing risk protection and long-term wealth creation solutions to our
customers. With a diverse product portfolio to meet customer requirements, it is evident that we
are setting benchmarks in the marketplace and are well on course of realizing our vision to
become India’s most admired Life Insurance Company.
VISION:

Vision statement is “Most Admired Life Insurance Company in India".

MISSION:

 Become one of the top quartile life insurance companies in India

 Be a national player
 Be the brand of first choice
 Be the employer of choice
 Become principal of choice for agents.

VALUES
• Caring

• Honesty

• Excellence

• Knowledge

• Integrity

• Teamwork
 SEGMENTING

TARGETING

POSITIONING

SEGMENTING
• Demographic: It is basically on the basis age of people, there family background and they do
there financial analysis.

• Psychographic: They also check the interest of people i.e which kind of insurance they want.

They are never preplanned that they will go and definitely sell the insurance

TARGETING
They follow the NOPP:

• N=who has the need for insurance

• O=opportunity
• P=the person is physically fit

• P=the person has the paying capacity i.e financially good

POSITIONING
• They believe in retaining there customers i.e. always take care of old customers.

• They believe in after sales which help them in positioning and remembering of there product or
service.

• Mouth to mouth publicity is the best for them.

SWOT Analysis

Strengths:-

• Strong corporate governance model

• Quality products

• Adaptability to changes

• Strong Brand name

• Large networks

• Leading company in insurance sector

• Diversification of funds

• Well Efficient Management

Weakness:-

• Less awareness about all products of life insurance in market

• Low advertising

• Focus only on URBAN areas

 Opportunities:-

• Fast growing economy

• Scope for opening of new branches in state/country

• High growth of ULIP industry

• Increasing population will increase in insurance business

• Increasing per –capita income in India

• Catering to the untapped Rural and Semi-Urban market

Threats:-

• Market uncertainty (Recession)

• Consumers do not invest easily

• Arrival of new entrants in the insurance industry.

• Cut throat competition within the industry

 TATA DOCOMO
A JOINT VENTURE BETWEEN
TATA
AND
DOCOMO.
 COMPANY PROFILE

• India’s mobile market is fastest growing market in world.

• TATA DOCOMO marks a significant milestone in Indian telecom landspace.

• Tata DoCoMo is the third largest telecom network in the world.

• TATA telecom Incorporated in 1996.

• TATA DOCOMO is Tata Teleservices Limited's (TTSL) telecom service provider with the joint venture
of the Tata Group's and NTT DOCOMO which came into existence on November 2008.

• First mobile service provider to have second pulse tariff and 3G in India.

• It is the global leader in value added services.

• The name DoCoMo is officially an abbreviation of the phrase, "do communications over the mobile
network", and is also from a compound word dokomo, meaning "everywhere" in Japanese.

• On 20 October 2011, Tata teleservices brought its services under the name Tata Docomo.

• A Star Enterprises is the authorised distributor of Tata Docomo in Jalandhar.

• A Star enterprises, Leading distributor out of 7 distributors in Jalandhar area has 595 outlets to
manage and distribute the services and products of Tata Docomo.

• Out of 595, 335 outlets are Transacting and 260 non transacting.
 Companies most popular amongst dealers

60 50
48 44 44 48 45
50 40
40
30
20
10
0
 Most sold Product/Service by Docomo

50 41 41 39
40
30 26
18 19
20 15
10
0

Current Achievements

 Had the largest number of demand of SIM Cards allover the state where an customer
statistics were taken as 10persons / min.

 Cheapest network cost ever.

 Best coverage & network

 Short time famous firm.

 Cheapest VAS
 Why TATA group is selling TATA DOCOMO

According to recent numbers published by the Department of Telecom, Tata Tele has net
worth of minus 5,346.65 crore, which makes them a possible target for acquisitions. If Vodafone
buys Tata Tele, it will be India’s leading player in terms of subscribers, overtaking Airtel.
According to the ET report both Tata and Vodafone denied to confirm anything.

SOWT Analysis of Tata Docomo

STRENGTHS-
• Flexible plans and Recharge offers,

• Good advertising,

• Good internet speed,

• Good distribution services,

• Good brand image of Tata Docomo,

• Affordable plans by common person,

• Youth appeal,

• First to launch per second tarrif plan,

• Ability to attract customers with various plans,

• Prices less than Almost all the brands,

• One of the best networks providing 3G services,

• Fast activating process.

 Weakness:
• Service centre issues.

• Similar and monotonous plans schemes

• Network issues

• Lack of post-paid services.

• Customer services are not satisfactory.

• Comparatively less Incentives and commission offered to retailers

• Untapped market of Ludhiana, Amritsar and other rural areas.

Opportunity:

• Fast expanding cellular market.

• Latest and low cost technology.

• Untapped other areas of Punjab- Amritsar and Ludhiana.

• Value added services.

• Introduce new plans for internet users.

• Introduce 3G in more regions.

• Activation process up gradation.

Threats:
• Brand name of Airtel is inducing customers to choose it.

• Price competition with Videocon, Reliance and BSNL

• Mobile Number Portability to other brands due to weak signal strength.

 Competitors:

• Airtel

• Vodafone

• Idea

• Videocon

• Reliance

• BSNL

Successful Joint Ventures

VOLVO – EICHER JV

TATA – DOCOMO

Failed Joint Ventures

Chrysler – Diamler AG

Yamaha – Escorts

JVs Leading to Takeover by one partner

Hero Honda (Takeover by Hero Group)

Virgin – TATA ( Takeover by TATA)

 CONCLUSION

 Launching and running a world class JV is a complex and demanding task. If done right
JV promises a better ROI than mergers and acquisitions.

 It is necessary for all executives involved to understand the unique demands of JV and
invest in early planning

 Right investments during launch phase will reap big rewards

“If you get the launch right, the rest will take care of itself”