Bonazzi Indo Joint Venture Culture Clash or Pure Economics?

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This action by Bonazzi could possibly due to the uncertainty of whether the joint venture will success or fail. In this case, Bonazzi gave the machinery that it brought from France created a major problem. The fundamental problems were that the machinery was fifteen years old and the only capable operators were French engineers, who most of them had left the company, consequently, it led to six months of delay of machinery transfer and operation. These circumstances had led into production troubles, delaying sales and bringing into quality patterns down, several costumer complaints and subsequently, decreasing sales.

In addition, there was a lack of communication and the non-existence of goal congruency between both parties. They did not clearly state their goals, their differences and a middle ground of operation. Exchange of ideas and discussions between the parties only occurred during board of meetings, and because of minority stakes, there was very little one joint venture could do on another. Moreover, Bonazzi’s refusal to have portion of the equity bought by Indo to solve their financial troubles worsen the situation. These lack of trust and communication had raised a very hasty environment to do business within.

Furthermore, there was a problem of power inequalities between the joint ventures’ parties, in which one party had only a minority share in one joint venture, and another JV running independently without a joint director. This sort of independency had led to further trouble such as lack of cooperation between them. On one side, as the joint venture started to lose money, Makhija from Indo complained and requested Bonazzi, who dominating the joint venture, to provide weekly reports, meet the projected numbers, and place more investments since they were unable to provide the combined amount of production. Indo also wanted to help Bonazzi’s financial problems and expressed its interest in buying Bonazzi’s shares. However, on Bonazzi side, they refused those helps, wanted no interference, and responded that they were able to fix the problems by themselves which resulted in further trust issues between the parties. From this perspective, it has no sense to have a joint venture, as it contradicts the its basic of sharing profits and risks along with helping each other to grow.

Based on the Hofstede’s power distance dimension, India is scored very high (77) whereas Italy has a median score of 50 (see Exhibit 1). Additionally, Italy is categorized as highly individualist country (scored 76) where that culture values their own personal ideas and objectives in life. In contrast to India who has relatively medium score of individualism (48) and tends to capture collectivism. Most of Bonazzi’s responses conflicted with Indo’s cultural expectations. Firstly, as Indian prefers a hierarchal and top-down approach, in contrast, Makhija received such a low power distance response where he was requested to not get involved in day-to-day joint venture management, also from Bonazzi’s responses it further indicates Italian’s preferences for a decentralized decision making and equality. In addition, the case also provides an example of India’s preference mentioning that, “Indo was a tightly controlled, family-run group”. Secondly, Indo clearly depicted its collectivism dimension by offering financial helps for the sustainability of the joint venture, but Bonazzi’s response countered it. Furthermore, Indo was proactive and asked that the numbers that had been projected for the joint venture to be met, but Bonazzi again showing its individualism which preferred to let Mehta as the CEO to decide the performance on his own, without pressure.

Was the process used to appoint Mehta as CEO correct?

Angeli from Bonazzi as the chairman of BIFL board nominated Mehta for the position of BIFL CEO. There was no such ground to blame the nomination for Mehta. As stated above and statistically proven, India have a high level of power distance which requires the manager to be considerably dependable and confident enough to make his own decisions for the greater good of the company. Therefore, Angeli’s decision to appoint a local “seasoned professional”, Mehta, with his long term experience and knowledge of the Indian market appears to be beneficial considering the Bonazzi group has almost no experience and reputation within the Indian auto-components sector. According to Gesteland model, India are scored very high (125) in terms of relationship-focused business culture (see Exhibit 2). Therefore, by nominating a local to manage the company, ease the employees to clearly catch what is expected by their leader and potentially form stronger relationships that all level of workers can build the trust in and depend on. In addition, any cultural or language barriers that most likely to exist towards a foreigner would be minimized. Furthermore, as it is specified that the joint venture agreement being interpreted and governed by Indian Laws, it is essential that the CEO has been familiar with the laws and can implement them accordingly. Perhaps, one of potential advantageous changes to prevent certain delays and breakdowns is to have Mehta gaining more knowledge and familiarizing with the Italian equipment by conducting an in-depth cross training on the important duties Angeli would be in charge of.

Alternative solutions and recommendations to run international joint venture

Successful international joint venture requires series of aspects to be clearly agreed, established, and well managed. In the case of Bonazzi Indo, in order to resolve their problems and to be success in establishing cross-cultural joint venture, it is essential to improve and establish clear communication and due diligence between both parties. The first step is to appreciate the need for the joint venture and make sure the well-suited work culture and organizational behavior to minimize the existence of cross-cultural problems and ensure synergies. Secondly, it is necessary to have a clear agreement on the way the joint venture will be managed, mutually agreed terms and conditions, and having a clearly defined role and responsibility of each partners. In addition, it is essential to clearly express long term goals and interests of the joint ventures. Therefore, it would be highly suggested to held more formal meetings, provide more frequent reports and ways to communicate changes, so both companies can find solutions to perform better together. In order to do that, both companies must have equal powers, shares, as well as merge and respect each other. By having those features, both companies could get more involved in making mutual decisions. Furthermore, it is also important to uphold transparency and trust between the parties to