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Copy of Nora-Sakari
Transcript of Copy of Nora-Sakari
Ha Sook Kim
Founded by Osman Jaafar (1975)
One of leading telecom industries in Malaysia
Approx. 3,000 employees
Nora Holdings past businesses include:
Sole distributor for Nortel's private automatic branch exchange
NEC's mobile telephone sets
Nora's Distribution activities include:
Radio related Equipt
Supplying Equipt to:
manufacturing auto parts for local auto companies
2003 - Nora entered into contract with Telekom Malaysia Bhd.
Purpose - To supply digital switching exchanges to aid in providing 4 million telephone lines
Nora would need to negotiate an alliance with reputable partners in order to fulfill this obligation (Sakari Oy)
Located in Finland
Leading manufacturer of cell phone sets & switching systems
Nora seeking Sakari as a partner to fulfill TMB contract
Have been negotiating for two years without coming to an agreement
Question #1 - Part #1
Why have negotiations so far failed to result in an agreement?
Is the formation of the joint venture between Nora & Sakari the best option for both companies to achieve their respective objectives?
May 21, 2003 - 1st Meeting
Finland's negotiations team was:
Serious, reserved and cold
Lack of facial expressions
United Kingdom Contract
Group 1 vs Group 2
July 8, 2003 - 2nd Meeting
Expatriates' salaries and perks
Paid up capital of RM5 Million
-proposed 49/51 split
-proposed 70/30 split - historically common practice
Technology Transfer & Royalty Payment
Sakari provide basic structure of their digital switch
Nora wanted "access to root of switching technology"
Sakari proposed 5% of JV gross sales
Nora proposed 2% of net sales
-Need to keep desired 10% ROI
Expatriates' Salaries & Perks
Nora asked Sakari to provide necessary training for JV employees
Sakari agreed with stipulations
- Short term basis experts receive $1,260/day plus travel exp.
- Long term experts receive $20,000/month
- Response: not comparable to industry rates
- Proposed own salary ranges and perks
Agreed to negotiate further disputes; Did not agree on location
Sakari wanted Helsinki
Nora wanted Kuala Lumpur
End of meeting
Both parties extremely upset
Nora solved a few issues by consulting Zainal
Sakari had to bring many issues to the board
Question #1- Part #2
Is the formation of the joint venture between Nora and Sakari the best option for both companies to achieve their respective objectives?
In a successful joint venture:
Nora would benefit from the technology transfer, and an opportunity to learn from Sakari's previous successes.
Sakari would acquire knowledge and gain access to the markets of South-east Asia.
With respect to joint venture formation, the achievement of their respective objectives is still very debatable
Disparity in culture
Has proven to be a significant barrier when it comes to:
According to Geert Hofstede
1) There are different cultural dimensions that are stronger or weaker for various countries
"In partnership selection, there should be some comparable characteristics, and a great amount of comfort as well as competence. These values will help the business flow seamlessly."
A JV will help 2 countries reduce competitive intensity and essentially exclude potential conflict
The alliance will build a complex, integrated value chain that can act as barrier
Leverage complementary skills and resources
"A key to successful alliance building lies in defining as simple and focused, a scope for the partnership as is adequate to get the job done but retain at the same time the possibility to redifine and broaden the scope if needed."
(Bartlett & Beamish, pg. 520-521.)
As Zainal, what would you do to ensure that Nora fulfills the TMB contract?
If Zainal decides to renegotiate (and assuming Kuusisto agreed), how should he restructure the terms of the deal?
If the two companies are able to form an alliance:
1) Potential to secure significant revenue
2) Recognize Sakari is an expert digital switchboard producer
3) Recognize Nora is a successful company in Malaysia
4) Technology expertise paired with market expertise
The terms can be restructured as follows:
Nora should assume the task of managing the project more directly
Regulations set by the Malaysian government (30-70 foreign-Malaysian)
Sakari should not be granted 49% of ownership
Nora should agree to Sakari's proposal
Developing a new R&D subsidiary
Nora should insist on its proposal
Sakari could accept Nora's proposal of 3% net sales ensuring its 10% ROI
Salaries & Perks
Living in Malaysia vs. a typical European city
Remain as tabled by ASakari
Justifies paying the experts according to Sakari's proposal
Meet at an unbiased territory
Periodic meetings that alternate between each location
Sakari needs to be more considerate of their business partner
Question #3 - Part 2 & 3
Explain the options available. Advantages and disadvantages for the two parties?
To complete the TMB Contract
Option 1. To Accept Sakari's Proposals and Compromise Nora's Interests
Option 2. To Seek a New Partner
Advantages & Disadvantages for the 2 Parties?
Main Conflicting Issues
If JV would become successful..
Nora would benefit by gaining:
Sakari would benefit by gaining:
Access to SE Asia
We feel it is POSSIBLE to build a strong partnership
If they can reconcile their differences and focus
on each other's strengths
Nora has a few options
1) Take Sakari's offer
2) Try to renegotiate
3) Seek new partners
We choose #2
(Nora is in a bit of a bind, may have to choose #1 if they won't budge due to time constraints)
If Zainal did get an opportunity to renegotiate they should:
1) Restructure by offering 49% ownership to Sakari
2) Agree to Sakari's tech transfer of basic digital switching
3) Insist on a 2% net sales for royalty
Unless they can guarantee 10% ROI at 3%
4) Salaries s/b indexed at Malaysia's cost of living
5) Accept Sakari's offer for perks
6) Alternate arbitration locations of settle for unbiased territory