Project Organising

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Project Organisation

by Amit Agarwal By Amit Agarwal

Forms of Organising ► Joint

Venture ► Alliance ► Licensing ► Contract Manufacturing ► Franchisee ► Royalty

By Amit Agarwal

JV

By Amit Agarwal

JV    

Entity formed between two or more parties to undertake project . Parties contribute equity , share in revenues , expenses , & control . Venture for a specific project only, or continuing business relationship ( e.g. Sony Ericson) May be company or limited liability partnership or trust or other depending on considerations such as tax, financial or tort liability sharing etc. By Amit Agarwal

JV types ► Equity

JV

 New entity where parties contribute equity capital  shares of existing company distributed to others. ► Contractual

JV

 No new entity e.g. A & B enter into contractual relationship to perform a specific job for third party C By Amit Agarwal

Reasons for JV ►

Internal :    



To Build on company's strengths; new businesses & contacts Spreading risks; Economies of Scale, advantages of size; Access to new technologies, Skill sets, and customers ;

Competitive goals :  Pre-empting competition ;  Creation of stronger competitive units ;  Speed to penetrate market ; Improved agility ;



Strategic :    

Legal requirements Diversification , business in unknown locations & systems, Reduce inefficiencies & costs (associated with multiple sub-contracts) Enhance time, cost performance By Amit Agarwal

Laws for JV in India ► No

separate laws for joint ventures in India. ► Companies incorporated in India, even with up to 100% foreign equity, are treated the same as domestic companies.

By Amit Agarwal

Demerits of JV ► Under-performance

of Partner ► Demands higher efforts in coordination ► Trust – crucial factor ► Dispute resolution is tedious / costly ► Overseas – Local partner very demanding

By Amit Agarwal

JV agreement – necessary contents ► ► ► ► ► ► ► ► ►

Applicable law. Shares : Holding , Transfer Management : Board of Directors, General meeting., CEO/MD ,Management Committee Dividend policy Funding Change of control Non-Competition, Confidentiality, Indemnity to other party Dispute resolution agreement Termination.

By Amit Agarwal

Alliance

By Amit Agarwal

Alliance ► Association

( collaboration) formed for furtherance of common interest & aims of participating parties  

share resources, technologies, supplement each others capabilities to gain competitive advantage.

► Primarily

based on trust & commitment

By Amit Agarwal

Alliance contd. ► involves

no equity stake by participants, no new entity, much less rigid arrangement. ► For One-off activity or just one part of a business or developing a new products jointly for a particular market. ► Firms retain independence & may not be formal JV

By Amit Agarwal

Activities under Alliance ► DESIGN

CONTRACTS ► JOINT PRODUCT DEVELOPMENT ► PURCHASING AGREEMENTS ► DISTRIBUTION AGREEMENTS ► MARKETING & PROMOTIONAL COLLABORATION ► Intellectual advice By Amit Agarwal

Advantages ► Leveraging

firm’s strength ► Risk sharing ► explore new opportunities, expand overseas. ► Allows smaller companies grow - marrying A’s product to B’s distribution set up ; C’s R&D to D’s production skills. ► Enhances ability to respond quickly to change & grab opportunity. By Amit Agarwal

Consortium ( Latin word : partnership or association)

By Amit Agarwal

Consortium ► Association

of two or more individuals, companies, organizations or governments ► Objective : participating in a common activity or pooling their resources for achieving a common goal. ► May not be a full fledged JV ► India : a Pre JV structure

By Amit Agarwal

Consortium Contd ► Example

( Non JV Consortium ) : Airbus Industrie

► Airbus

is owned by EADS. EADS itself is a merger of Aérospatiale-Matra of France, Daimler-Chrysler Aerospace of Germany, and Construcciones Aeronáuticas of Spain, which were originally separate partners in the consortium, owning 37.9%, 37.9%, and 4.2%, respectively. BAE Systems owned the remaining 20% but sold this in 2006. ► Profits accrue to the partner companies representative to their interests. By Amit Agarwal

Consortium Structure ► Consortium

  

agreement outlines

Members rights and obligations, ownership of existing and newly created assets arrangements for operational, technical and financial management.

By Amit Agarwal

SPV

By Amit Agarwal

SPV ► Entity

formed for a

 single & Specific ,  well defined purpose ► Entity

separate from the sponsors – usually a limited company.

By Amit Agarwal

SPV ► Advantage

  

to sponsors :

raise capital from market, risk protection , possibility of securitising future receivables

► Advantage

to lenders :

 conveniently control cashflows for repayment,  risk of sponsors not spilled over By Amit Agarwal

Organising ► Comprehensive

association

 Forming separate entity ►JV

: as SPV or GENERAL

 not forming separate entity ►Alliances ►Consortium

► Limited

association

 Licensing, Contract Manufacturing, Franchising, Royalties By Amit Agarwal

Matrix Organisation

By Amit Agarwal

Project Oriented Orgn

By Amit Agarwal

Project Organising ► ►

basic approaches Separation of organizations. Numerous organizations serve as consultants or contractors to the owner, with different organizations handling design and construction functions. Typical examples which involve different degrees of separation are:  Traditional sequence of design and construction  Professional construction management



Integration of organizations. A single or joint venture consisting of a number of organizations with a single command undertakes both design and construction functions. Two extremes may be cited as examples:  Owner-builder operation in which all work will be handled in house by force account.  Turnkey operation in which all work is contracted to a vendor which is responsible for delivering the completed project

By Amit Agarwal

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