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