Joint Venture Proposal – Optical 88

Joint Venture Proposal – Optical 88

 

Optical 88 was established in 1984 and now owns the largest professional optical retail network in Hong Kong. Optical 88 has presence of various Asian countries such as Macau, China, Singapore, Malaysia and Thailand through its 200 branches. Gaining the leadership position in the industry, the success of Optical 88 is because of high-quality and customer-oriented services. Stores, for instance, are equipped with eye inspection equipment and managed by registered optometrist. With its fixed price policy, all terms and conditions of sales and promotional activities are documented. A comprehensive and credible after-sales service programme is also in place.

 

Optical 88 is currently employing a geographic expansion and the Japanese market was chosen. This means that Optical 88 has to explore the competitive pressures that could present conflicting demands for the company. Optical 88, nevertheless, embraces the concept of local responsiveness. To react to pressures of local responsiveness necessitates the company to differentiate the product offering and the marketing strategy from country to country. This will also mean to accommodate the diverse demands based on consumer preferences, business practices, distribution channels, competitive conditions and government policies.

 

With this, a joint venture is the most plausible entry choice for Optical 88 in penetrating the said market. Joint venture refers to the entity formed between two or more parties, undertaking economic activity together. These parties agree to create a new entity hence share in revenues, expenses and control of the enterprises. A joint venture will advent Optical 88 through benefiting from the local partner’s knowledge of the host country’s competitive condition as well as culture, language, political systems and business systems. The local partner could also share with the company the risks and costs of setting up the business. Joint venture is particularly significant when the choice of entry mode is hindered by political issues. However, this joint venture has also disadvantages for Optical 88 such as risk of losing control over technology to venture partner and does not give the company tight control of the subsidiaries which is very important when pursuing a global strategy.

 

It would be necessary to note that Japan’s overall technical growth in the field of optics is thriving and has a forward direction. Optical industry was perceived as a phenomenal growth since wartime while also being equipped with efficient modern factories and capable scientific personnel. Optical industry is a highly competitive sector.

The common pitfalls to avoid when penetrating the Japanese market are heavy competition, difficulties in reaching satisfactory corporate profit levels in a short period of time, lack of well known company and brand name, inferior marketing capabilities, lack of highly qualified and talented Japanese personnel and lack of overall commitment toward the Japanese market.

 

As such, if Optical 88 is serious in entering the market through a joint venture the first step is through an intermediary prior to establishing a marketing/sales joint venture. An intermediary refers to the third party which offers intermediation services between two trading parties. There is the need therefore to decide which local company is the perfect candidate for the joint venture. Strategically, Optical 88 could choose a company which is open with joint venture. Nihon Optical Co., Ltd and Asahi Optical Company Limited are two companies which suits the goal of Optical 88. The leading optical company in Japan is Nippon Kogaku, but considering its size and scope, the company would not consider having a joint venture.

 

After choosing the company and the intermediary, Optical 88 should then educate itself in terms of limitation on fixed period of time of joint venture and share holding which would require approval of the Japanese government. Regulations and laws surrounding joint ventures must be also known to Optical 88. Specific requirements for the management structure of a joint venture and with this, Optical 88 needs to know the minimum investment for the Japanese partner as well as the regulation applied on permissible debt to equity ratio which basically depends on the size of the joint venture. Equity can include cash, buildings, equipment, materials, intellectual property rights, and land-use rights but cannot include labor. The value of any equipment, materials, intellectual property rights, or land-use rights must be approved by government authorities before the joint venture can be approved.

 

Registration would be the next step and if the joint venture between Optical 88 and a Japanese optical company pursued and was registered already, it will be considered and function as a Japanese legal entity and must abide by all Japanese laws. As a Japanese legal entity, a joint venture is free to hire Japanese nationals without the interference from government employment industries as long as they abide by Japanese labor law. It is advisable, however, for a Japanese joint venture to succeed to hire and utilize expatriation.

 

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