New APAC region Joint Venture model for smart shades company established to enhance overall performance
In order to better penetrate the Chinese market of Premium Smart Shades, a Joint Venture was set up between a Chinese partner and a Colombian partner in 2016.
However, due to a series of external and internal factors, the JV is yet to be profitable. The lack of positive cash flow has worsened the cooperative relationship and both parties were in great need of immediate actions for the turnaround and a better JV structure to mitigate the tensions and capture the growing APAC market.
The client turned to ARC Consulting to help formalize a new working model for the cooperation.
AP initially analyzed the current joint venture agreement and reviewed the cooperation model, role distribution and financial results, to form a general overview of the JV’s current state.
Secondly, AP re-establishing the JV agreement and constructed a new model for royalty rates.
Finally, a detailed business implementation plan for the Chinese partner was made to ensure the optimization of the business operation.
Due to the familiarity of the profile and raw material designed by the Colombian partner, along with the great experience of the Chinese market, the Chinese manufacturer was invited to set up a JV with the Colombian Partner to better capitalize the Chinese market and promote the pergolas products.
However, even with all the previous proven success, tremendous market opportunity, the JV did not receive any positive cash flow and both parties were baffled by the situation.
ARC Consulting’s mission was to identify the root of the miscommunication, mediator between the parties and get to a common ground, re-establish the agreement, and build up a feasible business plan to step by step help the JV to generate more sales and achieve profitability on Chinese market.
The project was conducted in four steps:
- Interview with Related Parties
- New Agreement Drafting & Finalizing
- Market Research & Business Plan Building
After thoroughly understanding the key pursuits from both sides, a new joint venture agreement was established, including a profile purchasing-based royalty model, more detailed of responsibilities for both sides, and a more collaborative communication & intel sharing system.
To enhance the JV’s overall performance in APAC region, ARC Consulting also compiled a comprehensive business plan covering marketing, sales channel, structure building and investment plan.
Based on the interviews with the different parties and the market research, AP recommended both parties to utilize a factor & usage-based royalty model, to determine the proper royalty level for the Colombian partner.
Also, a revised version of the JV agreement was drafted to regain control over the cooperation between the two parties. To better capture the current market opportunities in China, AP also recommend the JV to establish its leading role through multi-brand building, sales channel cultivating and further innovating.
The new version of the joint venture agreement and business plan proposed by ARC Consulting team has been approved by both of parties, and a brand-new JV model was established.