Bharti Mittal's Joint Venture Strategy and Management Principles

Management Skills Behind Bharti's Growth

Sunil Mittal used a variety of different skills in building his business empire. With respect to human skills, Mittal utilized two very different skill sets. The first was his own competency in marketing and distribution in India. The foreign partners with whom Mittal worked brought human skills particularly in technological innovation, customer service, and management systems. These skills were applied alongside Mittal's marketing expertise to build the company.

The technical skills employed by Mittal were primarily acquired from overseas partners. Each of the partners with whom Mittal established business — Nokia, Ericsson, Siemens, and even AXA — brought their own technical capabilities to the table. They introduced technology that could be adopted and adapted by Mittal for the Indian market. This eventually allowed him to branch into areas such as cell phone manufacturing.

Mittal drew on the joint venture framework to leverage the conceptual skills of both his own team and those of his partners. Mittal was able to develop his own vision for how the joint ventures would work and was subsequently able to sell that vision to his partners. It was this ability to create a compelling vision and then execute on it that allowed Bharti Enterprises to develop as rapidly as it did. The company was ready for its growth and success — to the point where even hiring and training thousands of employees in a short period was not considered especially difficult.

The foreign partners also brought their own vision to the table. For example, when Vodafone and Mittal worked together to build cellular towers, both firms shared a vision of back-end cooperation and front-end competition. While Mittal used his vision to build his company, the joint venture partners also had their own strategic visions that helped shape the current state of Bharti. In addition, Mittal was able to conceptualize the ways in which joint venture partners would help his business, and in what ways he could help them. This strategic vision allowed him to make a series of high-profile deals that enabled the company to grow so quickly.

There are a number of challenges that Mittal might face from his foreign partners. The most evident is the risk that a partner attempts to extract Mittal's knowledge of marketing in India and then strikes out on its own. Armed with proprietary back-end skills and newfound knowledge of the Indian market, a former partner could conceivably threaten Mittal's competitive position. This is because while both firms want to acquire each other's knowledge, the two will often have different areas of knowledge they wish to obtain (Yan & Luo, 2001). The foreign partner may feel it has acquired all the knowledge it needs before Mittal feels the same way. This challenge can be described loosely as a misalignment of strategies between the two partners, wherein one partner holds a different long-term view of the arrangement than does the other (O'Connor & Chalos, 1999).

There are also a number of human resources challenges in international joint ventures, including culture clash in terms of both national and corporate culture (Cyr, 1995). While each of the foreign partners was chosen for its technological expertise and strategic fit with Bharti, not all such arrangements succeed. Indeed, many partnerships are undone by culture clash. In Bharti's situation, the transfer of service standards could have proved to be a point of contention, since Western standards can differ substantially from Indian ones. There are significant differences between Western and Indian business culture, and managers from the West working alongside Indian managers in these joint ventures could experience friction at various points.

Challenges from Foreign Joint Venture Partners

Mittal might also face the challenge of buyout offers. The Western firms with which he is dealing are using his company as a vehicle to gain entry into the Indian market. Ultimately, they may see value in owning Mittal's expertise and attempt to make an acquisition offer. This dynamic is illustrated in part by the situation with Vodafone — the two firms are well-positioned to partner, yet this closeness creates conflict among Bharti's main shareholders.

Other potential challenges include the risk that a foreign partner fails to uphold its end of the bargain. If Bharti takes on a foreign partner to gain managerial controls and technology transfer, but one or more of those elements fails to materialize, the venture may fail or Bharti may be forced to take extra steps to compensate.

With respect to culture clash, research has found that for retail operations — which Bharti essentially is — the learning curve is much steeper than for production-oriented joint ventures (Owens & Quinn, 2007). Therefore, management must be proactive in addressing cultural issues before they arise. This includes providing training for both sides of the deal so that managers know what to expect before they begin working together.

Strategic alignment is at the root of the problem when foreign partners look to go solo after benefiting from knowledge transfer, or when they make an unwanted takeover offer. The two parties can mitigate this risk by clearly stating their objectives at the outset of the deal. Additionally, Mittal should investigate the corporate history of his partners to determine whether they have a propensity for such behavior.

To guard against non-performance by a foreign partner, a contract that defines the specific obligations of each party is a sound starting point. However, a contract alone does not guarantee performance. A degree of trust is also required for the partnership to function effectively. Having a high level of trust between partners is a significant predictor of the achievement of both financial and non-financial goals in international joint ventures (Ng, Lau & Nyaw, 2007).

Conclusion

Ng, P., Lau, C., & Nyaw, M. (2007). The effect of trust on international joint venture performance in China. Journal of International Management, 13(4), 430–448.

Reuer, J. & Koza, M. (2004). Strategic alliances: Theory and evidence. Oxford: Oxford University Press.