Question

Greenwich Industries entered the Latin American market in the 1950s by forming a joint venture with Industro Viejes in Santo Ignezeto to manufacture bicycle parts.

The joint venture flourished in the 1960s, and Greenwich eventually bought out 100% ownership. The company earned steady profits from the Latin American subsidiary until a military junta overthrew the government in the late 1970s. The ruling generals expropriated all foreign-owned companies, including the Santo Ignezeto bicycle parts plant.

Today Santo Ignezeto is ruled by a democratic government that has been in power for 10 years. Industro Viejes has approached Greenwich about another joint venture. The government is offering an attractive incentive package to attract foreign investment.

You have been assigned to travel to Santo Ignezeto and begin planning and staffing.

1. What are the potential problems that face the new venture?
2. Would you recommend entering the joint venture? Why or why not?

Answer 1

• The potential problems that face the new venture are: currency shifts, cultural differences, and infrastructure.
• In the previous joint venture, Greenwich Industries had its plant expropriated, hence this will be an ongoing concern, despite the current government stability.
• The potential advantages of this venture for the company are: Locating a plant in a Latin American country will probably mean lower-cost labor, thus reducing the cost of producing bicycle parts and lowering the prices to consumers.
• There is the potential for expanding Greenwich’s consumer base.
• In maximum t Latin American countries, low per-capita income means fewer people can afford a car.
• Bicycle transportation is most common and presents an opportunity to enter a new market with both production and revenue potential.
• Since, there are more advantages than problems, I would recommend entering the joint venture.

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