Problems and Benefits Faced by Joint Ventures between MNCS in the Real Estate Sector, as Illustrated by the Joint Venture between the Al-Futtaim Group and the Smith Group

Abstract

Abstract: This study describes benefits and risks the Al-Futtaim Group and the Smith Group are likely to experience as a result of participating in a joint venture tie-up. A structured questionnaire was administered to a set of forty respondents chosen from the managerial levels of the two firms using random and purposive sampling methods. Thirty usable responses are obtained, yielding a survey rate of 75%, and the data thus collected was analyzed by means of the spearman correlation coefficient. Since the findings are based on responses given by managers from the two firms, it is quite possible that a number of risks and benefits beyond the perception of these managers (notwithstanding their experience) may have been overlooked by the study. However, those identified by the study include: the reduction of market entry costs and risks, increased access to new markets, and increased access to new resources and distribution channels. While the preponderance of research studies indicate that national cultural disparities negatively affect the performance of the joint venture, this study finds that this is not the case with the joint venture between the Al-Futtaim Group and the Smith Group. Instead, it suggests that in the case of Al-Futtaim and Smith Group, organizational culture plays a much more substantive role in the success of the merger than do national cultures. The study affirms that the two firms have indeed enjoyed the benefits associated with joint ventures, and finds that such benefits can be generalized for other joint venture partnerships. However, it finds that the impact of culture is context-specific and therefore finds no grounds to make generalizations on that score. A number of recommendations are made, and directions for future research in the same area given.