Nora-Sakari: A Proposed JV in Malaysia.
This case presents a perspective of a Malaysian company, Nora Holdings Sdn Bhd (Nora), trying to establish a telecommunications joint venture with a Finnish firm, Sakari Oy (Sakari).
Negotiations that take place between Nora and Sakari are Cross-Cultural in nature as the former is an Asian company and the later a European company. Nora was a lead supplier of telecommunications (telecom) equipment in Malaysia while Sakari a Finnish Conglomerate, was a leader in the manufacture of cellular phone sets and switching systems.
The final negotiations between the two telecom companies took place on Nora’s turf, which is a clear ...view middle of the document...
Zainal was Nora’s most experienced negotiator. In the negotiations with Sakari, Zainal admitted making the mistake of approaching the negotiation by applying the method he when negotiating with his counterparts from companies based in UK or North America.
Some of the issues which came up during the July 8 meeting were difficult to resolve and led to heated arguments between the negotiating teams. These were as follows:
• Equity ownership
• Technology transfer
• Royalty payment
• Expatriates salaries and perks
Both companies disagreed on the equity share proposed by each side. Sakari proposed an eqity split in the JV company of 49% for Sakari and 51% for Nora. Nora on the other hand proposed a split of 30% for Sakari and 70% for Nora. Equity ownership became a major issue as it was associated with control over the JV company. Sakari was concerned about the ability to control the accessibility of its technology to Nora snd about decisions concerning the activities of the JV as a whole. Sakari perceived the lack of control as an obstacle to protecting its interests. Nora also had similar concerns of control over the JV as it had plans of developing its own digital switching exchanges and related high tech products.
Sakari proposed to provide the JV company with the basic structure of the digital switch so that the core switching technology would be well-protected. Nora on the other hand proposed that the basic structure of the digital switch be developed at the JV company in order to access the know-how of the switching technology. Nora was not interested in a “screw-driver” form of technology transfer as the core of the technology associated with making the switches would be unknown.
Sakari proposed a royalty payment of 5% of the JV...