In order, for a joint venture to be successful, we need the two parties to have similar long-term goals, share same

set of values and have compatible corporate cultures. Fiat and Tata, appear to have a strong stake in making this joint venture a success story. This joint venture may not live up to its expectations for these reasons: 1. Fiat is dependent on Tata to market its car Palio. It is going to use Tatas dealership network to display its car along with other cars. These dealers have alliance with Tata, hence why and how would they promote Palio is unclear. From the customers stand point, why would they prefer Palio and not Indica, when they are both in the same market segment? These ambiguities might affect the sales of the Fiat cars. Until Fiat has its own infrastructure in place, it will be at Tatas mercy to provide presence for itself in the market. 2. In a joint venture, profit is shared and in case of Fiat, a certain percentage of it needs to be repatriated back to Italy. In a country like India, where rupee is not convertible and government intervenes to keep foreign exchange under control, sending money back to parent country/company could be a problem. Moreover, government policies might affect the value of rupee and it might drastically affect amount that would be sent back to the parent company. Fiat needs to account for vagaries of foreign exchange while dealing in India. 3. During the course of discussions, Fiat and Tata realized that they have lot of things in common and they can collaborate in power trains, transmission and other automotive parts. This is good from business standpoint; however, this could also mean closing down of certain plants and laying off workers. In a country such as India, where labor unions are strong, this might be a problem. Central and regional governments may not allow closing of

factories and removing workers. Similarly, unions in Italy could create problems if workers are laid-off. 4. As the venture matures, there needs to be clear chain of command and communication. Fiat has culture of giving autonomy to its officers and this facilitates faster decision-making. However, Tatas appears to be orthodox, their officers need to take advice from higher ups in taking decisions. This may affect decision-making and can be detrimental to the day-today working of the company. To make a joint venture successful the following are some recommendations: 1. Both the companies need to have clear communication to build relationship. Both the parties need to have regular meetings and reviews of production schedules and issues. Both the parties need to strive not to repeat the same mistakes. 2. In a business, mistakes will be committed; however, concerned parties should not get into blame game. Understand the root cause of the problem and turn it into a win-win situation for both the players. 3. Financial health of both the parties should be discussed and should not be hidden from each other. In case one party is facing financial losses and have difficulty raising capital to fund new improvements/technologies, then it should be told to the other party. 4. As the joint venture progress, the performance of the venture should be benchmarked and realistic expectations should be set. Both the parties should dedicate time and resources as planned to the joint venture. They need to have some skin in the game to make this venture a success.