The Inherent Challenges of Joint Ventures in India

The news of McDonald’s Corp. terminating its franchise arrangement with its joint venture (JV) in India is of little surprise. It’s the latest development in the conflict between the two JV partners, the American company McDonald’s and the Indian partner, Vikram Bakshi of Connaught Plaza Restaurants Ltd.

When McDonald’s entered India in 1996, there were many foreign and Indian companies joining hands in partnership to take on the promising and complex Indian market. The JV structure seemed to be just what the doctor had ordered. On the one hand you had a foreign firm, often a global leader in its field, bringing brand and technology or savoir faire, and on the other an Indian company that had knowledge of the Indian consumer, possibly some relevant infrastructure and a route to market. The perfect combination to share investments, reduce risks and achieve success.

Things did not play out like that for most of the JVs. IndSight Growth Partners Advisors’ analysis of India entry strategy of 38 foreign consumer good companies over the last 25 years shows that of the 21 JVs started, only six have survived. Of the 15 that were terminated, a third of them ended in a public conflict.

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