SECTION IV: RECOMMENDATIONS
Decision Criteria
MABE’s decision criteria for evaluating their current position as part of a joint venture in Russia includes: * The joint ventures’ ability to generate future sales growth and substantial operating margin * The impact of Russia’s changing external environment on the joint venture and MABE as a whole * Other global opportunities for growth in emerging markets, including China and India
OPTION 1. Continue Operations in Russia with the JV
Cons:
* The JV may have not yielded the results the venture intended on achieving, but the potential for earning increased profit exists. They will have to work hard for it to produce, as it should. * Amount of expenses currently incurred
The potential for increased opportunity in similar emerging markets, including China and Russia, is outweighed by the capital investment that is needed as part of the expansion into Russia. Similar expansions into these markets has the potential to further leverage MABE’s balance sheet, exposing them to debt and interest related risks.
Externally, Russia does present a wide range of difficult to navigate and manage macro-economic factors. The risk of these challenges has been mitigated over the past four years though by the joint venture, which is evident in the joint venture’s profitability in 2012. The industry as a whole is quite competitive, with medium to high bargaining powers of buyers and suppliers, but the time and resources spent developing the partnership in Russia has helped to really put MABE in a good spot in respect to its competitors and the market shares they hold.
The last part of the recommendation will suggest that the joint venture should work towards establishing a domestic manufacturing plant in Russia within five years, essentially combining options 1 and 2 above. Combining these two options allows the joint venture to evaluate their performance for a period of five years before committing to further long-term operations in Russia.
Implementation
The following action plan should be implemented