The JV route is an excellent option for partner companies to catapult themselves quickly into dominant positions in the respective markets. It also serves the more immediate objectives of strengthening the product portfolio, ensuring a proper supply chain, and gaining access to a larger customer base through multiple channels of distribution.

But it is not enough for a JV to be driven by leadership aspirations alone. It is equally important to deliver shareholder value. It is also important to ensure that the employees owe allegiance to the JV and are driven by a common vision of the JV. One of the reasons why some JVs come unstuck, particularly when multiple partners are involved, is that they tend to distract the minds of the decision-makers at various operating levels. The single-minded focus on overall business, so essential to securing profitability, often gets diluted. Operating managers begin to pursue the interests of the partners from where they have been seconded.

Integrating and harmonising the interests and expectations of employees with the business goals of the JV is, by far, the single-largest mandate of the management of a JV. And this must be addressed upfront, right at the beginning of the JV. Evidently, Shermon and his team are finding it difficult, for various reasons, to fulfil that mandate. It, therefore, makes sense to dissolve the JV. There is also merit in converting the relationship into a strategic alliance.

The new alliance should focus on developing competencies that are critical to the successful management of an OTC business-product knowledge, supply base, brand building, channel management, and field sales management. The restructuring of the JV to an alliance will enable Shermon and his team to focus on customer opportunities in a more competitive way. It will also free Albert-Indica-and also the other two partners-to evolve working relationships with other product and service providers in the industry.

But the more enduring advantage of a strategic alliance is that it preempts irrational transfer pricing among partners. The benchmark costs and prices can be used as a basis for determining profitable transfer pricing without debilitating the end-customer focus. It offers them freedom to operate as entrepreneurs. They could concentrate on issues related to business instead of being preoccupied with mending fences.

There is, however, a major hr problem in the dissolution of the JV: low morale among employees. It is important that the top management team of Albert-Indica adopts a common briefing approach. They should explain the reasons for the dissolution and outline the future mode of working. Equally necessary is to brief the various business associates-dealers, vendors, bankers, and even large customers-about how the new relationship will impact positively on everyone.

Albert-Indica is actually a shell company. It lacks manufacturing facilities and brands. What is galling, in my view, is that even the personnel are 'seconded' from individual partners. The result is obvious: employees owe allegiance to their parent firms. In fact, this will make the harnessing of organisational learning and capabilities and using it to build a growth strategy quite difficult.

Albert-Indica's investment is probably limited to working capital and distribution assets. These provide below-average returns. Yet, it spends 70 per cent of its marketing costs on consumer research. Fruits of this research cannot be exploited to expand the company's product range or markets (and thereby reduce marketing costs) because of the restrictive covenants in the JV agreement. The restrictions also point to low level of trust between JV partners, whose main objective seems to be to keep key assets (like brands) outside the partner's control and to foreclose access to opportunities that lie outside the JV.

The key question to address is whether the JV can design and execute a low-cost marketing strategy and then use this capability to exploit the opportunity in the OTC market over the medium-term. Without such a capability, Albert- Indica will not be able to seize this opportunity. On the other hand, the restrictive covenants rule this out. In fact, given the apparent distrust, it is not clear how the partners plan to exploit the OTC market. Will they use it to sell only their own products or do they plan to source products and brands from other manufacturers?

The basis of JV has to be renegotiated or it must be dissolved. Yet, we need to be clear that the dissolution is not due to low returns, since these can be improved with changes in the scope of the JV. Rather, the dissolution is driven by the divergence in the strategic goals of partners. It is this divergence that makes tapping the OTC market opportunities difficult.

A strategic alliance will have the advantage that the production and marketing synergies can be exploited in Indica. Brands can be licensed to Indica by Albert, with usual restrictions. Indica can then also source additional OTC products from others manufacturers, lower its marketing costs, and exploit opportunities as they emerge. As far as Albert Plc. is concerned, unless its medium-term goals are to add several new products or brands to the portfolio in the emerging OTC market, without investing in manufacturing and marketing subsidiary, it is unlikely to see great merit in such an alliance. It already has a subsidiary (Albert India) in the personal care business and may want to enlarge its scope. The reason for this is obvious: it will have little control over an organisation (Indica) whose capabilities will be crucial to its plans in this market. However, if its strategic goal is to exploit opportunities in India with lower risk and investment, Albert Plc. may bite Shermon's bait.

A JV is essentially a long-term commitment. It is no different from a marriage. To sustain the mutual relationship, a clearly articulated vision is a must. It is a shared vision alone that provides an impetus for partners to have a stake not only in their own individual success but also in each other's success. There are, of course, different drivers in a JV. At the macro-level, they are three-fold: convergence of consumer needs (in terms of products, services, channels, and reach); amortisation of fixed costs over a larger market base (which eventually benefits the consumer); and economies of scale and scope. The micro-level drivers are again three-fold. A JV pre-empts the need to reinvent the wheel. It enhances the collective capability to deliver better customer value.

But for a JV to succeed, what is needed is autonomy. The management team should have operating freedom. This calls for a certain amount of flexibility in mindset of the partners. Especially in a three-way JV like Albert-Indica, this understanding of operational freedom must prevail both at the board level and among the 'seconded' employees. The employees have to wear the JV, not their parent's, hat.

It is obvious that the original goals of the three partners in the Albert-Indica JV have been met. There has been growth in volumes and marketshares. The market penetration of the respective brands has improved. One of the best ways to capture value is to transfer skills.

An equity-based JV for Albert-Indica at this particular stage can be a hindrance, not a spur for growth. It makes better business sense for the partners to utilise and build on each other's strengths and skills. After all, business focus changes, people change, and priorities change. But what endures is the relationship. This is why the pursuit of independent growth opportunities, even while working together, becomes mutually rewarding and satisfying.

In the transition from an equity-based JV to a strategic alliance, the basic issue will be of people. Since all the employees at Albert- Indica are pooled in from the respective partners, this issue is manageable. But the real area of concern is to ensure that there is no compromise on customer service, product availability, and brand equity.

It is necessary for the JV partners to put together a multi-disciplinary team to facilitate the transition. Constant and consistent communication to all stakeholders is imperative. You can never over-communicate in a situation like this. Finally, the strategic alliance will succeed only if the partners bring the same passion to the restructuring as they did for the JV.

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