Extended-form Case Study

Verizon and Vodafone: a case study in joint ventures

Published on November 30, 2015   24 min

Other Talks in the Series: Hot Topics

0:00
Hello. My name's Michael McDonald. This is a case study. Today we're going to be talking about Verizon, and Vodafone, and the issue of joint ventures in business.
0:11
Now a joint venture is a unique business arrangement. In particular, a joint venture involves two different companies, both contributing assets to a new business entity. Essentially, it's when two companies form a completely new third company. Each of these founding companies gets an equity stake in the new entity. The exact amount of that equity stake varies from case to case. Both founding parties don't necessarily have to have an equal stake in the equity of the company that's created, as we'll see today. Now joint ventures, or joint undertakings as they're sometimes called in Europe, are set up by founding parties as a way to share investment costs, share ongoing expenses, and then of course share the assets and the profits between the two companies. So the basic idea is to take the strength of two different companies and use those strengths to create a new business. It's sort of like when two individuals decide to form a partnership. Frequently for small businesses that form partnerships, one of the reasons for doing this is to combine the strengths of two different people. You might have someone who's a really good salesperson and someone who's a really good business manager, and they work together to run a very efficient business. The same thing applies to joint ventures. In the case of businesses, these business strengths could be things like experience in a certain geographic segment, say another country, or expertise with a particular technology, or simply a complementary set of assets.
1:43
There's a lot of joint ventures out there, but some of the biggest ones include Dow Corning, MillerCoors, Owens Corning, Sony Ericsson, and Verizon Wireless, which is the focus of today's talks. Dow Corning has been around for decades, since 1943 in fact. It makes silicone and specialty chemicals. Joint ventures don't necessarily have a shelf life, if you will. It's not like they expire after five years or even companies can necessarily reverse them after the joint venture is formed. MillerCoors has been around since 2007 and they make alcohol, of course. And we'll talk about MillerCoors in a second, but essentially they were put together by two major alcohol companies as a way to compete with a third company. Owens Corning is an interesting joint venture because while it started out as a traditional joint venture, making insulation, it was eventually spun-off as a separate entity. So today, it's a regular company owned by shareholders just like any other, but it started out as a joint venture between two companies. Sony Ericsson is a pretty famous joint venture, and they made mobile phones as a result of combined assets from Sony and Ericsson. The joint venture operated from 2001 until 2012, then Sony bought the joint venture outright. So essentially, what we see here is there's three possible outcomes for joint ventures. One, the joint venture could get bought out by one of the two founders, like in the case of Sony Ericsson. Two, the joint venture could get spun off and become an entirely independent third company like Owens Corning. Or three, the company could continue to operate as a joint venture for many, many years or even many decades like Dow Corning.
Hide

Verizon and Vodafone: a case study in joint ventures

Embed in course/own notes