Vol. 6 Num. 1 - GCG: Revista de Globalización, Competitividad y ...

International Joint Ventures among Developing Country Multinationals: The Case of Salinas Group-Faw34Furthermore, the cars did not meet Department of Transportation safety and pollution standardsin the United States, a market that they wanted to access from Mexico. Due to this,FAW did not put much effort into the partnership with Salinas Group, as they found theMexican market came with high competition. On the other hand, demand for automobiles inChina continued to grow, causing FAW to focus on its domestic market. This, along with thecrisis in the North American automotive industry and the boom of their business in China,made the FAW partners give little attention and effort to the Mexican adventure.4. ConclusionsThe case supports the idea that specialization is good and thus does not create problem ofcompetition. It initially appeared that there was a good complementarity between partners.FAW was a specialist in the mass production of cars at affordable prices in China and SalinasGroup was a specialist in the sale of goods on credit to the middle and lower-middle class ofMexico and other Latin America markets. The case reveals a different style of specializationsince the two companies were operating in different industries and thus the fear of creatinga competitor was not present. As mentioned, the two companies were truly specialized, oneon the industry and technology and the other in the market access and navigation of institutionalconditions. Thus, this created the opportunity for a deep collaboration.A lesson for managers of emerging country firms is that unlike other consumer productsthat can be imported from low cost regions (China, Southeast Asia, India), importing durablegoods, where a popular and renowned brand and its local distributors are important becauseof the high price (more than fifteen months of household income) and regular maintenance,is more difficult. The market introduction of these goods in a competition with developedcountries’ multinationals is challenging and requires different strategies than those used forselling consumer goods (less than three months of household income) with no substitutesand perception of better quality-price relation.Being developing country firms, they do not solve the perception that products are of lowerquality. The perception of low quality of the goods imported from a developing country multinationalcompany in a market with competition from large multinational firms from developedcountries, along with the inexperience of the local partner in that specific market,where its competitive advantages (existing stores and immediate credit) was not valuable,leads to a failure of the association. Some of the most notable challenges that the alliancebetween Salinas Groups and FAW faced were: (i) FAW cars were not high quality, eventhough they were acceptable for small markets (Libya, Iran, Syria, Ecuador, etc.); (ii) thesale of the cars required new sales and service spaces; (iii) there were no interested buyersgroups (taxis, government or business); (iv) communication between the parties was notgood; and (v) the economic crisis being experienced by the global automotive industry negativelyaffected the mood of consumers in an atmosphere of uncertainty. Thus, the casecautions about the challenges of undertaking IJVs with other developing country firms sincethese IJVs, although strategic and potentially profitable, suffer from the perception of lowerquality of products generated by developing country firms.GCG GEORGETOWN UNIVERSITY - UNIVERSIA ENERO-ABRIL 2012 VOL. 6 NUM. 1 ISSN: 1988-7116pp: 23-35