Nora-Sakari Memo
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Nora Holdings Sdn Bhd
Memo
Zainal Hashim, Vice Chairman of Nora Holdings Sdn Bhd
From:
Caterina Barraco, Consultant
Date:
July 13, 1992
Joint Venture Recommendation
To ensure compliance with the terms of the TMB contract, joint venture negotiations with Sakari must be successfully concluded. Negotiations to date have failed mainly due to a mutual ignorance of one anothers cultural norms, not as a reflection of the potential success of a Nora-Sakari joint venture.
The following indicators suggest that Nora and Sakari are a good fit, and could successfully partner:
Complimentary objectives – Sakaris main objective is to acquire knowledge of, and gain access to, South Asian markets for Telecom products. Nora is looking to secure a partner that will enable them to comply with the TMB contract, as well as to learn from Sakaris success and replicate that model in the Malaysian market.
Skills and Resources – each company has the necessary skills to enable the other to meet their objectives. Nora is a leading supplier of telecommunications equipment in Malaysia, providing Sakari the opportunity to gain access to the desired markets. Sakari is able to provide flexible, modular switching technology which is based on an open architecture – not only enabling Nora to meet the terms of the TMB contract at a reduced cost, but positioning them to secure further contracts from TMB.
Compatibility – Nora and Sakari are relatively small players in the telecom industry, both on growth trajectories. They both believe that research and development is the key to their continued success.
Care and Attention – both companies have invested considerable time (more than 20 face to face meetings in both countries) and money in the joint-venture to date.
The disputed elements which are currently stalling the negotiations pertain to: equity ownership, technology transfer, royalty payment, expatriates salaries and perks, and arbitration location in case of a future dispute. Currently, both Nora and Sakari have tabled positions which optimize the benefits to themselves for each of the five elements. In order to maximize the likelihood of success, a win-win agreement must be designed.
I recommend contacting Kuusisto immediately, prior to any decisions being finalized within Sakari, to propose the following structure for the elements in dispute:
1. Equity Ownership – This element is constrained by the laws currently in place in Malaysia – the 51-49 position being tabled by Sakari is not legally possible given the terms of the joint venture (relatively little exporting). As such, the Nora position of 70-30 is feasible.
2. Technology Transfer – Although Nora has an interest in securing the switching technology Sakari has developed, this would position you as a potential competitor to Sakari in future. Given