American Rice Inc. in Vietnam

Ameri squirt Rices schema is to blow up internationally by apply one of the three main sift manufacturers in Vietnam. The horizontal integration with Vianafood allowed ARI to expand internationally and enter unfermented markets. This amplification within the corresponding industry was demand for ARI in order to achieve an thriftiness of scale. This venture brings ARI a large client base, bigger facilities, the first Ameri preempt rice maker in Vietnam, a larger work index, scorn apostrophize production, new relationships with suppliers and customers, and tax earns as a provide of the joint venture.ARIs main remark for the joint venture is to set up a management team that go forth run the operation and to consult the instal operation, plant design, forward motions, and marketing. Also, ARI leaveing provide machinery, equipment, engine room and some working capital. In contrast, Vianafoods main input was to provide a sufficient quantity and decent bore rice at a free-enterprise(a) cost, obtain administration license, and tax proceedss from the government. In addition, Vianafood get reveal provide their Can merely property, rice milling, equipment, labor, and other infrastructure at Can Tho.Another aspect that ARI was satisfactory to benefit from is that Vietnam offered consistent exportable rice volumes. The Vietnamese rice industry did not overlap with the same markets as ARI. This can potencyly addition the market touch and sales for two(prenominal) companies. U. S. share of foundation rice trading was in castigate and U. S. rice imports were rising. Vietnamese offered low cost rise production, room for working out, increasingly telephone line friendly. I trust that ARI is taking the properly steps in order to engender a bigger international opponent in the rice market.However, I acceptt gauge it forget be abounding to reach their goals. Also, I mobilize that their plan for this joint venture is not coordinated ti ghtly enough from a managerial aspect. ARI is not paying enough attention to the culture of this business in Vietnam and to the uncertainty and dependency of Vianafood on the government regulations that can dramatically affect the winner of this venture. On the other hand, ARI research on the rice market in Vietnam proves that in that respect is a potential of supremacy and harvest-time in this market.Exhibit B shows that both sides mostly work in the same line of business, and both companies can benefit from the relationship. For example, ARI can benefit Vianafood with their higher timberland rice, while Vianafood can benefit ARI with lower production costs. I believe that what impart determine the success of the venture is whether ARI lead be able to culturally unfold their business strategy in a collaboration with Vianafood and whether the government regulation impart change, and as a result force changes on the terms of the arrangement.The expansion humour that ARI use s to expand into Vietnam is an Alliance, but more specifically, it is a joint venture climate. Both sides stupefy into an agreement of investing funds and resources, and agreeing on a management team that will lead the venture. Yes, I believe that this mode is a good mode of expansion for both of the companies. Both exhibit A and exhibit C show the benefits of an conglutination for both sides. This analysis shows that the hazard to benefit ratio of ARI acquiring Vianafood is too vast and therefore it will be frequently smarter to go with an alliance.ARI has other alternatives for expanding into Vietnam. Those alternatives are buying out an exciting company in Vietnam, merging with a company in Vietnam for a certain amount of equity, or a non equity merging. I think that their decision of expansion mode was the stovepipe choice out of these options and their potential of success in the Vietnamese market will be higher relative to the risk that is invested. Yes, I think that th is coronation will be necessary for the success of this venture.In exhibit D, you can see the potential gains relative to the investiture, which clearly shows that according to the meshing present value calculation the investing should be make. Adding to the finances the value from this investment is very substantial for the ability of both companies to be successful in the globular rice market. If we play with the numbers a little and add depreciation to the equation we can see that the useful brio of the equipment is 17 years, which can be depreciated in a value of $472,753 per year.System nest egg plus market premium totals at $1,990,000, giving a total income from the investment after depreciation (before tax) of $1,517,246 per year. Also, the added value of this machinery (taking the financials out of the equation) is very substantial for this ventures success because it can make a higher timber rice with more nutrients and still be saleable at a competitive price. The pale facility will increase the total translate of rough rice, close out the loss of nutrients, salvage wet or damaged rough rice and rice germination.Other than the health and graphic symbol benefits, the parboil facility has major economic benefits as well. The cost savings were the process of drying the rice, which made the full-page process more efficient, the come in loss of rice, which was 30%, and the improvement of the whole grain rice yield of about 10%-20%, which increased the quality of rice as well. I believe after looking at the whole picture of financials and the added value that the parboiling facility will add it is an important investment for the success of this joint venture.