sitesim.blogg.se - Benefit of joint venture

Growth without the need to borrow outside funds or scout for investors.

Access to each other’s resources like finance and technology.

The partners can utilise each other’s distribution networks and access new markets.

A joint venture, if managed efficiently, helps the partners to grow.

The advantages of a joint venture are mentioned below: It is to be understood that no venture is without risk. Advantages of a Joint VentureĬompanies enter into a joint venture to combine their expertise and resources, thus reaping gains from this new partnership. Such ventures are not very satisfying as, despite the cooperation, a feeling of resentment stays. The gains from this alliance are shared according to agreement by the parties. The parties also face opportunistic behaviour from each other. In this joint venture, disputes often arise because both companies are dealing in identical/ similar businesses. In this venture, companies dealing in/ selling similar products and direct competitors in the market join hands to create an output that can be reached to customers of either party.

The business prospers, and quality products reach consumers at a reasonable price. The relationship between the buyer and supplier also remains good. Usually, this category of joint venture proves to be very successful. In such a joint venture, different manufacturing stages of a single product are integrated to create economies of scale that reduce the per-unit cost of the finished product.

Not an economically viable option, it is termed bilateral trading. In this type of joint venture, the transaction is between the buyers and the suppliers. Before entering an agreement, the would-be partner companies ascertain whether they will be able to function and perform efficiently together or not. This enables them to work efficiently and effectively. This agreement is in order that they gain from each other’s expertise in different areas. In the function-based joint venture, the parties form an agreement to mutually benefit from the arrangement. These joint ventures exist for a particular task, project, or time span. Since these collaborations are usually done for an exclusive purpose, they stand cancelled once the project is accomplished. Under the Project-Based Joint Venture, the partners come together to accomplish a fixed task. There are four main types of joint ventures. Companies that desire to spread their distribution networks in foreign lands can enter a joint venture agreementto supply goods to a local business in that country. The companies can combine their expertise and gain from the other partner’s talent within their company.Ĭompanies also use joint ventures to enter a foreign market by partnering with a local business of the said country. Cost savings can also be made in advertising and labour costs. Today, with the costly implementation of technical advances, joint ventures can apply economies of scale and increase their production at a lower cost than if they were working separately. Channelling all these together can help achieve excellent results. Some have good distribution channels, while others include a very efficient and motivated workforce. One partner might possess the expertise, while another has a well-established manufacturing unit. There are four main reasons to form a joint venture:Ī joint venture is an advantage since it can avail of the combined resources of all partners to achieve the target. Let us know about the different types of Joint Ventures in this blog.

Although joint ventures are basically for production or research purposes, business companies opt for them for reasons like leverage resources, cost-saving, combined expertise, and entering foreign markets. Medium, big, and small companies together can combine and form a joint venture to begin projects and deals as desired. Big or small Corporations, Limited Liability Companies (LLCs), partnerships, and other businesses can all form a joint venture. A joint venture can be formed between any legal entity. Also, each partner of the joint venture is equally responsible for the costs, profits, and losses. A joint venture or partnership is an independent body and not teamed with any other ventures or projects of the partners. Introduction – Different Types of Joint VenturesĪ business arrangement or activity between two or more parties with consent to use their resources towards accomplishing a particular task is termed a joint venture. Also, learn about the advantages and disadvantages of joint ventures. Check out this article to learn what is a joint venture, the types of joint ventures, and the need to form a joint venture.