• Submitted By: kysa
  • Date Submitted: 12/02/2013 8:11 AM
  • Category: Business
  • Words: 324
  • Page: 2
  • Views: 81

A joint venture is a strategic alliance between two or more individuals or entities to engage in a specific project or undertaking. Partnerships and joint ventures can be similar but in fact can have significantly different implications for those involved. A partnership usually involves a continuing, long-term business relationship, whereas a joint venture is based on a single business project.

Parties enter Joint Ventures to gain individual benefits, usually a share of the project objective. This may be to develop a product or intellectual property rather than joint or collective profits, as is the case with a general or limited partnership.

Тhe Advantages of forming a Joint Venture:

-Provide companies with the opportunity to gain new capacity and expertise

-Allow companies to enter related businesses or new geographic markets or gain new technological knowledge

-access to greater resources, including specialised staff and technology

-sharing of risks with a venture partner

-Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business' exposure.

-Companies can gradually separate a business from the rest of the organisation, and eventually, sell it to the other parent company. Roughly 80% of all joint ventures end in a sale by one partner to the other.

The Disadvantages of Joint Ventures:

It takes time and effort to build the right relationship and partnering with another business can be challenging. Problems are likely to arise if:

-The objectives of the venture are not 100 per cent clear and communicated to everyone involved.

-There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners.

-Different cultures and management styles result in poor integration and co-operation.

-The partners don't provide enough leadership and support in the early...

Similar Essays