The significance of joint venture companies in commerce

The significance of joint venture companies in commerce

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Just like any other commercial endeavour, joint ventures have advantages and drawbacks. This post will note the most notable ones.

For decades, joint ventures in international business have actually culminated in mutually helpful outcomes, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are many reasons why businesses go into joint ventures however perhaps the most important of which is to take advantage of resources and access expertise that one business may be missing. For instance, one business may have excellent marketing and distribution channels however does not have a structured production center. By partnering with a company that has a reputable manufacturing process, both entities benefit greatly. Another reason JVs are popular is the fact that companies share costs and risks when embarking on a joint venture. This makes the partnership more appealing as both parties would share the expense of labour and advertising, and they both benefit from lower production costs per unit by leveraging their abilities and integrating expertise.

There's a long list of joint ventures that covers various sectors and businesses around the world, a few of which have actually culminated in the development of the world's most successful companies. That said, there are various types of joint ventures and picking the ideal one greatly depends upon the goals of the entities involved and the nature of their respective organisations. For instance, project-based joint ventures are a type of collaboration that combines two entities from various backgrounds to reach a common goal. This could be a JV between a commercial entity and an academic institution or short-term collaboration in between a businessman and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for expansion as these bring together 2 entities that co-exist in the very same supply chain like buyers and vendors, and they provide increased development chances for both parties.

Business expansion is an auspicious objective that any business owner thinks about at some point throughout their career, however, it can be a very stressful and costly process. It is for these factors that some businessmen choose joint ventures when trying to break into new markets and territories. Launching a world-class joint here venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the chances of success as partners pool their resources and connections in an attempt to increase effectiveness. For example, a company wanting to broaden its distribution to new markets and territories can benefit from partnering with local players. In this manner, it can take advantage of an already existing local distribution network, not to mention having access to understanding and proficiency on the target audience. Beyond this, regulations in specific jurisdictions limit access to foreign businesses, implying that a JV agreement with a local entity would be the only way to gain access.

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