The importance of joint venture companies in business

The importance of joint venture companies in business

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Knowing when to embark on a joint venture and who to do it with is essential. A lot more about this below.

There's a long list of joint ventures that covers different sectors here and companies across the globe, some of which have culminated in the development of the world's most prosperous companies. That said, there are various types of joint ventures and selecting the best one greatly depends upon the objectives of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a type of partnership that brings together 2 entities from various backgrounds to reach a shared goal. This could be a JV between an industrial entity and a university or short-term partnership in between a business owner 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 unite 2 entities that co-exist in the same supply chain like buyers and vendors, and they provide increased growth opportunities for both parties involved.

For decades, joint ventures in international business have culminated in equally advantageous results, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are numerous reasons why companies go into joint ventures however potentially the most crucial of which is to leverage resources and gain access to knowledge that one business may be missing out on. For instance, one company might have exceptional marketing and distribution channels but does not have a streamlined manufacturing center. By partnering with a company that has a well-established production process, both entities benefit considerably. Another reason why JVs are popular is the fact that businesses share costs and risks when starting a joint venture. This makes the collaboration more enticing as both parties would share the cost of labour and advertising, and they both benefit from lower production expenses per unit by leveraging their capabilities and integrating expertise.

Company expansion is an auspicious goal that any entrepreneur thinks about at some time during their career, however, it can be a really difficult and costly procedure. It is for these factors that some businessmen go with joint ventures when trying to get into brand-new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the possibilities of success as partners pool their resources and connections in an drive to increase efficiency. For instance, a company wanting to expand its distribution to new markets and territories can benefit from partnering with regional players. By doing this, it can benefit from an already existing regional distribution network, not to mention having access to knowledge and expertise on the target market. Beyond this, regulations in certain jurisdictions restrict access to foreign businesses, meaning that a JV contract with a local entity would be the only way to gain admittance.

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