Economies of Scale — If an industry has high fixed costs, a JV with a larger company can provide the economies of scale necessary to compete globally and can be an effective way by which two companies can pool resources and achieve critical mass. There are also legal procedures involved such as IJV agreement, ancillary agreements, and regulatory approvals.
The first type is An equity joint venture is a partnership between an overseas and a Chinese individual, enterprises or financial organizations approved by the Chinese government.
Advantages and Disadvantages of Joint Venture The creation of a joint venture or any other type of strategic alliances can open new opportunities for any business that is looking to expand and grow. The limited partnership does not pay taxes.
Alliances may be formed with foreign entities that can lead to substantial opportunities for a growing business. Due diligence is the investigation of a country, business or person, for the purpose of obtaining useful information on the potential benefits, pitfalls and costs.
Risk Sharing — Risk sharing is a common reason to form a JV, particularly, in highly capital intensive industries and in industries where the high costs International joint venture essay product development equal a high likelihood of failure of any particular product.
Channeling the expertise and strengths of both parties to maximize value for the customers and stakeholders while downplaying the weaknesses and presenting a united font.
This could distract from the bigger picture leading to major problems in the long run. Lack of understanding of the cultures of the individual parties poses a huge problem if not addressed.
Liability is not limited to the capital contributions of the parties. Turkey lies on the borders between Europe and Asia and is used as a way to achieve strategic goals to enter into the Asian or European market, which is important for those wanting to entre EU market since Turkey signed the European Customs Union ECU.
Access to new technologies: The features a JV partnership should aim to address for an effective marketing campaign: What is joint ventures Joint Ventures If a business entity is looking for further flexibility and has an ability to adapt to a changing mission or goal with its participants, then the entity should consider forming one of many types of strategic alliances like joint venture.
The lack of any need to incur publicity or expense in making filings with any regulatory body such as the companies registry can be an advantage. This usually happens when the financial performance is poorer than expected either due to poor sales, cost overruns or others.
For a successful joint venture, there has to be understanding and compromise between parties, respect and integration of the strengths of both sides to overcome the weaker points and make their alliance stronger.
Similarly, the objectives of the participants may well change over time, especially when wholly owned subsidiary alternatives may occur for the multinational enterprise with access to the joint venture market.
No matter how the alliance is structured, participants inevitably will lose some aspect of control over the project. The creation of a new legal entity during the launch of a joint venture comes with its share of ups and downs.
As such, the participants acquire a joint property interest in the assets and subject matter of the IJV. Acquisition Barriers; Prelude to Acquisition — When a company wants to acquire another but cannot due to cost, size, or geographical restrictions or legal barriers, teaming up with a JVP is an attractive option.
The cooperative effort can take several forms and can be comprised of any or all of the following: This is important to a company because creating new distribution channels and identifying new customer bases can be extremely difficult, time consuming and expensive activities.
Therefore, it is important that participants simultaneously; Structure the management of the alliance in such a manner as to retain as much control as possible without stifling the project and Conduct due diligence on the participants to ensure a level of trust to ensure a level of trust amongst them.
A joint venture or strategic alliance can provide a growing business with technology from a participant that it will not otherwise be able to develop due to costs, resources or time constraints. However, the difficulties which unlimited liablilities might cause can largely be mitigated in practice by establishing a strategic alliance between companies.
An alliance with an actual or potential competitor, as is often the case with alliances may jeopardise the cooperative advantage that the business might otherwise have developed in the absence of the relationship.
On the other hand, a Letter of Intent is a document outlining an agreement between the parties before the agreement is finalized.
It helps investors to make better profit and mitigate risk. For example, a marketing strategy may fail if a product was inappropriate for the joint venture or if the parties involved failed to appropriately assess the factors involved. On the plus side[ edit ] Joint ventures enable companies to share technology and complementary IP assets for the production and delivery of innovative goods and services.
As a result, there is a major slowdown of decision making processes. In order for participants to gain, they must also give something up, which is usually control of some aspect of their business and, in turn, rely on the other participants.
At the same time alliances may also free up capital for use in other markets and activities. The general partner can be held responsible for all the liabilities of the limited partnership. It has daily production ofbarrels of oil and 50 million cubic feet of natural gas and boasts proved onshore and offshore reserves of million barrels of oil equivalent.
The supply of know-how may therefore be used to enable a company to obtain an equity stake in a joint venture, where the local partner may have access to the required funds. Funding Constraints — When a company is confronted with high up-front development costs, finding the right JVP can provide necessary financing and credibility with third parties.
Poor financial performance could also be as a result of poor planning by the parties before setting up a joint venture, failure to approach the market with sufficient management efficiency and unanticipated changes in the market situation.International joint venture partnership is one of the integral factors to grow and develop economics and the most beneficial approach is by engaging with and utilising local business with strong market connections and existing established business networks.
international joint venture is often described as the joining together of two or more business partners from separate jurisdictions to exchange resources, share risks and divide rewards from a joint enterprise. Usually, but not always, one of the partners is.
An international joint venture (IJV) occurs when two businesses based in two or more countries form a partnership.
A company that wants to explore international trade without taking on the full responsibilities of cross-border business transactions has the option of forming a joint venture with a foreign partner. - ESSAY TOPIC (1):A joint venture is affected by the cultural distance between two partners.
In what ways are joint ventures and types of international collaboration affected by cultural differences. Joint venture is one of the preferred international market entry modes by many firms but it suffers high failure rate.
Construct a review of literature on how to manage international joint venture successfully. International joint venture is one of the preferred international market entry mode. International Joint Ventures (IJVs) are becoming increasingly popular in the business world as they aid companies to form strategic alliances.Download