The importance of joint venture companies in business

The importance of joint venture companies in business

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There are various joint venture approaches, each suitable for a particular purpose. Here is all you have to know.

For decades, joint ventures in international business have actually culminated in equally beneficial results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons why businesses go into joint ventures but perhaps the most crucial of which is to leverage resources and access competence that one company might be missing out on. For example, one business may have exceptional marketing and circulation channels but lacks a structured production hub. By partnering with a company that has a well-established production process, both entities benefit greatly. Another reason why JVs are popular is the fact that businesses share costs and risks when starting a joint venture. This makes the partnership more attractive as both parties would share the expense of labour and marketing, and they both gain here from lower production expenses per unit by leveraging their capabilities and integrating knowledge.

There's a long list of joint ventures that spans various sectors and businesses around the world, a few of which have actually culminated in the creation of the world's most prosperous companies. That said, there are various types of joint ventures and selecting the best one significantly depends upon the goals of the entities included and the nature of their respective organisations. For instance, project-based joint ventures are a type of partnership that combines 2 entities from different backgrounds to reach a shared goal. This could be a JV in between a commercial entity and an academic institution or short-term partnership in between a businessman and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are likewise another popular means for expansion as these combine two entities that co-exist in the very same supply chain like buyers and wholesellers, and they offer increased development chances for both parties involved.

Company growth is an ambitious goal that any business owner considers at some time throughout their professional career, nevertheless, it can be a very stressful and costly process. It is for these reasons that some entrepreneurs opt for joint ventures when attempting to break into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the chances of success as partners pool their resources and connections in an effort to maximise effectiveness. For example, a company wishing to broaden its distribution to new markets and territories can take advantage of partnering with regional businesses. By doing this, it can benefit from a currently existing local distribution network, not to mention having access to knowledge and know-how on the target market. Beyond this, guidelines in certain jurisdictions restrict access to foreign businesses, suggesting that a JV contract with a regional entity would be the only way to gain access.

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