Advantages and Disadvantage of Joint Ventures

A joint venture is a planned 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 implication for those involved. A partnership more often than not involves a continuing, long-term business relationship, whereas a joint venture is based on a solitary business project.

Advantages of forming a Joint Venture:

* Provide companies with the chance to gain new capacity and expertise

* Allow companies to enter connected businesses or new geographic markets or gain new technological knowledge

* Access to greater capital, including particular 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 promise and the business’ exposure.

* In the era of divestiture and consolidation, JV’s offer a original way for companies to exit from non-core businesses.

* Companies can slowly 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 attempt to build the right relationship and partnering with one more business can be challenging. Problems are likely to arise if:

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

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

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

* The partners don’t provide sufficient leadership and support in the early stages.

* Success in a joint venture depends on methodical research and analysis of the objectives.

Embarking on a Joint Venture can stand for a significant reconstruction to your business. However favorable it may be to your potential for enlargement, it needs to fit with your overall business strategy.

It’s important to review your business plan before committing to a joint venture. This should help you define what you can sensibly expect. In fact, you might make a decision there are better ways to attain your business aims.

You may also want to study what alike businesses are doing, particular those that operate in similar markets to yours. Seeing how they use joint ventures could help you decide on the best approach for your business at the same time, you could try to recognize the skills they use to partner successfully.

You can advantage from studying your own enterprise. Be realistic about your strengths and weaknesses – consider performing strengths, weaknesses, opportunity and threats analysis (swot) to identify whether the two businesses are compatible you will almost certainly want to identify a joint venture partner that complements your own skills and failings.

Remember to consider the employees’ viewpoint and bear in mind that people can feel threatened by a joint venture. It may be difficult to foster effectual working relationships if your partner has a different way of doing business.When embarking on a joint venture it’s very important to have your understanding in writing. You should set out the terms and circumstances agreed upon in a written contract, this will help stop misunderstandings and provide both parties with physically powerful legal recourse in the event the other party fails to fulfill its obligation while under contract.