What is Joint venture ?

• Its a type of business combination

• Companies enter into an agreement to provide resources towards
achievement of a particular objective
• Joint venture refers to joint equity ownership in a venture where
partners bring complementary resources
• A joint venture may be organized as a partnership, a corporation, or
any other form of business organisation.
 Need for joint venture
• To diversify risk
• To obtain distribution channels or raw materials supply
• To overcome insufficient financial or technical ability to enter a
particular line of business
• To achieve economies of scale
• To share technology and management skills in organisations
 Advantages
• Profit at low cost
• Flexible nature
• Start up push
• Share cost, expenses, benefit and risk
• Learning ground
• Enter into new markets
 Disadvantage
• Flexibility is restricted
• Assets and claim
• Equal involvement is impossible
• Rapport information
• Differences in the cultures and management styles
 Success factors in Joint venture
• Good communication, cooperation and coordination
• Common goals and shared vision among partners
• Dedication towards the success and long term sustainability
• Proper sharing of profits and benefits among partners
• Joint venture work towards the benefit of all partners
• Proper planning and research prior to the incorporation
 Factors hindering the success of joint venture
• Lack of understanding between the partners
• Lack of motivation and patience among partners
• Benefits lower than expectations
• Operational difficulties due to geographical location of partners
• Difference and conflicts between partners on various issues
• Incompatibility of the culture and management styles of the partner
Difference Between Strategic Alliance and
Joint Venture
Joint Venture
• Joint venture refers to form of business
organization set up by two or more
companies
• Joint venture do not continue to operate
as independent companies
• Contract exist
• Form of strategic alliance
• There is a separate legal entity
• The objective is risk limitation
Strategic Alliance
• Strategic alliance implies an agreement
admist two or more entities to work
jointly with one another
• Strategic alliance continue to operate as
independent
• companies May or may not exist
• Collaboration or corporate partnering
• There is no separate legal entity
• The objective is reward maximization