What is a Joint Venture?

It is a faced paced business world today. Things are changing rapidly making things different every time. Businesses are constantly updating their processes and systems in order to differentiate themselves and to remain at the top.

Joint venture is one such business arrangement in which two partners come together to share their expertise and resources for a limited period. Both the partners contribute assets and equity and exercise control, and then they also share revenues and expenses of the running business.

Joint ventures can be used by businesses of any size for collaboration on short term and long term projects. It helps in business expansion in terms of products as well as geographic territory. Increase in productivity and profits come along this way. Businesses can easily access new markets and distribution channels with the help of local joint venture partners. The production capacity is also increased this way. The joint venture partner is a party to the risks, costs and returns from the business.

Joint ventures are considered as an important growth strategy that does not require borrowing additional finances. Instead the partner comes with his/her own finances or other assets. Usually, joint venture partners come together with their strengths, so both businesses benefit from this sort of arrangement. For example, a joint venture can be established between two firms where one firm has an extensive customer database. This database is used by another firm to market its products and consequently, the second company can offer the first firm’s products or services to its own customers.

Similarly, competencies in engineering, distribution, research and development, logistics, computer technology, etc can be shared in a joint venture. The best thing about joint venture is its flexible nature. When two companies come together in a joint venture, they usually specify a period for their business arrangement. In addition, the work span of the joint venture is determined before the agreement. Therefore, the partners might continue with their core operations separately, and have separate joint venture operations.

Joint ventures can prove to be complex business arrangements. This happens when the objectives, goals as well as scope of the joint venture is not clear. Being in a joint venture is just like being in a relationship. A lot of time and effort is involved in making things work perfectly. The joint venture partners can face many problems regarding their joint venture relationship.

Both the partners are likely to face problems if the objectives of the joint venture are not clear. Partners are likely to face problems if they have entirely different objectives for the partnership. The differences in management styles and cultures can also have negative impact on the joint venture. Similarly, there is often a race for control amongst the joint venture partners, especially if one of the firms has a stronger base.

Even though joint venture might have a few drawbacks, it is still a very popular mode of doing and expanding business. In fact, for some business situations, it is the most effective way of conducting business.

This can also go for your marketing business online. There are multiple opportunities for joint ventures and expanding your business on the internet. If you have never looked into this subject and how it can help your business, it is recommended that you do so.