The value of joint venture companies in business

The value of joint venture companies in business

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Understanding when to embark on a joint venture and who to do it with is important. More about this below.

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Company expansion is an ambitious goal that any business owner considers at some point during their professional career, nevertheless, it can be a really demanding and expensive procedure. It is for these reasons that some businessmen go with 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 possibilities of success as partners pool their resources and connections in an effort to increase performance. For instance, a company wishing to expand its distribution to brand-new markets and areas can gain from partnering with local players. This way, it can take advantage of a currently existing regional distribution network, not to mention having access to understanding and know-how on the target market. Beyond this, regulations in specific jurisdictions restrict access to foreign businesses, meaning that a JV agreement with a regional entity would be the only way to gain admittance.

For decades, joint ventures in international business have actually culminated in mutually advantageous outcomes, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are numerous reasons why businesses go into joint ventures however potentially the most essential of which is to leverage resources and access expertise that one company might be missing. For example, one company may have exceptional marketing and distribution channels however lacks a streamlined manufacturing hub. By partnering with a company that has a well-established production process, both entities benefit significantly. Another reason JVs are popular is the truth that businesses share expenses and risks when embarking on a joint venture. This makes the collaboration more enticing as both entities would share the cost of labour and advertising, and they both gain from lower production costs per unit by leveraging their abilities and combining knowledge.

There's a long list of joint ventures that spans different sectors and companies across the globe, some of which have culminated in the creation of the world's most successful companies. That said, there are different types of joint ventures and picking the best one greatly depends on the goals of the entities involved and the nature of their respective organisations. For instance, project-based joint ventures are a type of partnership that unites 2 entities from various backgrounds to reach a common goal. This could be a JV in between an industrial entity and a university or short-term collaboration in between a business person and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are likewise another popular vehicle for expansion as these bring together 2 entities that co-exist in the same supply chain like buyers and vendors, and they offer increased development chances for both parties.

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