Joint Venture

What is a Joint Venture?

A Joint venture is when two or more companies or organizations come together to work on a specific project or goal, pooling their resources and expertise. They are formed specifically for well-defined expectations or milestones while retaining their separate identities.

Key Features of Joint Ventures

Shared control: Joint ventures require an understanding regarding ownership of the new business or business project. This involves each partner contributing resources in one form or another, say, through money, tangibles, work, or skills.

Explicit goal: The broad objective market penetration, market expansion or product diversification masticate a joint venture.

Legal formation: The legal forms of a joint venture can include, but are not limited to, partnership, corporation, and limited liability company or LLC, depending on the objectives of the partners.

Control and governance: Joint ventures provide for shared control in respect of the way a business is run and with respect to the decisions to be taken such as the allocation of losses and profits.

Purposes for Establishing a Joint Venture

Expansion in International Markets: A joint venture is quite often viewed as an alternative for entering into overseas markets. It is easier to get into a foreign market through a local partner who comprehends the necessary regulation.

Joint Costing: Companies can cut costs and improve efficiency through resource sharing. One firm may have the technology and the other the distribution network.

Risk Sharing: Joint ventures offer a means of spreading the risks of major investments, more so in capital intensive industries.

Focus in Particular Area: Joint ventures make it possible for firms to combine their strengths in areas that are specialized and probably, exclusive for the firms thereby making the venture stronger.