Strategic Joint Venture
What Is a Strategic Joint Venture?
A strategic joint venture is a business agreement between two companies that pursue the active choice to cooperate, with a collective aim of achieving a specific set of objectives and expanding each company's main concern.
Through this arrangement, the companies successfully supplement each other's assets, while compensating for each other's shortcomings. The two companies share in the returns of the joint venture, while similarly engrossing the potential risks implied. Strategic joint ventures might be viewed as strategic alliances, however the last option could possibly involve a binding legal agreement, while the former does.
In contrast to mergers and acquisitions, strategic joint ventures don't be guaranteed to must be permanent partnerships. Besides, the two companies keep up with their independence and hold their ways of life as individual companies, subsequently permitting every one to seek after business models outside the partnership command.
Figuring out Strategic Joint Ventures
There is a huge number of motivations behind why two companies could decide to go into a strategic joint venture. For one's purposes, strategic joint ventures let companies seek after bigger opportunities than they could endeavor independently. For instance, such partnerships let companies lay out a presence in a foreign country or gain competitive advantages in a specific market.
To refer to a more specific model, strategic joint ventures have assisted many companies with entering emerging markets that would be generally challenging to break into, without the benefit of nearby intelligence and associations with on-the-ground agents in the region.
In such arrangements, one company normally offers more to the operational costs, while the other company contributes ability and operational experience. The share of the venture owned by each company generally relies upon their individual contributions. Yet, the best strategic joint ventures are those where each establishing member firm breezes up with an equivalent stake.
Strategic joint ventures may likewise assist companies with achieving greater efficiencies of scale by consolidating assets and operations. They additionally may assist companies with accessing unique skills and capacities that they would some way or another not be able to foster themselves. Joint ventures likewise let the companies implied alleviate the risks for investments or projects, while assisting every one gain with accessing to the next's technology, increase incomes, extend their customer bases, and augment product distribution channels.
Strategic Joint Venture Structure
While strategic joint ventures can take various designs, most are officially incorporated. Such partnerships exist as their own legal elements, in that they operate autonomously of the establishing member companies.
A few strategic joint ventures are structured to break up when a project is completed or an objective is met. All strategic joint ventures have separate liability from their establishing member companies and can be sued — or bring litigation against another party.
Features
- A strategic joint venture is a business agreement that is actively connected by two companies that go with a deliberate choice to cooperate to accomplish a specific set of objectives.
- Joint ventures have assisted various companies with achieving access to emerging markets that they would somehow or another experience issues breaking into.
- Joint ventures are instrumental in assisting companies with laying out a presence in a foreign country or gain a competitive advantage in a specific market,
