How a joint venture agreement can promote company growth

How a joint venture agreement can promote company growth

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

For decades, joint ventures in international business have actually culminated in equally beneficial results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons why companies enter joint ventures but possibly the most essential of which is to leverage resources and gain access to competence that one company might be missing. For example, one company might have excellent marketing and circulation channels but lacks a streamlined production hub. By partnering with a company that has a reputable production process, both entities benefit significantly. Another reason why JVs are popular is the reality that businesses share expenses and risks when starting a joint venture. This makes the collaboration more appealing as both entities would share the cost of labour and marketing, and they both take advantage of lower production costs per unit by leveraging their abilities and combining knowledge.

There's a long list of joint ventures that covers various sectors and businesses across the globe, some of which have actually culminated in the development of the world's most successful . businesses. That stated, there are various types of joint ventures and choosing the best one considerably depends upon the objectives of the entities involved and the nature of their respective organisations. For instance, project-based joint ventures are a kind of partnership that combines 2 entities from different backgrounds to reach a shared goal. This could be a JV between a commercial entity and a university or short-term partnership between a business person and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular means for expansion as these combine 2 entities that co-exist in the exact same supply chain like buyers and suppliers, and they offer increased growth chances for both parties.

Company expansion is an ambitious objective that any entrepreneur considers at some time during their career, however, it can be an extremely stressful and expensive process. It is for these reasons that some business people choose joint ventures when attempting to get into brand-new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can considerably increase the opportunities of success as partners pool their resources and connections in an drive to increase efficiency. For example, a business wanting to expand its distribution to brand-new markets and areas can take advantage of partnering with local businesses. By doing this, it can benefit from an already existing regional distribution network, not to mention having access to knowledge and expertise on the target audience. Beyond this, guidelines in particular jurisdictions limit access to foreign businesses, suggesting that a JV contract with a local entity would be the only way to gain access.

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