Just how a joint venture agreement can cultivate company growth
Just how a joint venture agreement can cultivate company growth
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Understanding when to start a joint venture and who to do it with is crucial. More about this below.
There's a long list of joint ventures that spans different sectors and businesses across the globe, a few of which have actually culminated in the creation of the world's most prosperous businesses. That stated, there are different types of joint ventures and selecting the right one greatly depends upon the goals of the entities involved and the nature of their respective organisations. For instance, project-based joint ventures are a type of collaboration that brings together two entities from various backgrounds to reach a common objective. This could be a JV in 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 vehicle for growth as these bring together two entities that co-exist in the very same supply chain like buyers and suppliers, and they provide increased growth chances for both parties.
For decades, joint ventures in international business have culminated in equally advantageous outcomes, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons why businesses go into joint ventures however perhaps the most essential of which is to leverage resources and access competence that one company may be missing out on. For example, one business might have exceptional marketing and distribution channels however does not have a structured manufacturing center. By partnering with a business that has a well-established manufacturing process, both entities benefit greatly. Another reason JVs are popular is the fact that businesses share costs and risks when embarking on a joint venture. This makes the collaboration more attractive as both parties would share the cost of labour and advertising, and they both take advantage of lower production expenses per unit by leveraging their capabilities and integrating knowledge.
Company growth is an auspicious objective that any entrepreneur considers at some point during their career, nevertheless, it can be a really difficult and expensive process. It is for these reasons that some entrepreneurs go with joint ventures when attempting to break into brand-new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the chances of success as partners pool their resources and connections in an attempt to maximise efficiency. For example, a business wishing to expand its distribution to brand-new markets and areas can take advantage of partnering with regional players. This way, it can get more info gain from a currently existing regional distribution network, not to mention having access to knowledge and proficiency on the target market. Beyond this, guidelines in particular jurisdictions limit access to foreign companies, suggesting that a JV contract with a local entity would be the only method to gain admittance.
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