Generally, a joint venture arises when two or more companies or firms agree to establish a common enterprise or business-related activity in which they intend to participate jointly.
Joint ventures are an important strategic option for many businesses, particularly those operating internationally. Reasons for setting up a joint venture vary but some of the common rationales are:
- cost savings
- risk sharing
- access to technology
- expansion of customer base
- entry into emerging economies
There are downsides to joint ventures and many fail due to inherent problems in the form of the co-operation they require. Some of these problems are:
- Sharing management
- differences in culture
- usurping of skills, technology, etc.
- different commercial objectives
- management control
- management time
- lengthy costs and negotiations
You can learn a lot more about joint ventures by reading the more detailed ‘Joint Ventures Advice’ PDF