How a joint venture agreement can promote business growth

How a joint venture agreement can promote business growth

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There are different joint venture techniques, each fit for a specific function. Here's all you need to understand.

Business expansion is an ambitious objective that any business owner considers at some time throughout their professional career, however, it can be a really stressful and costly procedure. It is for these reasons that some businessmen go with joint ventures when trying to get into new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can considerably increase the chances of success as partners pool their resources and connections in an drive to increase efficiency. For example, a business wanting to broaden its distribution to new markets and areas can take advantage of partnering with regional players. This way, it can 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 certain jurisdictions restrict access to foreign companies, indicating that a JV contract with a local entity would be the only method to gain admittance.

There's a long list of joint ventures that spans different sectors and businesses across the globe, some of which have culminated in here the creation of the world's most successful companies. That stated, there are different types of joint ventures and selecting the right one greatly depends upon the objectives of the entities involved and the nature of their respective organisations. For example, project-based joint ventures are a kind of collaboration that brings together two entities from different backgrounds to reach a shared objective. This could be a JV between a commercial entity and an academic institution or short-term collaboration between a business owner and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for expansion as these combine two entities that co-exist in the very same supply chain like buyers and wholesellers, and they provide increased development chances for both parties involved.

For years, joint ventures in international business have actually culminated in equally helpful results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are lots of reasons why companies go into joint ventures but possibly the most important of which is to take advantage of resources and access proficiency that one company might be missing. For instance, one company might have excellent marketing and circulation channels however does not have a structured production center. By partnering with a business that has a reputable manufacturing process, both entities benefit greatly. Another reason why JVs are popular is the fact that companies share costs and risks when starting a joint venture. This makes the partnership more enticing as both parties would share the cost of labour and marketing, and they both benefit from lower production costs per unit by leveraging their capabilities and combining expertise.

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