Just how a joint venture agreement can foster company growth

Just how a joint venture agreement can foster company growth

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Joint ventures can be beneficial to companies aiming to expand to new markets and areas. Continue reading for more information.

There's a long list of joint ventures that covers different sectors and businesses around the world, a few of which have culminated in the development of the world's most prosperous businesses. That said, there are different types of joint ventures and picking the right one significantly depends upon the goals of the entities involved and the nature of their respective organisations. For instance, project-based joint ventures are a kind of partnership that combines two entities from various backgrounds to reach a shared objective. This could be a JV in between a commercial entity and an academic institution or short-term collaboration in 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 growth as these combine 2 entities that co-exist in the same supply chain like buyers and wholesellers, and they offer increased development chances for both parties involved.

Company growth is an ambitious objective that any business owner thinks about at some point during their career, nevertheless, it can be an extremely stressful and pricey procedure. It is for these reasons that some entrepreneurs go with joint ventures when attempting to get into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the possibilities of success as partners pool their resources and connections in an effort to maximise performance. For example, a company wishing to expand its distribution to brand-new markets and territories can benefit from partnering with regional players. By doing this, it can take advantage of an already existing regional distribution website network, not to mention having access to understanding and know-how on the target market. Beyond this, policies in certain jurisdictions restrict access to foreign companies, implying that a JV arrangement with a local entity would be the only way to gain access.

For decades, joint ventures in international business have actually culminated in mutually beneficial outcomes, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are many reasons why businesses enter joint ventures however potentially the most important of which is to leverage resources and gain access to know-how that one company may be missing out on. For instance, one business may have exceptional marketing and circulation channels however does not have a streamlined production hub. By partnering with a business that has a well-established production process, both entities benefit considerably. Another reason why JVs are popular is the fact that businesses share costs and risks when starting a joint venture. This makes the collaboration more appealing 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 integrating knowledge.

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