Joint ventures

The joint venture is a relationship that is very important to establish a relationship with the other party. Besides, business arrangement in which two or more parties agrees to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it. However, the venture is its own entity, separate and apart from the participants' other business interests.

Although JVs represent a great way to pool capital and expertise and reduce the exposure of risk to all involved, they do present some unique challenges as well. For instance, if party A comes up with an idea that allows the JV to flourish, what cut of the profits does party A get? Does the party simply receive a cut based on the original investment pool or is there recognition of the party's contribution above and beyond the initial stake? For this and other reasons, it is estimated that nearly half of all JVs last less than four years and end in animosity.

Joint venture an enterprise entered into by two or more people for profit, for a limited purpose, such as purchase, improvement and sale or leasing of real estate. A joint venture has most of the elements of a partnership such as shared management, the power of each venturer to bind the others in the business, division of profits, and joint responsibility for losses. However, unlike a partnership, a joint venture anticipates a specific area of activity and period of operation, so after the purpose is completed, bills are paid, profits (or losses) are divided, and the joint venture is terminated

The advantages when use the joint venture is:

A joint venture involves a potentially long term investment of funds, facilities and resources by two or more companies to a combined venture, which benefits all companies. All involved will have an equity stake in the new venture.  A joint venture may be formed to:

·         run production facilities in another country

·         establish a marketing and distribution presence

·         Use complementary technologies held by each participant.

The disadvantages when use the joint venture is:

It takes time and effort to build the right relationship and partnering with another business can

Be challenging. Problems are likely to arise if:

·         The objectives of the venture are not 100 per cent clear and communicated to everyone

                Involved.

·          There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners.

·         Different cultures and management styles result in poor integration and co-operation.

·         The partners don't provide enough leadership and support in the early stages.

·         Success in a joint venture depends on thorough research and analysis of the objectives.