How a joint venture agreement can foster company growth

How a joint venture agreement can foster company growth

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Joint ventures can be beneficial to companies looking to expand to brand-new markets and territories. Continue reading to learn more.

Company expansion is an ambitious goal that any entrepreneur thinks about at some point throughout their professional career, however, it can be a very demanding and costly process. It is for these reasons that some businessmen go with joint ventures when trying to get into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the opportunities of success as partners pool their resources and connections in an effort to increase effectiveness. For example, a business wishing to broaden its distribution to new markets and areas can take advantage of partnering with local players. By doing this, it can benefit from an already existing regional distribution network, not to mention having access to understanding and expertise on the target audience. Beyond this, guidelines in particular jurisdictions restrict access to foreign companies, implying that a JV arrangement with a regional entity would be the only method to gain admittance.

For years, joint ventures in international business have culminated in mutually advantageous outcomes, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are numerous reasons businesses go into joint ventures but perhaps the most important of which is to leverage resources and access competence that one business may be missing. For example, one business might have outstanding marketing and distribution channels however does not have a streamlined production hub. By partnering with a business that has a reputable manufacturing process, both entities benefit significantly. Another reason JVs are popular is the truth that businesses share expenses and risks when embarking on a joint venture. This makes the collaboration more enticing as both parties would share the cost of labour and advertising, and they both benefit from lower production expenses per unit by leveraging their abilities and integrating expertise.

There's a here long list of joint ventures that spans various sectors and businesses around the world, some of which have actually culminated in the creation of the world's most successful businesses. That said, there are various types of joint ventures and picking the ideal 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 combines two entities from various backgrounds to reach a shared goal. This could be a JV in between a commercial entity and a university or short-term collaboration between a business owner and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are likewise another popular vehicle for growth as these combine two entities that co-exist in the same supply chain like buyers and vendors, and they offer increased growth opportunities for both parties involved.

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