Joint Ventures: When to Make a Good Strategic Alliance
When two partners with equity make a business agreement to develop a new entity by combining their assets, it’s called a joint venture. Joint ventures can be developed for an agreed-upon finite time frame. This article discusses when to form a joint venture and more. Sometimes they last for 5-7 years. Usually they are not a partnership or incorporation, and they see their enterprise as being able to make money for both parties. As an online magazine article on About Money called “Joint Venture 101,” details, the logic of a joint venture borrows from the idea that, “two heads are better than one.” The article, written by Scott Allen, indicated that the term strategic alliance is used synonymously to describe a joint venture. It indicates that these connections can strengthen the reach of both sides and increase their presence in the global market. Joint ventures often help bring new products to the market, raise awareness of a brand or launch a new service.
What Ideas/Tasks Can Be Brought Together
Assets that each party brings to the table could include technology, distribution channels and intellectual property; such as copyrights, trademarks and patents. The parties of the venture also share knowledge and profits.
A Good Match
An article on joint ventures on the site uslegal.com explores certain parties who might not be compatible for a joint venture. They include companies with very different corporate cultures, companies where one party had considerably more assets than the other, and companies with different philosophies and ideologies about how the venture will be run or how the projects(s) will be managed.
A 1000ventures.com online article indicated that among international joint ventures poor integration was cited by CEOs as 46% responsible for the joint venture failure. As the article explained, cultural differences was cited as the cause for many of the failures and poor or unclear leadership also came in as a major problem.
Handling Conflict over Decision-making
Other problems cited included the following: conflict over the decision-making delegation, disagreement over operating strategies, tactics and policies, and differences in the management style and systems approach.
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