When thinking of growing and expanding your business there is often a over looked strategy that most business owners and companies are missing to add to their company growth plans. A joint venture, or abbreviated as JV and sometimes called joint adventure, is a tactical union flanked by two or more parties to embark on a financial activity together. This alliance agrees to create a new entity together by both contributing equity and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship such as Nestle and Coco Cola embarked on which has just come to an end after many years.
Organisations can also form joint ventures, for example, a child welfare organisation in recent news initiated a joint venture with a tech company, whose mission is to develop and service client tracking software for human service organisations. The five partners all sit on the joint venture corporation’s board, and together have been able to provide the community with a much-needed resource.
So when your thinking about your joint venture proposal and who with think on a broader scale instead of a small and local one.
Joint ventures are more common than you know
Joint ventures are more common in the oil and gas industry, and often are dealt within corporations on the national and local levels. A joint venture have always been seen as something good in this kind of business industry and a very good alternative in this sector as local companies can complement their skills and technology sets while it offers the foreign company a geographical presence.
There are many good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources, such as distribution channels, technology, or finance, joint ventures are becoming an increasingly common way for companies to form strategic alliances. There are so many reasons why companies form joint ventures, listed below are some of them.
Spreading of your cost
One of the most common internal reasons why most companies join joint ventures is the spreading of cost and risks, sometimes companies who are into new projects look for another company who is willing to undertake the same project with them. This way, companies are able to spread out the cost and the risk of failing.
It improves your financial access and resources
Joint venture is also a good way to improve your financial access or resources, for example your company can make a deal with non-profit organisations who can be exempted from taxes, so that your project will have lesser cost and much more financial gaining. You can also be partners with a bank or other companies that has a much higher earning power than your own company.
These are just a few ideas and not a financial guide that should be followed strictly. You would need to do your own research and sourcing for the right JV partners.
Larger potential for economic scale and growth
Economic scale is also one good advantage of having a joint venture, when you have a small company but have a very broad idea or have something new that will surely attract large mass of sales, and your company cannot afford to stabilise such a project you can look for a company who is larger when it comes to economic scale. Being partners with other companies and joining in a joint venture also gives you access to new technologies and customers. It also gives you the much coveted access to innovative managerial practices.
This can be seen when it comes to the new trend called Social Influencers. This new title has been given for those of us who have a knack for growing social followings. The recent trends in this market and industry, because it has grown that big it has developed it’s own category of the market. You can tell it’s new when writing the word INFLUENCER it automatically has a red line under it.
The reason for this is that people are still not sure if it’s a fad or something that will last the test of time. In my opinion I think it has the potential to stick it out if maximised wisely and put to great use in your business.
Joint ventures can also influence structural evolution
Joining a joint venture can also influence structural evolution of the industry. It is also a good way or pre-empting competition, like if you have a competitor and your on the same financial field and he has good strategies that work as well as yours, forming a good joint venture with this company can boom into a much bigger company, meaning bigger sales and more money. Joint venture is also a good response to blurring industry boundaries. Joining two companies can also lead to a creation of stronger competitive units. Joint ventures can speed up market and improve agility of the company when it comes to business terms.
If your company see’s and likes what other companies are doing and would like to adopt it on a much more legal way, joint venture is good way to do this that will better both parties involved. Joint ventures help transfer technology of one company to the other. If your company would also like to transfer skills from other companies you can also look into joint ventures.
Diversification is also a great reason why some company goes into joint ventures, this helps them stabilise their company growth and also make them available to different forms and types of business industry. Other countries may require foreign companies to form a joint venture with their local firms in order to enter a certain market. This requirement often forces technology transfer and managerial control to the domestic partner of the joint venture.
What ever road you go down make sure you do all the right checks before going ahead and once that’s all done here’s to your new found Joint Venture (JV) partner and to your success.
Thank you so much for taking out the time to read my latest article. I hope it truly helped you in some way. If you loved what you just read your more than welcome to take a look at other articles of mine here on LinkedIn.
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Much Love and To Your Success and happiness XO.
Named Top Global Marketing Expert by Huffington post and She Inspires Her. Rachael Aprill Phillips is the CEO and Founder of Rachael Academy.The online platforms that helps entrepreneurs and small business owners to launch, run and grow highly successful businesses.Your also more than welcome to send me a message