International Markets:

Market Entry Strategies:

Joint Venture

Both partners in a JV have some common goals such as

  • Introducing a new product in a new market,
  • Risk sharing,
  • Sharing of technology
  • Manufacturing if new product
  • Following JV rules and regulations of host country

Joint Ventures bring many other benefits such as help in increasing political connections and improving one’s distribution channel.

Advantages of Joint Venture:

JV is often a very attractive option under following circumstances. 

  • When goals of both the partners converge without being competitive to each other
  • When resources, size of market, and size of both partners are smaller than leading players in the market
  • When both partners are able to leverage each other’s strengths in the most effective manner

Most important areas in a JV are holding of each partner, nature of control, agreement period, easy transfer of technology, ability of local partner to cobble together efficient infrastructure, etc.

Disadvantages of Joint Venture:

Despite being a very good model of business, there are certain drawbacks.

  • Disputes over new investments by both partners
  • Distrust over local partner regarding use of proprietary knowledge
  • Incomplete support from the foreign partner
  • Ego problems and political clashes

There are always pressures on both the local and foreign partner in a JV to continue or end a JV when it approaches its completion. Also, the junior partner always feels like competing with the senior partner.

While both partners strive hard to make the JV a success, they also work to strengthen their respective positions. Though both are required to share resources, they try to save resources as far as possible. JV succeeds through a series of coordination and negotiation endeavors. It is seen that both partners try to gain an upper hand in these exercises.

Joint Venturehttps://i1.wp.com/www.capitalbudgetingtechniques.com/wp-content/uploads/2015/09/International-Business-Joint-Venture.jpg?fit=322%2C307https://i1.wp.com/www.capitalbudgetingtechniques.com/wp-content/uploads/2015/09/International-Business-Joint-Venture.jpg?resize=125%2C125AdminCapital Budgeting Techniques International Markets: Market Entry Strategies: Joint Venture Both partners in a JV have some common goals such as Introducing a new product in a new market, Risk sharing, Sharing of technology Manufacturing if new product Following JV rules and regulations of host country Joint Ventures bring many other benefits such as help in increasing political connections and improving...Investment analysis basics