Joint Venture

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 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.

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