Market Entry Strategies:
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.