Information AboutJoint Venture |
| CATEGORIES ABOUT JOINT VENTURE | |
| business law | |
| strategic alliance | |
| joint ventures | |
| types of companies | |
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Organizations can also form joint ventures, for example, a child welfare organization in the Midwest initiated a joint venture whose mission is to develop and service client tracking software for human service organizations. 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. The phrase generally refers to the ''purpose'' of the entity and not to a type of entity. Therefore, a joint venture may be a Corporation , Limited Liability Company , Partnership or other legal structure, depending on a number of considerations such as Tax and Tort liability. WHEN ARE JOINT VENTURES USED? Joint ventures are common in the oil and gas industry, and are often cooperations between a local and foreign company (about 3/4 are international). A joint venture is often seen as a very viable business alternative in this sector, as the companies can complement their skill sets while it offers the foreign company a geographic presence. Studies show a failure rate of 30-61%, and that 60% failed to start or faded away within 5 years. (Osborn, 2003) It is also known that joint ventures in low-developed countries show a greater instability, and that JVs involving government partners have higher incidence of failure (private firms seem to be better equipped to supply key skills, marketing networks etc.) Furthermore, JVs have shown to fail miserably under highly volatile demand and rapid changes in product technology. Some countries, such as the People's Republic Of China and to some extent India , require foreign companies to form joint ventures with domestic firms in order to enter a market. This requirement often forces technology transfers and managerial control to the domestic partner. Majority of joint ventures fail in Asia due to cultural differences, as was the case with the alliance between Renault , a French car company, and Nissan. Joint ventures fail due to various reasons, including the lack of communication and the distribution of power between management. REASONS FOR FORMING A JOINT VENTURE Internal reasons #Build on company's strengths #Spreading costs and risks #Improving access to financial resources # Economies Of Scale and advantages of size #Access to new technologies and customers #Access to innovative managerial practices Competitive goals #Influencing structural evolution of the industry #Pre-empting competition #Defensive response to blurring industry boundaries #Creation of stronger competitive units #Speed to market #Improved agility Strategic goals #Synergies #Transfer of technology/skills #Diversification EXAMPLES
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