Just how a joint venture agreement can promote business development

Just how a joint venture agreement can promote business development

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Joint ventures can be beneficial to companies seeking to broaden to new markets and areas. Carry on reading to learn more.

There's a long list of joint ventures that covers various sectors and businesses across the globe, some of which have actually culminated here in the development of the world's most successful businesses. That said, there are different types of joint ventures and choosing the best one greatly depends on the objectives of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a type of collaboration that unites 2 entities from various backgrounds to reach a common goal. This could be a JV between a commercial entity and a university or short-term partnership in between a businessman and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular means for expansion as these bring together 2 entities that co-exist in the exact same supply chain like buyers and vendors, and they provide increased growth opportunities for both parties involved.

For decades, joint ventures in international business have culminated in mutually advantageous results, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are numerous reasons businesses enter joint ventures however possibly the most essential of which is to take advantage of resources and gain access to competence that one business might be missing. For example, one business might have excellent marketing and distribution channels but does not have a structured manufacturing hub. By partnering with a company that has a well-established manufacturing process, both entities benefit significantly. Another reason why JVs are popular is the truth that businesses share expenses and risks when embarking on a joint venture. This makes the collaboration more enticing as both parties would share the expense of labour and marketing, and they both gain from lower production costs per unit by leveraging their abilities and combining knowledge.

Company growth is an ambitious objective that any business owner considers at some point throughout their professional career, nevertheless, it can be a very difficult and costly procedure. It is for these reasons that some businessmen choose joint ventures when trying to get into brand-new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the opportunities of success as partners pool their resources and connections in an drive to maximise efficiency. For example, a company wishing to expand its distribution to brand-new markets and areas can take advantage of partnering with regional players. This way, it can gain from an already existing local distribution network, not to mention having access to understanding and know-how on the target audience. Beyond this, guidelines in certain jurisdictions limit access to foreign companies, indicating that a JV contract with a regional entity would be the only method to gain access.

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