How a joint venture agreement can promote company growth

How a joint venture agreement can promote company growth

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Joint ventures can be beneficial to businesses looking to broaden to brand-new markets and areas. Continue reading to learn more.

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For years, joint ventures in international business have culminated in mutually helpful outcomes, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are lots of reasons companies go into joint ventures but perhaps the most crucial of which is to leverage resources and gain access to competence that one company may be missing out on. For instance, one business might have outstanding marketing and distribution channels however does not have a streamlined manufacturing center. By partnering with a business that has a reputable production process, both entities benefit considerably. Another reason why JVs are popular is the reality that companies share expenses and risks when embarking on a joint venture. This makes the partnership more appealing as both parties would share the expense of labour and advertising, and they both take advantage of lower production costs per unit by leveraging their abilities and integrating expertise.

Business growth is an ambitious goal that any entrepreneur thinks about at some point during their professional career, nevertheless, it can be a very stressful and pricey procedure. It is for these factors that some businessmen go with joint ventures when trying to break into brand-new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the possibilities of success as partners pool their resources and connections in an effort to maximise efficiency. For instance, a business wanting to expand its distribution to new markets and territories can gain from partnering with local players. This way, it can gain from an already existing regional distribution network, not to mention having access to knowledge and expertise on the target audience. Beyond this, regulations in certain jurisdictions limit access to foreign businesses, implying that a JV contract with a regional entity would be the only method to gain admittance.

There's a long list of joint ventures that covers various sectors and companies across the globe, some of which have actually culminated in the development of the world's most successful businesses. That stated, there are various types of joint ventures and selecting the best one greatly depends upon the objectives of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a kind of partnership that brings together 2 entities from different backgrounds to reach a shared objective. This could be a JV between an industrial entity and a university or short-term collaboration between an entrepreneur and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for expansion as these bring together 2 entities that co-exist in the same supply chain like buyers and vendors, and they provide increased development chances for both parties.

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