It is a constant; uncertainties will always lie ahead. With COVID, the year was full of sadness, financial troubles, and a lack of medical resources; we do not know what the future will hold. But it does tell us one thing: opportunities await us.
Let us look at it this way. We did not know that remote working would be this successful. Furthermore, we did not realize the true extent of eCommerce in business. But we pulled off both those endeavors with excellence. The statistics show the same. Similar is the case for joint ventures. Of course, concerned parties must take innovative and strategic steps to maintain a steady relationship with all of them. But before we finalize joint venture partnerships, let us look at probable unknowns.
What is a Joint Venture?
JV is a strategic partnership with two or more parties who provide capital goods and services through a mutually controlled commercial project. However, there will always be uncertainties, like COVID-19, that can cause JVs to have severe issues. A JV can be a single recipe for disaster, from concurring losses to decision-making deadlocks.
Joint Ventures vs. Partnerships
At a glance, a joint venture seems like a partnership. But, legally, both those entities are quite different. Using the strategic alliance concept, there is no ownership exchange between the involved parties. The ideal difference between a partnership and a joint venture is that the parties involved in a JV have joined hands for a particular project. On the other hand, the partnership members work together to achieve business success. Furthermore, each joint venture member retains ownership of their part of the property. Moreover, each member shares the expenses of a particular project or venture.
New Market Penetration
Want to know the best part of Joint Ventures? A joint venture enables companies to access a new market almost immediately. A joint venture can be quite fruitful even with the relevant regulations and organization. Companies present at one location with those present at the other. Since they want to gain access to the marketplace currently in their counterpart’s place by fostering a joint venture to expand their product portfolio and market size, they will perform exceptionally well in the grandest stage.
Intellectual Property Gains
With technology at the pinnacle of its power, it is difficult for businesses to create operations in-house. To counteract such concerns, companies often join hands with technology-driven organizations, which can provide them with innovation, which is expensive to acquire for themselves. A large-scale organization with suitable financing and working capital can strengthen a joint venture with an organization with promise but lacking the required funding.
What to Consider Before Finalizing a Joint Venture?
- Due diligence: First and foremost, you need due diligence with a potential partner to ensure the business performs well. Before you enter into an agreement with another company for a JV, you must investigate your potential member(s) credentials, such as resource availability, property, and human capital.
- Financials: Let us be honest; what is more critical than financials? If your potential members do not have the financials to perform business-level operations, they are just a liability. Of course, in an ideal scenario, everything would be 50/50. However, that is not always true. Sometimes, joint ventures can become one-sided, and everything could end up in a rut.
- Cultural considerations: Businesses operate differently in different conditions. If any business is entering into a JV with a partner in any other region, they must understand how they work. From cultural differences to each party’s satisfaction within a JV, there are elements to ponder.
To Sum It Up
Nobody can be sure if we look at the uncertainties that lie in each new year. But one thing is certain. Joint ventures can still work. You must be strategically and operationally sound to excel within a JV. Also, do not forget to consider the abovementioned considerations before joining other businesses.
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