BE- Joint ventures

8/7/2019 BE- Joint ventures

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ADVANTAGESADVANTAGES

&&DISADVANTAGESDISADVANTAGES

OFOFJOINT VENTURESJOINT VENTURES

NAME:NAME:- - MEHBOOB MANDAL,MEHBOOB MANDAL,STD:STD:- - F.Y.B.M.S,F.Y.B.M.S,ROLL.NO:ROLL.NO:- - SS--136 ,136 ,SUB:SUB:- - BUSINESS ENVIRONMENT.BUSINESS ENVIRONMENT.



THE JOINT THE JOINT-- ENTURE ENTURE

CONCEPT CONCEPT DEFINATION: DEFINATION:-- A contractual agreement joining togethe A contractual agreement joining togetheor more parties for the purpose of executing a particor more parties for the purpose of executing a partic

business undertaking. All parties agree to share in thbusiness undertaking. All parties agree to share in th profits and losses of the enterprise. profits and losses of the enterprise.

The term JV refers to the The term JV refers to the purpose purpose of the entity and not to of the entity and not to a

type of entity. Therefore, a joint venture may be a type of entity. Therefore, a joint venture may be a corporation, a limited liability enterprise, a partnershcorporation, a limited liability enterprise, a partnershor other legal structure, depending on a number of or other legal structure, depending on a number of

considerations such as tax and tort considerations such as tax and tort



R EASONS FO R FO RM ING JV: R EASONS FO R FO RM ING JV:R educing 'entry' risks by using the local partner's assR educing 'entry' risks by using the local partner's assI nadequate knowledge of local institutional or legal I nadequate knowledge of local institutional or legal environmen environmen

perception that the goodwill of the local partner is ca perception that the goodwill of the local partner is ca

forward forward I n stratagic sectors, the county's laws may not permiI n stratagic sectors, the county's laws may not permi foreign nationals to operate alone foreign nationals to operate alone Access to local resources through participation of na Access to local resources through participation of na partner partner access by one partner to access by one partner to foreign technology foreign technology or expertise,or expertise, oftea key consideration of local parties a key consideration of local parties

I ncoming foreign exchange and investment.I ncoming foreign exchange and investment.



AD V A NT AG ESAD V A NT AG ES

P rovide companies with the opportunity to gain newP rovide companies with the opportunity to gain newcapacity and expertise.capacity and expertise.

Allow companies to enter related businesses or new Allow companies to enter related businesses or newgeographic markets or gain new technological knowgeographic markets or gain new technological know

Access to greater resources, including specialised s Access to greater resources, including specialised sand technology.and technology.S haring of risks with a venture partner.S haring of risks with a venture partner.



Joint ventures can be flexible. For example, a joint v Joint ventures can be flexible. For example, a joint vcan have a limited life span and only cover part of wcan have a limited life span and only cover part of wyou do, thus limiting both your commitment and theyou do, thus limiting both your commitment and thebusiness' exposure.business' exposure.

I n the era of divestiture and consolidation, JV·s offeI n the era of divestiture and consolidation, JV·s offecreative way for companies to exit from non creative way for companies to exit from non--core core businesses.businesses.

C ompanies can gradually separate a business from thC ompanies can gradually separate a business from threst of the organization, and eventually, sell it to the rest of the organization, and eventually, sell it to the parent company.R oughly 80% of all joint ventures en parent company.R oughly 80% of all joint ventures en

a sale by one partner to the other.a sale by one partner to the other.



D ISD IS -- AD V A NTR AG ESAD V A NTR AG ES

I t takes time and effort to build the right relationshipI t takes time and effort to build the right relationship partnering with another business can be challenging partnering with another business can be challengingP roblems are likely to arise if:P roblems are likely to arise if:The objectives of the venture are not 100 per cent clThe objectives of the venture are not 100 per cent cl

and communicated to everyone involved.and communicated to everyone involved.There is an imbalance in levels of expertise, investmThere is an imbalance in levels of expertise, investmassets brought into the venture by the different partnassets brought into the venture by the different partn



Different cultures and management styles resu Different cultures and management styles resuin poor integration and co in poor integration and co--operation.operation.The partners don't provide enough leadership The partners don't provide enough leadership support in the early stages.support in the early stages.S uccess in a joint venture depends on thorougS uccess in a joint venture depends on thoroug

research and analysis of the objectives.research and analysis of the objectives.

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BE- Joint ventures