Joint Ventures

Meaning

Any business organisation — private, government-owned or global — can join hands with another organisation for mutual benefit. When two businesses agree to come together for a common purpose and mutual benefit, the result is a joint venture.

Key ideas

• Businesses of any size can use joint ventures — to strengthen long-term relationships or to collaborate on short-term projects.
• A joint venture is flexible, shaped by the parties' requirements, which must be clearly stated in a joint venture agreement to avoid later conflict.
• A joint venture may also be an agreement between two businesses in different countries, in which case the provisions laid down by both governments must be followed.
• In a broad sense, a joint venture is the pooling of resources and expertise by two or more businesses to achieve a particular goal, with the risks and rewards shared.
• Common reasons for joint ventures include business expansion, developing new products, or entering new markets — particularly in another country.
• It is increasingly common for companies to form strategic alliances, driven by complementary capabilities and resources such as distribution channels, technology or finance. In such a joint venture, two or more parent companies agree to share capital, technology, human resources, risks and rewards in a new entity under shared control. …