Joint Venture Essay

Published: 2020-04-22 15:25:15
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Joint Venture is a basically a mutual agreement between two companies or more to work together towards achieving a common aim, which is usually economic progress. To attain this goal, the members of the joint venture invest expertise, capital, time and equity to form a separate entity. The terms and conditions of the joint venture are bound by an agreement. One of the reasons behind joint ventures is to spread and share risks as well as expenses.

For example, when an organization in one country wants to expand its business in another country, it signs up a joint venture with a local company in that country to gain regional expertise and marketing trends. This would give a company a competitive edge in reaching the market quicker than its competitors. It would also lend strategic advantages like diversification of knowledge, manpower and technologies.

For instance, companies in the oil and gas industry sector usually enter into such agreements in foreign countries to market, distribute and sell their product. A joint venture can be an ideal solution in cases when two companies need each others expertise. In some cases, a joint venture can help bring companies dealing with products and services that compliment each other. For, instance Hardware company and Software company can enter into a joint venture to innovate a new product.

Sony Ericsson is a good example of this kind of a joint venture (Joint Venture, 2006). But, in recent times, limited liability company (LLC) is being preferred over joint venture as a business ownership model in America, mainly due to the lower tax deduction. Moreover, LLC s almost offer all the features offered by a Joint venture.

Reference: Wikipedia. (2006, July). Joint Venture. Retrieved 2006, July 30, from http://en. wikipedia. org/wiki/Joint_Venture.

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