A joint venture is the long-term commitment of funds, facilities and services by two or more
legally separate interests, to a combined enterprise for their mutual benefits.
A joint venture need not be a separate legal entity or company. Other forms of joint ventures include an agreement to work together formalized through the Heads of Agreement or a Strategic Cooperation Agreement.
A Manufacturing Joint Venture
Joint ventures are most commonly entered into to get around a trade barrier that is preventing your entry into a target market. Another way of circumnavigating a trade barrier is to establish a wholly owned manufacturing or assembly subsidiary in an overseas market; however, many companies find the joint venture route a better option. A joint venture achieves many of the advantages of a fully owned operation, without the long lead-time and at a fraction of the cost.
[...] If the partnership is Successfully established, it will provide: Shared financial commitment Shared risk Growth Mutual learning & professional development Increased research capacity Widening markets / programs / opportunities The Disadvantages of a Joint Venture Potentially high capital cost plus ongoing financial support is required Profitable returns may take some time to achieve High level of commitment of staff and management Time consuming (especially where a new venture is involved) Potential for conflict with your joint venture partner Cultural differences and communications difficulties A minority equity position may work against you Difficult to get out of quickly Working in a different legal and commercial system Political risks in the country where the joint venture is based Bajaj auto plans JV in Indonesia Bajaj has set up a joint venture in Indonesia with PT Abdi Raharja to expand its presence in south-east Asia. [...]
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