What is a Joint Venture? What are the advantages and disadvantages?

Whether you own a small business or a multi-million dollar business, there are huge potentials to consider pursuing a joint venture.

So let's go together lamchutaichinh.vn Explore the Joint Venture aka What is Joint Venture?? The benefits that this type of business relationship brings to your company.

What is a Joint Venture?

Joint Venture is a voluntary partnership between two or more independent domestic, foreign or government companies. By jointly contributing capital, sharing resources to jointly establish, develop business projects and distribute profits as agreed, joint ventures bring optimal efficiency in business development.

Joint Venture is considered an extremely good business strategy for companies or corporations that need capital to invest but cannot afford to do it alone, can cooperate with each other for common purposes.

In addition to capital, Joint Venture also allows the two sides to access each other's resources, science and technology, and resources to create favorable conditions for successful business.

For example, some joint venture companies in Vietnam and abroad such as:

Honda Vietnam company.
Canon Vietnam Company.
Cuu Long JOC Joint Venture Company was established by PVEP Oil and Gas Exploration and Production Corporation (50%), ConocoPhillips Petroleum Company (UK), Korea Petroleum Corporation, SK Company and several other companies.
The joint venture Bayernoil Refinery Raffineriegesellschaft mbH in Germany includes 3 member groups: Eni (20%), Varo Energy (51.34%) and Rosneft (28.57%).

These are good examples of the success of joint ventures, where these companies share resources that save millions of dollars but still bring in huge profits.

Features of Joint Venture

The highlight of the form of joint venture is the cooperation and capital contribution for production and business investment. The rate of capital contribution is an important factor that determines the level of participation in enterprise management as well as the rate of profit to be enjoyed and the risks that the parties must bear.

The joint venture will be able to reduce risks and bring about great resources, which creates favorable conditions for the parties to maximize resources and maximize profits.

Assess the advantages and disadvantages of joint ventures

The following lamchutaichinh.vn will mention the advantages and limitations of the Joint Venture business form for you to have a more detailed look.

Advantage

Here are the advantages that make Joint Venture a business strategy that brings many benefits to businesses as well as contributes to building the country's economy:

Creating conditions for companies or corporations to implement strategic projects even when they do not have enough capital, advanced technology or abundant human resources. Joint Venture helps companies support each other to be able to bring to market the best products and bring the highest profits.
Joint Venture creates opportunities to learn and exchange business experiences. For small and medium-sized companies or new companies entering a new business, this is an advantage not to be missed.
Each project or business activity has potential risks and liabilities, the joint venture between many parties can partly share these burdens.
Joint ventures create opportunities for companies to expand their markets and reach many potential customers from many different business fields. Especially, stepping into competition in foreign markets is an extremely difficult process that not all companies have the potential to carry out, joint ventures with foreign companies create a foundation to help for businesses to access the market in a more favorable way.
Improve competitiveness, directing to other partners' products.

Limit

Although there are many advantages, but Joint Venture still has the following limitations:

For small companies with a low percentage of capital contribution, it is almost impossible to decide in the business process. In other cases, for joint ventures with a capital contribution ratio of 50:50, it is easy to lead to disputes over ownership as well as the right to make decisions affecting the business process.
Disputes can arise when there is no consensus on investments and profits. Poor relationship management between parties can cause tensions and conflicts in the joint venture process.
When one party to the joint venture is the local government, loss of control over the joint venture is possible for industries considered to be sensitive such as cultural communication, security and defense infrastructure, etc.
Language barriers, time zone differences, uneven quality of workers, differences in cultures and ways of thinking are also barriers that are detrimental to business operations.
For small companies with no experience with Joint Venture can also face the risk of being scammed by ghost companies.

Popular forms of Joint Venture

Join Venture ahead

Forward integration joint venture is also known in English as Forward integration joint venture.

This is a form in which the parties agree to invest together in the production of output products for the supply chain.

In it, a company will go further in the direction of controlling the distribution of its product or service by entering into joint ventures with companies that have been suppliers or customers to ensure control over channels. distribution.

Join Venture behind

Backward integration joint venture is a form of joint venture against the supply chain. Simply put, to ensure the supply of raw materials, companies enter into joint ventures with companies that produce or supply raw materials and services needed for production.

From there, businesses can save costs, increase revenue and improve production efficiency. Moreover, backward integration is also a way to create competitive advantages and barriers to entry for new entrants in the industry.

Joint Venture (Joint Venture) acquisition

Buyback joint venture is a form of joint venture between companies to provide input resources to carry out the production process to create outputs for the next production process. of the parties.

This form is often used when companies do not have enough production scale for the supply chain, scaling cooperation helps build a base to serve demand and enjoy the advantages of scale.

Multi-stage Joint Venture

Multistage joint venture is a combination of downstream integration partners and upstream integration partners. This business form ensures the input and output for each partner's business process, contributing to increasing business efficiency.

Benefits of an Effective Joint Venture Strategy

An effective joint venture strategy will bring unexpected benefits to the development of the business. A joint venture is an opportunity for growth and experience for newcomers to the industry, and an opportunity to establish a position in the market for both established and emerging companies.

To optimize the advantages, a smart business strategy is a prerequisite. An effective strategy will allow all parties to correctly see the joint venture goals as well as the responsibilities and risks along the way. At the same time, clearly identifying the roles and powers of each party also helps to avoid unnecessary conflicts.

Should I do a joint venture?

Although Joint Venture brings great benefits to the development of a business, it does not mean that if a business wants to grow, it must be a joint venture.

Depending on the industry, long-term business orientation and resources of the company, it is possible to decide whether to implement a joint venture strategy or not.

Any business strategy must be effective to be truly meaningful.

Therefore, before starting a joint venture strategy, businesses need to determine the goals, organization, scope and influence of the joint venture on the company's business activities to avoid significant losses. regret.

Distinguish joint venture company and company with 100% foreign capital

To create an effective business plan, you first need to understand the nature of each business form. A lot of people confuse a joint venture company with a 100% foreign owned company. Here, let lamchutaichinh.vn distinguish the difference between the two forms of companies above.

What is a Joint Venture?

A joint venture company is an independent company established by different companies and corporations on a voluntary and equal basis to conduct business activities in order to bring the highest benefits to the parties.

The joint venture agreement will describe the purpose and establish the parameters of the participation and responsibilities of each party before commencing the joint venture. This will include details of profit, loss, allocation of ownership, discretion, renewal or termination terms.

Companies with 100% foreign capital

This is a company with 100% foreign investment capital and wholly owned by foreign investors built in Vietnam. Foreign investors representing the company bear full legal responsibility in accordance with Vietnamese law and international treaties recognized by Vietnam.

A company with 100% foreign capital will have full control over its business activities and business results by foreign-invested organizations or individuals.

Conclude

Above are detailed information to help you understand Joint Venture The benefits and risks that it brings to the development of the business. Hopefully lamchutaichinh.vn has given you a useful hint to develop your business to achieve maximum profit.

Information edited by Lamchutaichinh.vn