While the World Trade Organization may eventually forbid mandatory JVs, many companies new to a foreign market find they need partners who know the cultural and political terrain. Some emerging market countries require that foreign companies set up JVs as a way of creating employment, training and technology transfers. In the event the partners fail to win the contract, they might still pursue other projects together. Companies involved in infrastructure projects often set up a JV before bidding on a contract, so they can market the venture’s collective strengths. Or you might form a JV to conduct research and development to reach the prototype stage. You might have a prototype for a product already but can’t afford to hire the technical experts needed to refine it. Which comes first: the opportunity to expand, or the JV that will make it possible? The situation varies. If both JV partners are not deeply committed to the joint operation, it is unlikely to succeed.There are risks of failure because of compatibility problems and liability for partners' mistakes.Entering a JV requires the diversion of resources from one's present business.JV partners get access to each other's technology and resources.Venture partners can learn about and adopt each other's best practices.Resources from multiple companies can accomplish goals and objectives more quickly and effectively than resources from one.

Joint ventures make it possible for independent small companies to participate in large projects.The return on both venture partners' investments is expected to be greater than the return they would get independently.Factors to consider as you define your role.12.)Īs with any partnership - whether temporary or long-term - such factors as compatibility and mutual trust can make or break the deal. In the fourth quarter alone, joint ventures across the globe realized a combined value of $779 billion.” (“M&As Reach New Heights,” Internal Auditor, April 2000, p. According to Thomson Financial Securities Data, “The 31,528 worldwide joint ventures in 1999 were valued at $3.4 trillion. Many expanding businesses have found that pooling resources with one or more partners to create a JV is an excellent way to minimize risk while helping each partner boost both expertise and revenues.

Your best friend at a time like this may actually be a competitor - or at least, a company in a related line of business, such as a supplier. Unlike a merger, however, a JV is temporary and is often dissolved or sold on completion of the project that brought the partners together. A joint venture (JV) is an incorporated entity, in which each participating company is responsible for the entity's actions and debts. Joint ventures are a popular way to share the costs of expanding into new territory. But they need a whopping investment for that kind of expansion, and there is no guarantee the investment will pay off.

Washington State Department of CommerceĮntrepreneurs at the expansion stage typically face a dilemma: To distinguish themselves from their competitors, they must add a new product or service, a new market, or a contract twice the size of anything they've done before.

Michigan Economic Development Corporation.

Shared venture definition