Let‘s start from the fundamental question, as to, what is joint venture? and, what the joint venture definition is.
A Joint Venture is a strategic business association or partnership, for the specified period of time, generally between two parties or companies, for achieving certain common objectives and synergic advantages, in order to prosper undaunted amidst intense national or international business competition. In a joint venture, both the parties contribute to the necessary assets, resources, experience and expertise, etc., and share the involved risks, expenses, responsibilities, and profits, in the agreed proportion. Majority of the joint ventures are structured as Limited Liability Companies (LLCs), in order to harvest the outstanding benefits of limited liability. Some famous examples of joint ventures are - Sony Ericsson, Dow Corning, Penske Truck Leasing, MillerCoors, etc.
The joint ventures are quite prominent and popular form of business structuring, for fulfilling some common objectives for survival, progress, and desired business expansion. Large business corporations popularly use this method for diversification of their products or services. Today, joint ventures are preferred forms for foreign direct investments in any targeted country, in the desired field of business or profession.
As a joint venture is a strategic business alliance for a finite period of time, it can be confined to any areas or activities of a business for mutual benefits, namely, production, industrial infrastructure, packaging, distribution, marketing, advertisement, customer care, and so on. Any of these specific objectives, a joint venture can be erected, with any national or international company. Hence, the joint ventures can broadly be classified into the following categories:
Though joint ventures are popular and successful business arrangements, not all joint ventures succeed in meeting their objectives or the requirements of stability and progress. Reports point out that only 40% of joint ventures actually survive and achieve their goals. Reasons for both these contrasting facts are made conspicuous through the following Pros and Cons of the joint venture form of business: