WHAT IS JOINT VENTURE/ FEATURES / TYPES | CLOUD DOWN TO EARTH
What Is a Joint Venture (JV)?
A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity..
In a joint venture (JV), each of the participants is responsible for profits, losses, and costs associated with it. However, the venture is its own entity, separate from the participants' other business interests.
Examples
- Maruti Ltd. Company of India and Suzuki Ltd. Of Japan got into a joint venture to introduce Maruti Suzuki India Ltd. in the Indian market.
- Another is between an Indian company Mahindra Renault Ltd. and Bharti AXA General Insurance, where two completely different companies are working together.
- Between Idea and Vodafone mobile network companies to enhance their mobile network services
- Another famous example of a joint venture between Tata Global Beverages and Starbucks corporation. Both companies came together to set up TATA Starbucks private Limited outlets in India.
- It is between Google company and NASA to develop Google Earth.
Features of Joint Venture
#1. Agreement between the parties involved:
When two or more companies come together, they sign an agreement. In that agreement, they mention to undertake a business together and also define the purpose of the business and declare to bound by it in every situation.
The agreement is an important feature of a joint venture. Without a proper agreement, a joint venture can be considered invalid and might cause problems later.
#2. Companies create synergy in Joint Venture:
Companies involved in a joint venture have different qualities. There are certain qualities that one company has, and others do not, and vice versa. When these companies involve in a business venture, they share the special characteristics possessed by them with each other.
In this way, they create synergies for better results. By making the use of qualities of one another, both companies take advantages of the joint venture.
#3. Shared profit and loss:
Another important feature of the joint venture is the sharing of profit and losses incurred. No business endeavor is free of risks. The risks involved become more when you want to enter a new market.
By getting into a joint venture, you can effectively deal with diversified culture, geographical differences, and increase profit generation and in this way, minimize the risk of loss.
#4. Shared control:
Along with the shared profit and loss, you also share control over the business. You mutually control all-important business endeavors, operations, and other administrative tasks.
#5. Shared Expertise and resources:
When two or more companies involved in a joint venture. They also share their resources, such as technology, capital, and staff. By sharing expertise and resources, innovation becomes possible.
#6. Limited duration of joint venture:
Unlike a business partnership, joint ventures take place for a limited period. Two companies come together for a specific purpose, and once that purpose is fulfilled, the companies can call-off their venture, or they can get into a longer partnership if both companies agree.
#7. Use of advanced technology in Joint Venture:
When two or more companies get into a joint venture. They also share their resources, such as techniques of productions and strategies of doing marketing. Advanced technologies can be used by companies to benefit their business and to create new products.
In this way, the overall cost of the business reduces, innovation happens, and profits increases.
#8. No special firm name:
As joint venture is temporary, there is no need to give a special name to the firm. Both companies can use the brand names that they already have to get into a joint venture.
#Types of joint venture
There are different types of joint ventures. How you set up a joint venture depends on what your business is trying to achieve. The most common types of joint venture are:
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