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Associate and Joint Ventures - Essay Example
Joint ventures have become a vital strategic option for many businesses and this fact is mainly due to increased globalization, the increase of modern technology as the means of conducting business, and by far the most important of all improved international travel…
The reason behind this strategic alliance between the companies is not a single one in fact there are many. Companies engage in these activities to benefit more and reduce the risk involved with competition and failure. Here are a few advantages which the companies seek in order to maintain growth and expansion due to a Venture.
By forming a joint venture a company can easily expand their business and could possibly cover more market share in the market. This is because the company has more resources, greater capacity, a better distribution channel
A joint venture also makes a company more flexible because a joint venture are formed for a limited life span and also it only covers part of company's processes, therefore joint ventures limits both the company's commitment and the business' exposure in the existing market.
Since different businesses have different size of business, therefore by forming a joint venture with a small business with a larger business the smaller business is not able to invest or bring in more assets into the venture as compare to the larger business, this results in an imbalance in the joint venture.
A simple and easy to form venture is a partnership. ...