International Joint ventures between companies of developing countries and international organizations offer significant benefits as both domestic as well as international firms tend to benefit from comparative advantage of each other. International joint ventures are often made…
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ventures are often formed between two entities to achieve certain economic objective and after achievement of such objectives they are often liquidated. Joint ventures are common in different industries and are formed for different purposes as all the parties to the Joint venture contribute one way or another for the purpose of achieving the objective. Joint ventures are therefore important in the sense that their formation allows companies to utilize each other’s strengths in achieving the desired strategic objectives.
There are various benefits that organizations can derive from join ventures including sharing of technology and R&D facilities, developing new markets and sharing of risks spread over different markets as well as the expansion into new markets. However, despite the fact that international joint ventures offer such benefits but their failure ratio is significantly larger because most major international joint ventures failed to perform.
This paper will discuss different reasons as to why international joint ventures are formed and potential benefits they provide to respective organizations by citing example from different business sectors where International joint ventures have actually been formed.
“In general, a joint venture (“JV”) is an association of two or more entities (whether corporate, government, individual or otherwise) combining property and expertise to carry out a single business enterprise and having a joint proprietary interest, a joint right to control and a sharing of profits and losses. “(Vaughan, 2009).
The above definition indicates that a joint venture can be formed between different entities regardless of their legal status by taking benefit from each other’s expertise and property to perform a single business objective. However, all the entities in the joint venture also settle for gaining joint right to control the venture as well as share profits and losses arising out of taking that business activity.
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ursue a specific objective in which they share revenues, expenses, assets, and management roles. International Joint Ventures (IJVs) involve individuals, companies, or firms from different countries forming a partnership. Globalisation has resulted in the need for collaboration of companies of different countries hence the emergence of multinational companies.
A well clarified objective of purpose will place the International Joint Venture (IJV) in a powerful position. This will result to an efficient management structure that is characterized with accountability, responsibility, employees and organization structure modelling in the partner’s level.
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