In addition to its strategic relevance, the purpose of the joint venture must be precisely determined before the new structure is formed, so that each partner shares the same interpretation of the issues at stake. Management must emphasise clear delineation of common issues and mutual obligations. What are the crucial factors for a good project implementation?
If, in the course of the process, it turns out that this original view is no longer shared by all partners, the efforts and energy mobilised would have been in vain. However, this form of cooperation has its limits and disadvantages.Ĭompanies must be able to establish a well-defined management roadmap and, above all, to maintain it over the duration of the contract.Ī merger between several companies with potentially different corporate cultures carries a risk of divergence in strategic vision, and may hinder the achievement of the desired benefits. The companies sign a partnership agreement while maintaining a certain independence which they can fully return to once the objectives of pooling resources are considered to have been achieved.įrom a strictly financial point of view, the union of several companies allows, in theory to generate economies of scale and synergies from combining production facilities, and thus reduce costs that could have been prohibitive if they had been incurred by a single company.įinally, the risks can thus be diluted for a substantial expected return on investment in the long term.
#ADVANTAGES OF JOINT VENTURE REGISTRATION#
It is an agreement that can take different forms, in particular the joint venture does not require the registration of a new company. What are the advantages and disadvantages of a Joint Venture? The advantages of the Joint Venture are primarily its legal flexibility. For example, regulatory obstacles that complicate access to certain markets. The effect of size may also come into play: some markets will be more accessible to players with a dominant position and enhanced reputations.Īgreements between companies of different nationalities make it possible to remove the obstacles to a new organisation by relying on a local partner. From a commercial point of view, the joint venture can be set up to increase the volume of sales by combining distribution channels. Joint ventures may be motivated by the sharing of or access to strategic resources essential to the continuity of activities, or by the merging of production sites. It may involve pooling technological expertise or patents, with a view to creating a new innovative product, or offering a new service if the companies operate in the same sector. In practice, these synergies can be of various kinds. The search for synergies is one of the main motivations for joint ventures.
When and why should you choose a joint venture? This pooling covers a more or less long-term horizon and is based on an agreement concerning the purpose and the resources committed, which may be formalised by a contract, without necessarily giving rise to the creation of a new legal entity. What you need to know - expert insights from Nord France InvestĪ Joint Venture is an association between two or more companies with a common goal to optimise strategic expertise, skills and resources.
#ADVANTAGES OF JOINT VENTURE HOW TO#
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