Bba Eim Group No 2

ACCESING RESOURCES FOR GROWTH
FROM EXTERNAL SOURCES

• Joint Venture
JOINT VENTURE
• A joint venture is a collaborative arrangement between two or more

individuals or organizations. Studies have shown that in developing
countries joint venture investments have been more successful than foreign
investments(Beamish 1988).A joint venture is the most popular form of
entry because of the benefits it brings to the host country through
technology transfer, job creation and capital inflow (Sormarajah, 1992).
EXAMPLE OF A JOINT VENTURE
Tanzania Railway Corporation and Rail India Technical and

Economic Service joined to form a new company named
Tanzania Railways Limited (TRL) of which Government of
Tanzania owned 49% shares and RITES of India owned 51%
shares (Sumatra, 2011).
TYPES OF JOINT VENTURES
• Between Private-sector companies.
• Industry-University Agreements.
• International Joint Venture
BETWEEN PRIVATE-SECTOR COMPANIES
• This is the most common type of joint venture which is between two or
more private sector companies. Example is Boeing, Mitsubishi, Fuji and
Kawasaki entered into a joint venture for the production of small aircrafts
to share technology and cut costs. The main objective of this type of joint
venture is entering new or foreign markets, raising capital and cooperative
research.
INDUSTRY-UNIVERSITY AGREEMENTS
This type of joint venture is created for the purpose of doing research. A
profit corporation has the objective of obtaining tangible results, such as
patent from its research investments and wants all proprietary rights.
Universities wants to share in the possible financial returns from the patent,
but the university researchers want to make the knowledge available through
research papers in spite of these problems many industry-university teams
have been established.
INTERNATIONAL JOINT VENTURE
This type of venture is rapidly increasing in number due to their relative advantage. This
venture is formed by different firms that exists from different geographical location. Not
only both companies share in the earnings and growth, but the joint venture can have a low
cash requirements if the knowledge or patents are capitalized as a contribution to the
venture. Also the joint venture provides ready access to the new international markets that
otherwise may or be easily attained. Example TOYOTA and FORD in 2011 entered into an
agreement to create HYRID trucks.
FACTORS IN JOINT VENTURE SUCCESS
• The accurate assessment of the parties
Assessment of the parties involved in order to best manage the new entity in light of ensuing
relationships and growth of a venture. The joint venture will be more effective if the managers can
work well together choosing the best management style. Without this chemistry, the joint venture has
a low likelihood of success and may even fail.
• The degree of symmetry between the partners.
This symmetry goes beyond chemistry to objectives and resource capabilities. When one partner feels
that he or she is bringing more to the table, or when one partner wants profits and other desires
product outlet problems arise. For a joint venture to be successful, the managers in each parent
company, as well as those in the new entity, must concur on the objectives of the joint venture and the
level of resources that will be provided.
• The timing must be right
With environments constantly changing, industrial conditions being modified. And markets
evolving a particular joint venture could be a success one year and a failure next. Intense
competition leads to a hostile environment and increases the risks of establishing a joint
venture. Some environments are just not conducive to success. An entrepreneur must
determine whether the joint venture will offer opportunities for growth or will penalize the
company, for example by preventing it from entering certain markets.
ADVANTAGES OF JOINT VENTURES.
• Increase of profits.
By entering into a joint venture with a larger company with more financial resources, in which
small business can expand more quickly, also the larger company extensive distribution channels
may also provide a small with larger and more diversification revenue streams. Also partners
agreed to share the profit and take the burden of loss incurred.
• Minimization of costs.
Since companies Can jointly invest in takeover of a price assets and subsequently benefit from its
joint use, so they share investment burden, reduce the lead time to build the assets from scratch
and possibly prevent from falling into competitors hands.
• Expansion of markets
Expansion can be within the country or international, in which expansion occur due to
sharing of technologies between companies, sharing of different ideas and sharing of goals
and objectives, this may influence the expansion of market.
DISADVANTAGES OF JOINT VENTURES
• It limits other outside activities.

When agencies come together to form a joint venture then one of the stipulation that govern the arrangement
involves future outside activities, it is quite common for these contacts to restrict any other outside effort
from participant companies while this agreement remain active, this means that a new business opportunity
that comes up while working in adventure would need to be set aside or ignored and that could a costly
decision to make.
• Different culture and management styles
Different companies have their own unique managerial styles that they implement. When these two cultures
are at odds with each other, then it can result in poor integration of the joint venture arrangement and also it
can lead to poor performance of desired achieved goals.
• Level of expertise and investment is not equally matched.
If one agency has more expertise, investment or assets than other party it may lead to
imbalance of which bring an impact on relationship because the return are not equal to the
work put into efforts.

Bba Eim Group No 2

Uploaded by

Copyright:

Available Formats

Bba Eim Group No 2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bba Eim Group No 2

Uploaded by

Copyright:

Available Formats

ACCESING RESOURCES FOR GROWTH

FROM EXTERNAL SOURCES

• A joint venture is a collaborative arrangement between two or more

Tanzania Railway Corporation and Rail India Technical and

• The accurate assessment of the parties

• It limits other outside activities.

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.