Question

Please identify the key motives for international joint ventures. Write and Explain and Elaborate in depth

Answer 1

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A joint venture is termed as a enterprise formed mutually between two or more parties and the main purpose of the formation of this type of shared business ownership is to capture a share in the market and to grow the business in the international market. This type of business entity comes into existence in order to share profit and loss as well as their resources and technology to attain the desired goal within the specified period of time. However both of the companies doesn’t transfer their ownership rights to each other.

A joint venture is very important in international operations as it is termed as the finest ways to enter international markets and it also helps the parties (partners) to modify their marketing techniques enabling them to work on the established market trends and taste. This helps the organization to maintain a share in the market and also gives the competitive edge.

The key motives of international joint ventures are:-

• It enables the parties/partners to share their resources and technology which results in cost-cutting and minimal wastage of the resources.
• The work is divided between the partners which enable the partners to share their work pressure/work-load.
• Helps the partners to formulate major strategies to carry out day-day business operations.
• Results in cutting the competition in the market.
• Enables the organisation to finish the desired objective within the specified period of time as timely completed business operations are the key to a successful business.
• Sharing financial investments results in minimising the load on the partners in terms of funds/money.
• Allows the business entity to share risks as well as the losses incurred by the business dealings/operations.
• Enables the senior authorities of the organization to form various departments for every segment of their offerings which helps them to make the process less complex.
• Sharing the resources makes it easier for the partners of the enterprise to make higher investments Internationally in order to capture a foreign market.

• Starting a business in an international market/foreign market requires a lot of legal formalities, paperwork and a higher amount of taxes. However, In a joint venture government allows tax exemptions which are enjoyed by both of the parties or partners.
• Legal formalities are shared by the business entity i.e. the partners which is less time-consuming and ensures efficiency.

The three main features of a joint venture are:-

• Strengthening Trust.

Trust is the basic feature to make a business successful as it creates a bond between the parties which may take the business to new heights and helps in maintaining harmony between the workforce in the organisation ensuring longevity.

• Effective Regular monitoring.

Regular monitoring of the business environment, as well as the financial transactions of the organisation on a regular basis, enables the parties/partners to minimise the threat of conflict within the organisation.

• Knows when to formulate and close a plan/strategy.

A business can only sustain only when the partners know when to create or formulate a strategy and if it doesn’t work then when and how to dissolve it. And this is a very crucial factor when it comes to a mutual agreement between 2 parties to share their business activities i.e. joint venture.

Examples of some of the successful joint ventures are BMW TOYOTA and BMW DAIMLER etc.