JOINT VENTURES

In today’s world, many projects are too large for any one company to undertake as it may involve huge financial commitments. Joint ventures between corporations are a fact of modern business. Some Joint ventures are no more than fleeting encounters lasting only as long as it takes one partner to establish a presence in a new market while others are a prelude to a merger of the technologies and capabilities of two companies. Whatever may be the duration or the objectives of various Joint ventures, being a good partner has become an important asset for any corporation.In pursuit of profitable growth, many companies are forming joint ventures, often in collaborations with the cross border partners. An alternative to a traditional merger or acquisition, a cross border joint venture has much to offer. This is particularly relevant in the global context where the ability to create and sustain collaborations is vital in companies obtaining a significant competitive advantage. But getting it right is as challenging as or even more challenging than managing a successful merger. It could result in to legal conflicts in the future if things start getting wrong.

But the advantages of having a joint venture are worth this risk. Joint ventures specially cross border type Provide companies with the opportunity to gain new capacity and expertise. It even Allow companies to enter related businesses or new geographic markets or gain new technological knowledge, access to greater resources, including specialised staff.

sharing of risks with a venture partner

Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business' exposure.

In the era of divestiture and consolidation, JV’s offer a creative way for companies to exit from non-core businesses.

Companies can gradually separate a business from the rest of the organisation, and eventually, sell it to the other parent company. Roughly 80% of all joint ventures end in a sale by one partner to the other.

The Disadvantages of Joint Ventures

It takes time and effort to build the right relationship and partnering with another business can be challenging. Problems are likely to arise if:

The objectives of the venture are not 100 per cent clear and communicated to everyone involved.

There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners.

Different cultures and management styles result in poor integration and co-operation.

The partners don't provide enough leadership and support in the early stages.

Success in a joint venture depends on thorough research and analysis of the objectives.

Advantages of joint ventures

Joint ventures enable companies to share technology and complementary IP assets for the production and delivery of innovative goods and services.

For the smaller organization with insufficient finance and/or specialist management skills, the joint venture can prove an effective method of obtaining the necessary resources to enter a new market. This can be especially true in attractive markets, where local contacts, access to distribution, and political requirements may make a joint venture the preferred or even legally required solution.

Joint ventures can be used to reduce political friction and improve local/national acceptability of the company.

Joint ventures may provide specialist knowledge of local markets, entry to required channels of distribution, and access to supplies of raw materials, government contracts and local production facilities.

In a growing number of countries, joint ventures with host governments have become increasingly important. These may be formed directly with State-owned enterprises or directed toward national champions.

There has been growth in the creation of temporary consortium companies and alliances, to undertake particular projects that are considered to be too large for individual companies to handle alone (e.g. major defence initiatives, civil engineering projects, new global technological ventures).

Exchange controls may prevent a company from exporting capital and thus make the funding of new overseas subsidiaries difficult. The supply of know-how may therefore be used to enable a company to obtain an equity stake in a joint venture, where the local partner may have access to the required funds.

Disadvantages of joint ventures A major problem is that joint ventures are very difficult to integrate into a global strategy

that involves substantial cross-border trading. In such circumstances, there are almost inevitably problems concerning inward and outward transfer pricing and the sourcing of exports, in particular, in favour of wholly owned subsidiaries in other countries.

The trend toward an integrated system of global cash management, via a central treasury, may lead to conflict between partners when the corporate headquarters endeavours to impose limits or even guidelines on cash and working capital usage, foreign exchange management, and the amount and means of paying remittable profits.

Another serious problem occurs when the objectives of the partners are, or become, incompatible. For example, the multinational enterprise may have a very different attitude to risk than its local partner, and may be prepared to accept short-term losses in order to build market share, to take on higher levels of debt, or to spend more on advertising. Similarly, the objectives of the participants may well change over time, especially when wholly owned subsidiary alternatives may occur for the multinational enterprise with access to the joint venture market.

Problems occur with regard to management structures and staffing of joint ventures. Many joint ventures fail because of a conflict in tax interests between the partners.

Caterpillar and Daimler/Chrysler ... and the reason for the failure ...Tom Hasslet

successful its nokiasiemens and virgin and tata tele servicesand unsuccessful is philips and lucent technologiesnot so successful i don't have answer for this

There are several successful joint ventures in place of companies in the US and Mexico as a result of the NAFTA agreement.

The venture partners include Tech Mahrinda and WiPro Technologies.

The hookup with Tech Mahindra will be called Canvas M and will focus on developing a variety of mobile IT solutions, including end-user applications, content services and frameworks for delivery and management.

The companies said in a release that Canvas M would be "a vehicle for delivering an evolving portfolio of content-based services."

The venture with the IT services arm of WiPro Ltd. will be known as WMNetServ and will provide outsourced telecom services to public and private network operators.

"Wipro has a proven track record in delivering managed services and complements Motorola's expertise in mobility," said Motorola Vice President Srikanth Kannankote. "The combined strength of Wipro and Motorola gives WMNetServ a significant competitive advantage in managed services.

 Joint Venture between Nilpeter and Proteck Machine :

        By introducing the latest auxiliaries like rotary screen,  cold foil and hot foil stamping which increases supporting capacity,  Nilpeter is entering a joint venture with its sales and service  partner Proteck Machinery. Currently Proteck offers sales and  technical support services for Nilpeter in India. Nilpeter is a  strongly established firm in US and Danish manufacturing units. Their  objective is to manufacture flexo servo presses in India which  resembles the Nilpeter FB-line machine’s design.The joint venture  manufacturing announcement follows the first Indian installation of a  Nilpeter FB3300 Servo press at Adjanta Packaging Daman Plant.

Joint Venture between Vornado and Reliance Industries Limited :

      Vornado and Reliance Industries will commit up to $250 million  each to the venture inorder to penetrate deeper into the retail  shopping market in key cities in India. Paramus based Vornado Realty  Trust has got lot of confidence in Reliance marketing strategy as  currently Reliance operates over 700 retail stores in multiple formats  in India.

  Joint Venture between Virgin Group and Tata Tele Services :

      Virgin has partnered with Tata Telecom services in India  keeping its rates for out going calls in line with those of  competitors.The new mobile operator is the “first nation-wide youth  focused mobile service” and the “first CDMA service where all  customers will be on RUIM (SIM)-based phones.”.

Joint Venture between Tyson Foods and Godrej Agrovet :

      Tyson Foods, Inc in an effort in the direction of extending  their company’s international presence has purchased 51% ownership of  Godrej Foods, Ltd., based in Mumbai. This joint venture between Godrej  Agrovet and Tyson will be called Godrej Tyson Foods.Their objective is  to expand the capacity of the poultry plants which are already in  operation.

Joint Venture between Marks & Spencer and Reliance Retail of India :

      In a view of establishing the British food to clothes retailer  as a major retailer brand, above mentioned firms have entered a joint  venture and formed M&S Reliance India. Each partner would initially  invest up to 29 million pounds in this Venture.

  Joint Venture between Malvern Instruments and Aimil in India:

      Malvern Instruments which is a leading materials  characterization company and Aimil which is Malvern’s long-term  distribution partner in India have entered a joint venture that  resulted in the establishment of Malvern Aimil Instruments which  

started its operation on May 1, 2008. Malvern Instruments provides a  wide  range of complementary materials characterization tools that  deliver inter-related measurements reflecting the complexities of  particulates and disperse systems, nanomaterials and macromolecules.

Joint Venture between Volvo and India’s Eicher :

      AB Volvo, Swedish truck maker has invested about $312 million  which resulted in a joint venture with Indian Vehicle manufacturer  Eicher Motors named VE Commercial Vehicles Ltd.This venture involves  entire truck and bus operations of both Volvo and Eicher.For the first  fiscal year ended March 31, they have earned a profit of $22.9 million .

  Joint Venture between Germany’s ERGO Insurance Group and India’s  HERO Group :

      These both firms have come together to form a joint venture  which is an Indian life insurance company named HERO ERGO Life  Insurance Company Ltd. ERGO International AG will take a 26% share in  HERO ERGO Life Insurance Company Ltd, which is the maximum permissible  limit under the existing guidelines for the insurance sector in India.