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GLOBALISATION Globlisation means linking the economy of a country with the economies of other countries by means of free trade, free mobility of capital and labour, etc. it also means inviting multinational corporations to invest in India. Economic Reforms assume that Indian economy should have close link with the world economy. As a result, there will be unrestricted flow of goods and services, technology and expertise among different countries of the world. These will be creased cooperation of Indian economy with different economies across the world. Capital and technology will flow from the developed countries of the world towards India. 1.1. Effects of Globalization on Indian Economy (1) Increase in Foreign Trade: As a result of foreign trade policies adopted in the wake of globalization, India’s share in the world trade has gone up. In 1990-91, India’s share in world trade was 0.53 per cent. In 1995-96, it rose to 0.60 per cent. In 2005-06 it further increased to 1.0 per cent. (2) Increase in Foreign Investment: As a consequence of globalization, there has been a considerable increase in foreign direct investment as well as foreign portfolio investment.
(a) Foreign Direct Investment (FDI): Foreign Direct Investment is made by foreign
companies in order to establish wholly owned companies in another country and to manage them or to purchase share of companies in another country for the purpose of managing such companies. The main characteristic of foreign direct investment is that native companies are managed by the foreign companies or new companies are set up in India by foreign companies. In this type of investment, it is the foreign investor who takes risk and is solely responsible for profit/loss of such company.
(b) Portfolio Investment: Under this type of investment, foreign companies/foreign
institutional investor (FIIs) buy shares/debentures of native companies, however management and control remain vested with the native companies themselves. There is significant increase in foreign investment in India. In the year 1990-91, total foreign investment (FDI and Portfolio investment) was US$ 103 million. In the year 20052006 amount of foreign investment increase to US$ 20,155 million. Because of
significant increase in foreign investment, India began to experience a surplus balance of payments and very remarkable improvement in foreign exchange reserves. (3) Increase in Foreign Collaboration: Globalization has promoted collaboration of foreign companies with many India companies. These collaboration agreements can be technical collaboration. Financial collaboration or both. In financial collaboration, foreign technology is provided by foreign companies. Foreign companies are setting up many enterprises in India in collaboration with Indian companies. (4) Increase in Foreign Exchange Reserves: As a result of globalization of Indian economy, foreign exchange reserves have also increased substantially. In 1991, foreign exchange reserves of India amounted to Rs.4,388, crore which in 2006-07 increased to Rs.7,96,000 crore (US$ 185.1 billion). Thus, there has been an increase of 181 times in foreign exchange reserves of India. (5) Expansion of Market: Globalization has expanded the size of market. It has permitted Indian business units to expand its business in the whole world. Now multinational corporations have no national boundaries. Indian companies like Infosys. Tata Consultancy, Wipro, Tata Steel etc, doing their business in many countries. (6) Technological Development: Globalisation has enabled the inflow of foreign technology, which is very superior and advance. Now Indian business units use this modern technology. (7) Brand Development: Globalisation has promoted the use of branded goods. Now branded goods are not only durable goods but products of daily use like soap, colddrinks, tooth-paste, garments, food grains, etc., are also branded. Foreign brands are very popular among Indian consumers. Brand-development has led to quality improvement. (9) Development of Service Sector: Globalization has helped in growth of service sector. With the entry of foreign companies, tremendous improvement has been
witnessed in various services like telecommunication, insurance, banking, e.g. now mobile phones are very cheap and popular in India. (10) Increase in Employment: Globalization has promoted employment
opportunities. Foreign companies are establishing their production and trading units in India. It has increased employment opportunities for Indian, e.g. many Indians are presently employed in foreign insurance companies, mobile companies, etc. (11) Reduction in Brain Drain: As a result of globalization, many multinational corporations have set up their business units in India. These MNCs provide attractive salary package and good working conditions to efficient, skilled Indian engineers, managers, professionals, etc. Now Indians get good employment opportunities in India. It has resulted in reduction of brain drain. (12) Improvement in Standard of Living: As a result of globalization, the standard of living of Indian population has improved. Now Indian get better quality goods at low prices. Globalisation has resulted in reduction of prices many products particularly electronic items like television, A.C., mobile phones, refrigerator, etc. now middle-income group also uses these luxury products, why joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship such as the Fuji Xerox joint venture. This is in contrast to a strategic alliance, which involves no equity stake by the participants, and is a much less rigid arrangement.
Joint Venture Joint Venture companies are the most preferred form of corporate entities for Doing Business in India. There are no separate laws for joint ventures in India. The companies incorporated in India, even with up to 100% foreign equity, are treated the same as domestic companies. A Joint Venture may be any of the business entities available in India. A typical Joint Venture is where:
collaborate to jointly carry on the business of that company and its shares are taken by the said third party through payment in cash. and start a new business. your joint venture profits will be taxed just as any other business income would. Promoter shareholder of an existing Indian company and a third party. Tax-wise. So. As a member of a joint venture. if you operate a sole proprietorship. while the members of a partnership have joined together to run "a business in common". Foreign companies are also free to open branch offices in India. (individuals or companies). 4 . 2. you will receive a share of the profits which will be taxed according to whatever business structure you have set up. However.1. one of them non-resident or both residents. there are also differences between joint ventures and partnerships. The other party subscribes for the shares in cash. And each member of the joint venture shares only the expenses of the particular project or venture. who/which may be individual/company. shares are issued by the company and subscribed by that party. for instance. Business of one party is transferred to the company and as consideration for such transfer. The above two parties subscribe to the shares of the joint venture company in agreed proportion. 3. in cash. The liability of the parent company is also greater in case of a branch office. incorporate a company in India. Two parties. Joint Ventures versus Partnerships The main difference between a joint venture and a partnership is that the members of a joint venture have teamed together for a particular purpose or project. Some practical aspects of formation of joint venture companies in India and the prerequisites which the parties should take into account are enumerated herein after. Each member of the joint venture retains ownership of his or her property. a branch of a foreign company attracts a higher rate of tax than a subsidiary or a joint venture company.
joint ventures can help your small business go where it's never been able to go before. A joint 5 . • And be open to being asked. So instead of dismissing an opportunity as out of your reach. And joint ventures don’t have to file information returns. a joint venture idea you haven’t even thought of might pop up . If you need help getting started with this. Joint Venture: Promotion Deal with Partnership Businesses! The more the product or service owner is trusted and considered to be an expert in his or her field. look at the four things a joint venture can do that I've listed at the beginning of this article. Look in the business groups you already belong to. the more the Joint Venture will have the potential to be profitable. unlike partnerships. While those in partnerships have to claim CCA according to partnership rules. Study business listings in the phone book or on Web sites to find those that might share your goals. those in joint ventures can choose to use as much or little of their CCA claim as they like. The key for you here is to create the type of Joint Venture that absolutely no one can say no to.one with a lot of potential. • Then it's time to look for the like-minded . start thinking instead about how you could participate with a joint venture. I strongly recommend hiring a legal professional to do this.Joint ventures enjoy tax advantages over partnerships. • Once you've found the people to share in a joint venture. pick one. and then develop a goal that is as specific as possible. Properly planned and executed.people or firms that might be interested in the same goal or goals you want to pursue. too. How to Get a Joint Venture Started • The first step to creating a joint venture is to set your goals and decide what you want your joint venture to do. Capital Cost Allowance (CCA) is treated differently. both in person and virtually. be sure to have it all put into writing in a joint venture agreement. Once you start talking to other people about what you might do together. Use your social networking connections.
joint venture partners (or alliance partners). The most powerful secret to successful joint ventures is to realize that asking for a joint venture is very similar to "making an offer to a prospect.joint-ventures-secret.joint-venture-guide.com which ratios must be strictly adhered to when apportioning profits both during the venture’s operation and after 6 . for more detail visit www. Joint Venture E-mail Promotions There are many vendors and retail golf shops you work with that own large golfer databases. joint-ventures. newspaper/magazine inserts. for more detail visit www. These involve partnerships. This means that you’ll need to convince potential joint venture partners that a decision to partner with your business will be wise on their part.venture is an agreement in which two or more businesses work on a project for a set period of time. You could joint venture or cross promotion deal with other businesses. Many of the new list-building communities are nothing more than old 'safe list' programs cloaked as Joint Venture communities. You can even form a joint venture to work with someone. websites (with much thought given to key word phrases).com and get articles in rezones. Foreign investors other than Norris were allowed to invest only in development of integrated townships and settlements either through a wholly owned subsidiary or through a joint venture company in India along with a local partner. as well as special commission rate. It is a joint economic venture of twenty one thousand financial institutions. network online. Persuading them and to conclude recruiting them is the hardest part of your job and you have to make sure that your joint venture proposal is convincing and interesting. Finance Manager: An Equity Joint Venture is required to appoint one or more accountants to assist the General Manager with finances. letterbox flyers. the parties are obligated to divide their respective contributions to the joint venture (whether in cash or in kind) into discrete ratios. venture loans or equity. These industries need marketing like direct mail. But to take advantage of a joint venture (JV) you need your own large list already or your very own product which you own outright. Create joint venture partnerships. Show the site owner the benefits of doing a joint venture with you and don't forget to give your partner a copy of your product. In an Equity Joint Venture.
if a foreign partner or an NRI or PIO partner is involved. ”Use this blueprint to create behaviors that lead to activities like more follow up purchases. In other special cases. All the joint ventures in India require governmental approvals. automatic approval is available for 74% foreign equity holdings setting up international trading companies engaged primarily in export activities. a joint venture is covered under automatic route. Greater than 74% of equity and areas outside the high priority list are open to investment. Please see Foreign Investment in India . good planning and foresight to execute. Besides the 37 high priority areas.. Internal joint venture marketing. then the approval of Reserve bank of India is required. Are you ready to start a joint venture? Joint venture marketing is rising in popularity everyday.You probably offer complimentary products within your own business. you need to be mindful of certain things. but it does take some skill. The Government has outlined 37 high priority areas covering most of the industrial sectors. Investment proposals involving up to 74% foreign equity in these areas receive automatic approval within two weeks. Government Approvals for Joint Ventures. not covered under the automatic route. In case.Sector wise Guide for sector wise guidelines under automatic route. but government approval is required. get more done. An application to the Reserve Bank of India is required. increased qualified employment applications. When looking for joint venture partners. You pay your joint venture partner a commission for each sale that is generated from the partnership. a special approval of FIPB is required. The approval can be obtained from either from RBI or FIPB. Approval of foreign equity is not limited to 74% and to high priority industries.liquidation. Full foreign ownership (100% 7 . new joint venture proposals or a big boost in capital contributions. You can construct most joint venture deals with little or no money. and in turn earn more money. For these greater equity investments or for areas of investment outside of high priority an application in the form FC (SIA) has to be filed with the Secretariat for Industrial Approvals. A response is given within 6 weeks. You can make a joint venture (agree to work together). higher contributions levels..
The FIPB is located in the office of the Prime Minister and can provide single-window clearance to proposals in their totality without being restricted by any predetermined parameters.equity) is readily allowed in power generation. steel. Once a partner is selected generally a Memorandum of Understanding or a Letter of Intent is signed by the parties highlighting the basis of the future joint venture agreement. coal washeries. For major investment proposals or for those that do not fit within the existing policy parameters. Negotiations require an understanding of the cultural and legal background of the parties. including exploration. The Government had recently allowed foreign investment up to 51% in mining for commercial purposes and up to 49% in telecommunication sector. The government is also examining a proposal to do away with the stipulation that foreign equity should cover the foreign exchange needs for import of capital goods. In view of the country's improved balance of payments position. The entire hydrocarbon sector. refining and marketing of petroleum products has now been opened to foreign participation. there is the high-powered Foreign Investment Promotion Board ("FIPB"). Before signing the joint venture agreement. coal washeries. and telecommunications. Before signing a Joint Venture Agreement the following must be properly addressed: • • Dispute resolution agreements Applicable law. Export Oriented Unit (EOU) or a unit in one of the Export Processing Zones ("EPZ's"). A Memorandum of Understanding and a Joint Venture Agreement must be signed after consulting lawyers well versed in international laws and multi-jurisdictional laws and procedures. this requirement may be eliminated. 8 . How to Enter into a Joint Venture Agreement? Selection of a good local partner is the key to the success of any joint venture. the terms should be thoroughly discussed and negotiated to avoid any misunderstanding at a later stage. Foreign investment is also welcomed in many of infrastructure areas such as power. producing. luxury railways. electronics.
to negotiations to drafting agreements to compliance programs. INTERNATIONAL JOINT VENTURES TYPES OF BUSINESS ARRANGEMENTS 9 . CEO/MD Management Committee Important decisions with consent of partners Dividend policy Funding Access. Drafting International Joint Venture Agreements Madaan & Co.• • • • • • • • • • • • • • • • • • Force Majeure Holding shares Transfer of shares Board of Directors General meeting. Negotiating Joint Ventures properly is very important for a win-win Joint Venture. We can help you in setting up your Joint Venture: from entry strategies. has helped US companies & Foreign companies in setting up their Joint Venture operations in India and other countries. Break of deadlock Termination. Business Joint Ventures are more likely to be beneficial if Joint Venture Entry Strategies are carefully formulated. The Joint Venture agreement should be subject to obtaining all necessary governmental approvals and licenses within specified period. Change of control Non-Compete Confidentiality Indemnity Assignment. Proper drafting of Joint Venture Agreements are very important for the success of any joint venture.
licensing and other contractual arrangements.An international joint venture is only one of a variety of means by which a domestic owner of a technology can exploit or develop that technology in a foreign market. A joint venture is not merely a contractual undertaking by two or more parties to collaborate on and perform a specific task or one-time project. and direct investments. A joint venture is neither suitable nor appropriate for all purposes. In addition to joint ventures. Before embarking upon a joint venture. but it also possesses one other essential characteristic: a joint venture must embody a separate legal entity jointly owned and jointly managed by the venturers. a joint venture is not merely a patent and technology agreement calling for the conveyance of rights and the physical transfer of technology. a technology owner should examine the relative advantages and disadvantages of the other vehicles for foreign market entry. (2) an ownership interest in such entity by each joint venturer. there must be (1) a separately identifiable joint venture entity. or the respective degrees of equity or management involvement. the methods of exploiting a technology in a foreign market include exports. It is important at the outset to distinguish a joint venture from other types of business arrangements so that the advantages and disadvantages of a joint venture can be viewed in proper perspective. if successful. This kind of association is sometimes called a "consortium" or a "teaming arrangement. A joint venture also is not merely a contractual arrangement by two or more parties to cooperate in the pursuit of a particular contract and. Certain business arrangements often are incorrectly referred to as joint ventures. to perform such a contract by dividing the prescribed tasks in accordance with the respective qualifications of the parties. Regardless of the scope of the undertaking. A joint venture often contains some or even all of the foregoing contractual ingredients." Furthermore. a straightforward contractual arrangement is frequently preferable. and (3) an active management involvement. There may be no justification for the complexity and collaborative effort of a joint venture if the receipt of 10 . the nature of the joint venture entity. The sometime reference to such arrangements as "contractual joint ventures" is the source of some of the confusion surrounding the nature of a true joint venture. In circumstances where there is little or no interest in management involvement or in long-term earnings.
may provide the most satisfactory mechanism for establishing a viable foreign presence. thereby expanding the A company may desire to enlarge its market power or to expand into a foreign market capabilities and business opportunities available to each. 2. a sharing of risks. A joint venture partner ("JVP") that is well-established in the locale. on the contributions. Investment Spread. are largely matters for negotiation. and a uniting into a common entity for the achievement of objectives that would be exceedingly difficult. Easier to obtain project financing. A company may not have sufficient resources to undertake a particular project and may need the financial resources of another company with similar needs or interests to share the business risks and reduce the burden of investment costs. valuation may be quite 11 .0 THE NATURE OF A JOINT VENTURE 1. Parties may wish to share the risks of new ventures. 7. and the other party accepts. and equally at risk. Joint ventures are frequently characterized by a 50/50 participation in which each partner contributes 50 percent of the equity in return for 50 percent participating control. knowledgeable in the local business customs. a joint venture contemplates a pooling of resources. 6. 5. with which it has no familiarity. Research and development activities that require a substantial initial cost outlay may best be carried out through such a joint venture operation. there is no need for a more comprehensive business relationship. The relative contributions.royalties for rights in technology is sufficient. Similarly. particularly where contributions involve technology. Such a valuation frequently can be a difficult and tedious exercise. 3. a blending of expertises. as well as degree of ownership and control. Government Policies There are two types of joint ventures. On the other hand. 4. The parties may wish to pool technology and expertise. They relate to the value each party places. If the joint venture is to be located in a country with a controlled economy. if not impossible. if the proceeds of a single contractual effort can be fairly divided among the parties performing discrete and identifiable portions of the work. 2. for any one of the joint venturers acting alone. the equity joint venture and the contractual joint venture. and reflect the objectives of the venturers.
The 50/50 arrangement is common in joint ventures. during 12 . the JVP may insist upon more than a coequal role in that phase of the joint venture's business. 2. corporation is basically a creature of state statute. Because of this. Such a sharing of interest and control raises the possibility. Such equal participation has a number of advantages. 3. Basic features are: 1. It should be noted that joint ventures are characterized by extreme flexibility. the joint venture can be structured to accommodate the particular need.1 Equity Joint Ventures The equity joint venture in its most basic form arises where the two legal entities for a joint stock company in order to engage in a common commercial enterprise. Cash Injection preferential right to purchase shares vested in the respective companies. while retaining maximum control over the conduct of the enterprise.problematic. Many corporations nevertheless subscribe to this form to ensure an equal commitment by the other partner. Such objectives can be reconciled by careful planning at the inception of the joint venture. so that if one partner is uncomfortable with coequal status in one phase of the business enterprise. however. if a JVP is concerned that the joint venture may expand its product line beyond the initial parameters of the joint venture and thereby threaten that JVP's already established product lines. and is not subservient to the other partner. Advantages A U. 2. Each JVP is equally at risk. especially if the JVP from that country is contributing land or goods in kind that may not have readily ascertainable free market values. incorporation generally involves greater expense and formality than other forms of association and. Free transferring of shares. exclusively to companies owned by the partners. as would be the case where majority control is vested in one party. with Management by a Board of Directors. For example. of deadlock and early termination of the joint venture before its objectives have been accomplished.S.
g. and of more importance in this context. requires adherence to continuing statutory obligations and formalities. Many consequences and advantages logically follow from this attribute. such transfers do not affect the corporation's existence. or use of the corporate form to perpetrate a fraud). Class A common and Class B common. shareholders. if called for. or common and different classes of preferred). Conversely. Although affecting voting power and control.g. This is an important advantage in the context of the inherently speculative nature of many technology joint ventures. a corporation is deemed to be an entity legally separate from its incorporators. thereby preventing unknown third parties from entering into the joint venture. common and preferred. Except in the unusual case in which the "corporate veil is pierced" (e.. Accordingly. the corporate form also provides a simple method for differentiating among the rights of its shareholders. including different voting. and such limited liability may be a critical factor in attracting a JVP. with different rights and preferences. Through issuance of different classes of stock. 3. and officers. dividend. which may be as complex or straightforward as the situation demands. A corporation can issue different classes of stock (e. 13 ..the existence of the corporation. redemption. On the other hand. Their risk is generally limited to the value of their stock. Under general corporate law principles. failure to follow corporate formalities. the capital structure may be simplified to one class of common stock. In the event disparate treatment of shareholders is not necessary. Advantages The primary advantage of the corporate form of association is the fact of limited liability. However. the corporate form has built into it a simple and flexible mechanism for allocating such rights. for inadequate capitalization. innumerable variations are possible in setting up and operating the corporation. A further advantage of the corporate form is that a corporation's stock may normally be freely transferred. 2. those who invest in a corporation are not personally liable for corporate debts. 1. and liquidation rights. provided the statutory formalities are followed. reasonable restrictions can be placed on the transferability of the stock.
stock options.S. a partnership format may offer comparable tax-benefited plans. Centralized management is provided by a corporation's board of directors. tax treatment. Another attribute of a corporation is that it has a generally recognized management structure. To the extent a corporation intends to offer its securities to the public. the corporation may be required to comply with the state securities ("blue sky") laws. 3. and dissolutions.several classes of common and preferred may be used to differentiate among the rights of the shareholders. A further advantage of doing business as a corporation is the availability of fringe benefits for corporate employees. A second significant tax disadvantage associated with corporations is that the shareholders have less flexibility in transferring assets into and out of the corporation with minimal tax effect than in the case of a partnership. A corporation must conduct its 14 . a corporation also is subject to greater governmental regulation both at the state and federal level. 4. Some such benefits receive advantageous U. and group insurance plans. which is charged with overseeing the general management of the corporation's business and operations. 5. at a substantial cost.Profits could be subject to tax at the joint venture and shareholder levels. Suspicions as to liability implications Duplication of Resources Taxation. However. thereby serving as an inducement for attracting top level management personnel. and is subject to greater difficulties in transacting business across state lines. 6. the corporation can raise money by selling its stock to many shareholders without fearing that they will directly interfere with the management of the company. The shareholders of a corporation exercise control over the operation of the business through their power to elect the board of directors. As compared to some other forms of organization. Formal shareholder approval is normally necessary only for fundamental or extraordinary corporate actions. as well as the federal securities laws. Disadvantages 1. 4. 5. Accordingly. such as amendments to the corporate charter. Careful planning is required to deal with this problem. 2. mergers. These benefits may include qualified pension and profit-sharing plans.
or otherwise) combining property and expertise to carry out a single business enterprise and having a joint proprietary interest. and the compliance with quorum and majority rules. state laws generally vest in the board of directors the authority to manage the affairs and operations of the corporation. the joint venture provides a means of achieving business and economic objectives potentially beyond the capabilities of either JVP acting alone. What form the association takes—partnership. general business corporation. including the objectives of the parties. The joint venture need not be formally organized as a corporation or other business entity. the maintenance of appropriate books and records. courts have defined a contractual joint venture as an association of two or more persons (whether corporate.business with greater formality than other forms of association.S. Although joint ventures normally are governed by the substantive law of partnerships under U.S. 2. the scheduling of meetings of shareholders and directors. U.2 Contractual Joint Ventures Generally. and a sharing of profits and losses. The motivations for forming a joint venture are several and often overlapping. For example." thereby subjecting its shareholders to unlimited liability. not a specific undertaking. notice requirements. a court may determine that the corporate form is merely a sham and "pierce the corporate veil. it is customary to do so. they differ from partnerships in that partnerships contemplate the operation of a general business. To the extent the shareholders attempt to "usurp" control of the business operations. Basic Advantages Regardless of the motivating force. but in more substantial undertakings. minutes and other record-keeping requirements. law. capitalization requirements. This is the primary advantage and hallmark of the joint venture form of association—the ability to 15 . or close corporation—depends on several factors. a joint right to control. Such corporate formalities include incorporation formalities. it is possible that the corporate form will be disregarded. individual. In the event these corporate formalities are not strictly followed.
expertise. One of the primary advantages of the joint venture is that it can allow the participants to undertake potentially speculative and high-risk endeavors without exposing assets to unlimited liability. a joint venture involves co-ownership and co-management and thus creates a risk that problems will develop in the decision making process. without guidance. Moreover. technology. This is particularly true in the case of 50/50 ownership where there is an increased probability of management deadlocks that can effectively stalemate all activities. it is important to weigh the relative advantages and disadvantages of this form of business association. Given the close cooperation necessary for effective operation of the joint venture. Although recognition of this problem at the outset allows the JVPs to provide for dispute resolution mechanisms. this serious problem. the disruptive potential remains the JVPs at the commencement of their economic "marriage" may not. a substantial unity of interest between JVPs is a prerequisite for success. The JVPs can define at the outset the extent to which each will be liable for costs and will share the risks associated with the endeavor. A joint venture further provides a substantial degree of flexibility in distributing operational responsibilities and authority between the JVPs and thus allows the parties to utilize effectively the particular strengths of each. there are also certain disadvantages in the joint venture form of organization. Accordingly. However. a company can experiment with larger projects or enter into new areas without making a permanent commitment or risking capital beyond its means. In deciding whether a joint venture is the appropriate vehicle to implement the intent of the parties. consider realistically or give sufficient credence to.combine the strengths. a joint venture may have its effectiveness undermined by negotiated compromises between JVPs replacing the certainty of a single management. First. the financing arrangements of the new joint venture entity may not appear on the balance sheets of the parent companies. a joint venture requires continuing agreement between the JVPs as to the nature and scope of the 16 . Second. Unlike merger or acquisition transactions which necessitate agreement of the parties only for a short period of time and after which only one of the parties will control the enterprise. and know-how of separate businesses with the concomitant benefit of sharing investment costs and risks.
philosophies. as well as the company's expectations and goals. If the basic objectives of the individual JVPs are incompatible at the outset or if they change over time. Similarly. A concern may initially seek a co-venturer of equal business stature and with comparable corporate policies. linguistic.2 Selecting a Partner If a joint venture is deemed desirable. and financial resources. it is necessary to have an understanding of the basic objectives of the proposed enterprise. 17 . Careful planning is required at all stages. and potential areas of conflict between the JVPs must be identified and reconciled. given the cultural. one of the first considerations is the selection of a compatible partner. 3. This includes identification of the nature and scope of the proposed undertaking. and social differences between the parties.enterprise. 3. The goals of the enterprise must be defined. The planning stages essential to the formation of a joint venture are outlined below. For example. This process may be difficult. if a company is seeking a short-term arrangement to measure the potential market for a product in a foreign country. involving business people as well as lawyers. which generally contemplates a longer term and more substantial commitment. particularly in the context of multinational joint ventures.0 PLANNING THE JOINT VENTURE The formation of an international joint venture can be an extremely complex process. political. there may be legal. a licensing or straightforward contractual arrangement might be preferable to a joint venture. the JVPs should determine whether their objectives are compatible. but it is important. 3. numerous legal issues must be recognized and resolved. the structure must be negotiated.1 Identifying Objectives At the outset of every proposed joint venture. The important considerations relevant to each stage are discussed in detail in later chapters of this book. Through the process of active negotiation. these differences can create significant problems and bring about the premature termination of the venture.
more commonly. it is necessary to draft the joint venture agreement. including governmental regulatory matters. international joint ventures often involve unique features. they must be reconciled.4 Identifying Legal Problems At the beginning of the process. 3. and know-how. shares its technology expertise. For example.accounting. structure. counsel must identify and resolve major legal issues and potential problem areas. Since all of these differences may give rise to misunderstandings. and legal issues have been identified. 3.5 Identifying Conflicts between Partners It is also important to identify potential areas of conflict between the JVPs so that they can be reconciled prior to making an irrevocable commitment. A variety of complex legal and practical considerations are involved at this stage.3 Choosing the Business Form The next step is to choose the basic structure of the business venture. Frequently. in return. the parties may have to deal with differing tax objectives resulting from fundamentally different business goals or. from different constraints of the tax laws and accounting practices of the home country. and careful draftsman ship is required.0 TYPES OF BUSINESS ARRANGEMENTS 1. It is necessary to identify the respective contributions of the parties and the proposed financing arrangements in order to measure the compatibility of the potential JVPs and to determine the appropriate organizational form. 3. 1.6 Drafting the Joint Venture Agreement Finally. and tax differences between the countries of the JVPs. one JVP looks tor a capital infusion and. Early recognition of these issues may allow the parties sufficient flexibility to structure the joint venture to avoid these problems. 3. As will be seen in later chapters of this book. after the goals.1 Joint Ventures 18 .
2 Information Exchange Agreement 5.6 Drafting the Joint Venture Agreement 4.4 Identifying Legal Problems 3.2 Contractual Joint Ventures 3.0 INTERNATIONAL JOINT VENTURES 5.0 THE NATURE OF A JOINT VENTURE 2.1 Identifying a Suitable Partner 5.3 Licensing & Other Contractual Arrangements 1.4 Direct Investments 2.3 Letter of Intent or Memorandum of Understanding 5.1.1 Identifying Objectives 3.2 Exports 1.5 Identifying Conflicts Between Partners 3.4 Important General Provisions ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ Prefatory Clauses Definitions Currency Provision Management & Control Provisions Disputes Resolution Procedures Disputes Resolution Forum & Choice of Law Designation National Security Restrictions Termination Provisions Representations & Warranties Force Majeure Clause 19 .3 Choosing the Business Form 3.0 A HYPOTHETICAL JOINT VENTURE 5.0 PLANNING THE JOINT VENTURE 3.1 Equity Joint Ventures 2.2 Selecting a Partner 3.
Technology & Technical Assistance Real Estate Transfer Agreement Supply Agreement Equipment & Machinery Agreement Administrative Services Agreement Marketing Agreement Trademark/Trade Name Agreement When are joint ventures used? Joint ventures are not uncommon in the oil and gas industry. (Osborn. marketing networks etc. JVs have shown to fail miserably under highly volatile demand and rapid changes in product technology Some countries. Brokers In addition. as the companies can complement their skill sets while it offers the foreign company a geographic presence.) Furthermore. 2003) It is also known that joint ventures in low-developed countries show a greater instability. such as the People's Republic of China and to some extent India. require foreign companies to form joint ventures with domestic firms in order to enter a market.5 Tax Planning 5. and that JVs involving government partners have higher incidence of failure (private firms seem to be better equipped to supply key skills. and are often cooperations between a local and foreign company (about 3/4 are international).5. and that 60% failed to start or faded away within 5 years. A joint venture broker then often make a percentage of the profit that is made from the deal between the two parties.6 Ancillary Agreements ¨ ¨ ¨ ¨ ¨ ¨ ¨ Patent. who are people that often put together the two parties that participate in a joint venture. Studies show a failure rate of 30-61%. A joint venture is often seen as a very viable business alternative in this sector. joint ventures are practiced by a joint venture broker. Reasons for Forming a Joint Venture Internal Reasons Build on company's strengths Spreading costs and risks 20 .
Philips Components (LG + Philips) Nokia Siemens Networks (Nokia + Siemens AG) Sony Ericsson (Sony + Ericsson) Verizon Wireless (Verizon Communications + Vodafone) Why Joint Ventures? As there are good business and accounting reasons to create a joint venture (JV) with a company that has complementary capabilities and resources.Improving access to financial resources Economies of scale and advantages of size Access to new technologies and customers Access to innovative managerial practices Competitive Goals Influencing structural evolution of the industry Pre-empting competition Defensive response to blurring industry boundaries Creation of stronger competitive units Speed to market Improved agility Strategic Goals Synergies Transfer of technology/skills Diversification Reasons for Dissolving A Joint Venture Aims of original venture met Aims of original venture not met Either or both parties develop new goals Either or both parties no longer agree with joint venture aims Time agreed for joint venture has expired Legal or financial issues Evolving market conditions mean that joint venture is no longer appropriate or relevant Examples LG. 21 . such as distribution channels.
gain. most joint ventures involving fast growing companies are structured as strategic corporate partnerships) • Availability of appreciated or depreciated property being contributed to the joint venture. • • special allocations of income. joint ventures are becoming an increasingly common way for companies to form strategic alliances. risks and rewards in a formation of a new entity under shared control. Joint venture association can be used effectively in a business-based technology. In a joint venture associations. Sustainable Competitive Advantage In a joint venture. two or more "parent" companies agree to share capital. by misunderstanding the significance of appreciated property. but it's good business practice to verify the facts through interviews with third parties) • • development of an exit strategy and terms of dissolution of the joint venture most appropriate structure (e. You all strategies and contracts must be planned properly in accordance with the law. benefits and / or 22 .technology. knowledge. human resources.trust the information you receive from the prospective partner. especially where the Intellectual Property assets concerned. or finance.checking the credentials of the other party ("trust and verify" . companies can fundamentally weaken the economics of the deal for themselves and their partners. technology. loss or deduction to be made among the partners compensation to the members that provide services Joint Venture Technology The concept of a joint venture technology is important to understand if you consider entering into a joint venture. businesses work together and share resources. Important Factors To be considered before a joint venture is formed • • screening of prospective partners joint development of a detailed business plan and shortlisting a set of prospective partners based on their contribution to developing a business plan • due diligence .g.
The problem of laws on tax issues and legalities related to the Anti must also be stated clearly. a more general. the careful plans for all your business contracts and the right strategy in accordance with the law so that the channel to avoid further complications. Various forms of joint ventures. In one scenario. they provide access to resources. should be clarified as part of the joint venture technology. a joint venture agreement that formed between the business for a particular purpose. The joint venture is focused technology partners to manage. technical resources and so forth. When you make your contract. Global Competition: What's the First Move? 23 . In another method. The main focus is to create a joint venture company to create innovative companies or joint-venture. In short. capital. The requirements for completing these objectives must also be clearly stated in the agreement. such as one campaign or individuals to share resources and bring about increasing benefits and / or client base to increase. Points to be consider while planning a joint venture technology. the organization in May to join together to form a joint venture that is its own entity with the ownership shares and rights. This usually happens in a multi-national company or a larger business. resources intellectual property. detailed information that is clear and the details relating to the special role in the joint venture and your skills. which will help in increasing the value of new business or to form a body that is able to manage the business. Joint ventures to help bring you in contact with new clients in the fast and efficient. and with it is very powerful mode for business entrepreneurs. Joint venture technology can be of various forms. a joint venture technology. If you are planning a joint venture.geographic market. Establish joint ventures with this mode of joint venture technology may be for the initial phase of a more permanent business relationship. This form of a joint venture with technology in general to the merger of two separate companies from the law itself. A contract must be arranged a certain set of clear transfer of IP rights through the current as the nature of Intellectual Property total assets are insubstantial. you must be careful to also include the following aspects. Documents from the control and format of the joint venture contract must jointly decide on the goals that must be achieved. etc.
Unilever's 24 . So the first step in the CSI process is to set up a table that reflects all your assets and all the territories you compete in. the complexity of the competitive situation can quickly overwhelm ordinary analysis. the Americas. Dove soap." or CSI. and they're even worse at using interdependency to their advantage. a middle game. With the following mapping tools and techniques. and the AsiaPacific-Africa region. In this excerpt. with each engagement with a competitor broken into an opening. you need a clear understanding of your own product categories and the geographic arenas you operate in.For multinationals. like the proverbial butterfly that flaps its wings in New York and causes a tsunami in Japan. out of proportion to the events that provoke them. and Snuggle fabric softener. you can learn to see the whole chessboard—that is. The company's wellknown brands include Knorr soups. Unilever competes in three principal product categories—foods. they might happen far away from the apparent sphere of competition. We call this approach "competing under strategic interdependence. competition is a complex series of moves and countermoves on a global landscape. Furthermore. a European consumer-goods manufacturer. As strategists have learned from game theory. To uncover—and ultimately exploit—the interdependencies between you and your competitors. For an example of this. let's consider Unilever. you can anticipate how the moves you make in one market can influence competitive interactions not only in that market but in others far afield. personal care. In most of those categories and in all of those territories. the results of any move a player makes stem in large part from the choices his opponent makes. and fabric care—and in three major global geographic arenas—Europe. Most business strategists are terrible at anticipating the consequences of interdependent choices. Often those results are nonlinear—that is. But what's the best opening move? Competing with multinationals can be considered a big game of chess. and an endgame. Competition among multinationals these days is likely to be a three-dimensional game of global chess: the moves an organization makes in one market are designed to achieve goals in another market in ways that aren't immediately apparent to rivals. the authors set out best moves for an effective opening. And where this strategic interdependence exists.
is the mirror image of reactiveness. is more difficult to ascertain. Reactiveness measures how much incentive your competitor has to counter your move. including your competitor's market share in a particular business arena (the larger the share.S. but it can be as critical a consideration as share and profitability. and Tide laundry detergent.principal rival is U. the greater the arena's importance to your competitor) and the arena's profitability (the more profitable the arena.-based Procter & Gamble. and the relative clout each of you brings to the table. for specific types of products within those groups. The final sub factor. Unilever's CSI table. by product type. in this scheme. national or corporate pride. Essentially. makers of Folgers coffee. if the company's personal-care group were thinking through its global positioning prospects. It is based on several sub factors. the more incentive your rival has to defend it). grooming. Attractiveness. we see that the personal-care group competes in fifteen different arenas. your competitor's emotional attachment to the arena. shown below. and senior hygiene. the historical significance of the arena. and for different geographic arenas. you should be looking for any noneconomic factor that would make your competitor more likely to want to protect the arena—for instance. infant hygiene. and any significant sunk costs. For instance. Unilever's executives could then drill down further and draw up CSI tables for each product group. The best way to do that is to analyze three important factors: your competitor's potential reactiveness to increased pressure in that arena. feminine hygiene. It's the measure of how important the arena is to you and is based on the same subfactors as reactiveness: How 25 . a manager in that unit might look at the competition more narrowly. So if we continue analyzing Unilever's business opportunities in the same three geographic regions (for simplicity's sake). as shown below. The personal-care group is responsible for products in the following categories: oral care. indicates that the company competes in nine different product and geographic arenas (each represented by a cell in the table). the second step in the CSI process is to take a rigorous look at where you stand relative to your main competitor in each arena. Once you've created your tables. Pampers diapers. the arena's attractiveness to you.
the least appealing arena for the instigator is represented by bubble e. the third factor. measures who's in a better position to launch. Clout can be determined by looking at the relative sales of a company and its competitor. Bubble d suggests that this arena would prompt less of a reaction by the defender than bubble e would. and so on. The higher the bubble. For instance. while reactiveness measures the propensity to fight back. Choices get more difficult when comparing bubbles like d and e. but the 26 . attractiveness.) We've set up a Web site that offers our methodology and formulas for measuring reactiveness. or defend against. the company that wants to make an opening move. mapping the competitive terrain on a bubble chart. the more attractive the arena is to you. also known as the defender. attractiveness. because it reflects low attractiveness to the instigator and the highest reactiveness score on the chart for the competitor—a promise of much pain for little gain. The size of a bubble indicates the defender's market clout—the bigger the bubble. Conversely. bubble b in the upper left appears to be the most appealing arena for the instigator. To do this. first plot your competitor's reactiveness along the horizontal axis. Reactiveness increases from left to right. (Clout measures the ability to fight back.much market share do you have in the arena? How profitable is it? How emotionally attached to it are you? Relative clout. and clout—numbers you can use in the third step of the CSI process. so bubbles further to the right indicate arenas that are more important to that competitor. Then plot the arena's attractiveness to you along the vertical axis. then adjusting for other factors such as each party's distribution dominance or technology advantages. a product division's performance compared with that of the rest of the organization. and relative clout based on publicly available information— things like a company's individual product sales. a strategic move in the arena. The end result will be numerical ratings for reactiveness. The size and position of the bubble indicate that this arena is highly attractive to the instigator and that any strategic ploy it launches in this arena would prompt relatively little reaction from the defender. the stronger the competitor. The chart may end up looking something like this: The bubble chart is useful because it quickly conveys a great deal of information about two competitors' relative positions. the company's sales in a particular region of the country or the world.
No. said. such as states or even cities. d or e. but it is useful for other reasons. where Coca-Cola and Pepsi control 76 percent of the U. Combining our semiconductor manufacturing expertise with Origin’s solar experience could result in a strong partnership. 81. 5. Major Development Projects. It's also possible to plot several competitors in each arena to fully understand the dimensions of the competitive landscape. market. Micron’s President and Chief Operating Officer. “As we have looked to leverage our core strengths in other markets. photovoltaic energy technology is a natural area of investigation. The vertical axis would continue to measure only the instigator's attractiveness scores." Harvard Business Review. May 2003. charting will likely start at a national or regional level. The reactiveness scores would then be used to place different competitors along the horizontal axis of the chart. it would best be able to defend from a competitor's retaliation. Bubble size would indicate each competitor's clout relative to the instigator —not relative to the other competitors. Coca-Cola. using different colors to identify each competitor. it allows a company to look at its world through its competitor's eyes. Second. For companies with less global reach than Unilever. First. the price of a twelve-pack in a suburb of Oakland on Super bowl Sunday is of genuine importance to the outcome of the competitive battle. competitive battles are planned down to the level of individual supermarkets in individual cities. Excerpted with permission from "Global Gamesmanship. The instigator would have to make a judgment call about which arena. P&G.” Origin’s Executive General Manager. Mr Andrew Stock. Even in highly concentrated industries such as consumer soft drinks. and Pepsi. Companies can build charts that focus on smaller geographic areas. the mapping technique can be employed at several levels of granularity to expose competitive opportunities and weaknesses that might not otherwise be evident. if the data are available.defender has more clout in this product or geographic arena. The ultimate purpose of this mapping technique is to help managers plan competitive campaigns in multiple markets. “We are pleased to joint venture with Micron as a global semiconductor leader to further 27 . Mr Mark Durcan said. Vol. Origin is a company with a significant interest and history in renewable energy technologies.S.
” Mr.explore the potential of solar photovoltaic technology. Payment of royalty up to 2 per cent for export and 1 per cent for domestic sales is allowed under automatic route on use of trademark and brand name of the foreign collaborator without technology transfer. Stock added. Technology can either be developed through own research and development or it can be purchased through indigenous or imported sources. Technology Transfer Agreement in INDIA Technology Exponential Growth of Technology in India has played a significant role in all round development and growth of economy in our country. In case of technology transfer. Ministry of Commerce and Industry. Payment of royalty up to 8 per cent for export and 5 percent on domestic sales by wholly owned subsidiaries (WOS) to offshore parent companies is allowed under the automatic route without any restriction on the duration of royalty payments All other proposals for foreign technology agreements not meeting the parameters for automatic approval are considered on merit by the Project Approval Board (PAB). payment of royalty subsumes the payment of royalty for use of trademark and brand name of the foreign collaborators. Royalty payable being limited to 5 per cent for domestic sales and 8 percent for export. India has opted for a judicious mix of indigenous and imported 28 . subjected to a total payment of 8 per cent on sales over 10 year period. “The near term objective of the joint venture is to combine the work Origin has done to date in solar development with Micron’s capabilities and to examine opportunities for commercialization. department of Industrial Policy and promotion. Policy for foreign technology agreements RBI accords automatic approval to all industries for foreign technology collaboration agreements subject toThe lump sum payments not exceeding US $ 2 million.This is chaired by the secretary.
‘Technology transfer’ means the use of knowledge and when we talk about transfer of the technology. subjected to a total payment of 8 per cent on sales over 10 year period. we really mean the transfer of knowledge by way of an agreement between the states or companies. ‘Transfer’ does not mean the movement or delivery. transfer can only happen if technology is used. Technology generally would comprise the following elements: Process Know how Design Know how Engineering know how Manufacturing know how Application Know how Management know how Policy for foreign technology agreements RBI accords automatic approval to all industries for foreign technology collaboration agreements subject toThe lump sum payments not exceeding US $ 2 million.technology. Royalty payable being limited to 5 per cent for domestic sales and 8 percent for export. Payment of royalty up to 2 per cent for export and 1 per cent for domestic sales is allowed under automatic route on use of trademark and brand name of the foreign collaborator 29 . Purchase of technology is commonly called “Technology transfer” and it is generally covered by a technology transfer agreement. it is application of technology and considered as process by which technology developed for one purpose is used either in different applications or by a new user. So.
This is chaired by the secretary.Government of India (foreign investment Promotion Board) may consider import of technology in Industries other than those listed in priority list Annex 4A. not meeting the any or all of the parameters for automatic approval. Payment of royalty up to 8 per cent for export and 5 percent on domestic sales by wholly owned subsidiaries (WOS) to offshore parent companies is allowed under the automatic route without any restriction on the duration of royalty payments All other proposals for foreign technology agreements not meeting the parameters for automatic approval are considered on merit by the Project Approval Board (PAB). Finding Joint Venture Partners Just Got Easy 30 . No doubt. on merits.Technology transfers by SIA All others proposals of foreign technology agreement. Ministry of Commerce and Industry. The list so issued is illustrative only. by the Government. are considered for approval. payment of royalty subsumes the payment of royalty for use of trademark and brand name of the foreign collaborators. Ministry of Industry. Applications in respect of such proposals should be made submitted in form FC/IL (SIA) to the secretariat for Industrial Assistance. Procedure for approvals. Udyog Bhawan. Department of Industrial Policy Promotion. Scope for foreign collaboration Government of India issues from time to time lists of Industries “where foreign investment may be permitted”. No Fees is payable.without technology transfer. Approvals are normally available within 4 weeks of filing the application. a broad technology base has been created in the country. In case of technology transfer. department of Industrial Policy and promotion. yet a need to update the production technology may arise due to constant technological advancements in developed countries . New Delhi.
like the Private JV Club. Most entrepreneurs do not have the luxury or time then need to make these networking sites produce even one joint venture partner. More importantly though. of course the entrepreneur started to turn to the internet to find joint venture partners. however building joint venture alliances can be time consuming and unproductive if you don't know what to do or where to find them. people have hired joint venture brokers. just like you waiting for you to make an alliance with 31 . but not if you do not have the right connections or do now know how to use them correctly. In the past. A joint venture club such as the Private JV Club can help you to reach. from all over the world. If you are an entrepreneur and you are trying to make the most of your resources. The trick to actually meeting your goals is to actually "meet" these other entrepreneurs who have the right connections and then learn which joint venture marketing strategies will work best for your company. Companies create new profiles on sites like these every day only to discover that it takes hours and hours of time in order to even make a dent in the huge websites. entrepreneurs have sat at their desks and asked themselves who they might know that they could joint venture with and have found themselves trying to partner with the same colleague they joint ventured with last week. purchased joint venture programs or joint venture software and these are good tools if you have the time to invest learning how to use them. A joint venture club.Finding Joint venture partners has not been easy until now. Sites like Facebook and MySpace can be great for helping you to build a loyal customer following. gives you access to entrepreneurs. that's where a joint venture club comes in. So. most profitable form of marketing strategy in the world. who want to meet you and joint venture with your company. you have to realize that there are tens of thousands of people just like you. This does not create new customers fast enough and can leave your sales stagnating and your customers wondering where you are. fastest growing. In the past. and surpass. Everyone knows that joint ventures are the number one. is the ingredient that makes a joint venture become profitable and work and that is to actually have a joint venture partner to create a joint venture alliance with. your goals.
This insures the success of your joint venture transactions and provides your company with credibility to other Private Joint Venture Club Members In a joint venture club such as the Private Joint Venture Club. in a club you can have access to all of that simply because you are a member. you are no longer the lone entrepreneur. This is all part of belonging to a Private JV Club. Save your money. safest. create profits. You have virtual boardroom meetings where you can bring your ideas. questions and challenges forward to have other entrepreneurs help you mastermind and solution seek with you.them. gain market share and never pay a joint venture broker again. There are entrepreneurs who you can create alliances with and build your network of colleagues as fast as you are building your customer network. have access to and create a joint venture empire. launch them together. Membership has its privileges. friendliest way to learn about. No making hundreds of phone calls to get to your dream guru. the more the Joint Venture will have the potential to be profitable. In a joint venture club. There is no having to get past the gate keepers. They offer this for free so you no longer have to pay to take a joint venture course. If you are looking to explode your sales and build your business along with your customer network fast then a joint venture club is the fastest. There is instant access to that big company or big guru right now. A joint venture club offers training in all facets of doing a proper joint venture transaction. Joint Venture Promotion Deal with Other Businesses! The more the product or service owner is trusted and considered to be an expert in his or her field. you have business mentors and multi-millionaires who share their secret strategies for free. You can create products with other entrepreneurs. The key for you 32 .
joint-venture-guide. Show the site owner the benefits of doing a joint venture with you and don't forget to give your partner a copy of your product. the parties are obligated to divide their respective contributions to the joint venture (whether in cash or in kind) into discrete ratios. You can even form a joint venture to work with someone. joint-ventures. Joint Venture E-mail Promotions There are many vendors and retail golf shops you work with that own large golfer databases.here is to create the type of Joint Venture that absolutely no one can say no to.com and get articles in rezones. In an Equity Joint Venture. You could joint venture or cross promotion deal with other businesses. This means that you’ll need to convince potential joint venture partners that a decision to partner with your business will be wise on their part. It is a joint economic venture of twenty one thousand financial institutions. Many of the new list-building communities are nothing more than old 'safe list' programs cloaked as Joint Venture communities. joint venture partners (or alliance partners). websites (with much thought given to key word phrases). The most powerful secret to successful joint ventures is to realize that asking for a joint venture is very similar to "making an offer to a prospect. Finance Manager: An Equity Joint Venture is required to appoint one or more accountants to assist the General Manager with finances. Persuading them and to conclude recruiting them is the hardest part of your job and you have to make sure that your joint venture proposal is convincing and interesting. as well as special commission rate. network online. Create joint venture partnerships. for more detail visit www. These involve partnerships. for more detail visit www. letterbox flyers. Foreign investors other than Norris were allowed to invest only in development of integrated townships and settlements either through a wholly owned subsidiary or through a joint venture company in India along with a local partner. But to take advantage of a joint venture (JV) you need your own large list already or your very own product which you own outright.joint-ventures-secret. venture loans or equity. A joint venture is an agreement in which two or more businesses work on a project for a set period of time. newspaper/magazine inserts.com which ratios must be 33 . These industries need marketing like direct mail.
Are you ready to start a joint venture? Joint venture marketing is rising in popularity everyday.strictly adhered to when apportioning profits both during the venture’s operation and after liquidation.You combine your marketing with that of another business that uses a product or service that compliments your own. When looking for joint venture partners. you need to be mindful of certain things. and other business benefits such as expanding each other’s network of quality friends. it has the additional advantage of enabling you to support each other’s business in other ways that will present more joint venture opportunities. You pay your joint venture partner a commission for each sale that is generated from the partnership. Let’s take a look at an example of an endorsed joint venture versus cold mailing: Let’s suppose that home study course on how to write a book and get it published. You can construct most joint venture deals with little or no money. "Such an offer is called a joint-venture offer. get more done. and in turn earn more money. There are two Methods of marketing using Joint Ventures: External joint venture marketing. However. each may be unique). associates and business partners. There are Two Methods of Marketing Using Joint Ventures Both Joint Venture parties are excited. good planning and foresight to execute. Your aim is to find credible centers of influence that you can joint venture 34 . increased qualified employment applications. but let's just play out a typical scenario for the purpose of an example. ”Use this blueprint to create behaviors that lead to activities like more follow up purchases. Internal joint venture marketing. new joint venture proposals or a big boost in capital contributions. You can make a joint venture (agree to work together). it will almost certainly work very well. higher contributions levels. jointventures. but it does take some skill. These involve partnerships. enthusiastic and passionate about the Joint Venture. venture loans or equity. A joint venture is only limited by the creativity of the parties involved.You probably offer complimentary products within your own business. The Joint Venture between the merchant and these marketers can be structured in many ways (in fact.
affiliate programs. An example of a joint venture in the brick and mortar world would be a gym coming together with a company that produces body building supplements. email campaigns. A joint venture is formed when you not only have an alliance but you come up with a strategy to find customers together. I hope this tips can help you setting up your own joint venture. What might have started out being a joint venture could lose its joint venture advantage by being deemed a partnership. pay-per-click advertising and a whole host of other resources too numerous to mention here. A popular guest speaker and participant in industry conferences internationally. some limited number of partners . search engines. measurable and action-oriented goals for your joint venture. Joint ventures are processes where two people in the business combine their resources to sell a product then split the profits for the venture. Make joint venture deals that will support it. This means small businesses intending to enter into a joint venture agreement must thoroughly understand partnership elements and avoid using them in order to avoid being deemed a partnership rather than a joint venture. Now let’s look at the many resources available to you to generate the traffic you need to run a successful website. And finally. Then you are going to care about the leveraging and joint venture aspects of the project. and inherit the disadvantages of a partnership instead. devise a back-up system of your very important files such as your mailing list. content submissions. blogs. You will then want to contact them to propose a joint venture deal by offering them complementary products and/or services. Affiliate Programs: Some will debate that there has to be some exclusivity. Advantages of joint ventures 35 . joint venture partners. and sits on numerous international charity and industry boards of directors. She is not someone to approach for a Joint Venture. a joint venture between the Universal Music Group and Penguin Putnam. Write down your goals and desired outcome be sure to have specific. link exchanges. customer list.to qualify as a Joint Venture.with over and over again. along with a realistic time frame for their execution. your joint venture partners and your "products" on the design table.
the joint venture can prove an effective method of obtaining the necessary resources to enter a new market. The supply of know-how may therefore be used to enable a company to obtain an equity stake in a joint venture. channels of distribution. In such circumstances. joint ventures with host governments have become increasingly important. major defence initiatives. skills. government contracts and local production facilities. in favour of wholly owned subsidiaries in other countries. In a growing number of countries. Joint ventures can be used to reduce political friction and improve local/national Joint ventures may provide specialist knowledge of local markets. foreign exchange management. There has been growth in the creation of temporary consortium companies and alliances. The trend toward an integrated system of global cash management. may lead to conflict between partners when the corporate headquarters endeavours to impose limits or even guidelines on cash and working capital usage. where local contacts. civil engineering projects. Exchange controls may prevent a company from exporting capital and thus make the funding of new overseas subsidiaries difficult. 36 . Joint ventures enable companies to share technology and complementary IP assets for For the smaller organization with insufficient finance and/or specialist management the production and delivery of innovative goods and services. there are almost inevitably problems concerning inward and outward transfer pricing and the sourcing of exports. via a central treasury. and the amount and means of paying remittable profits. 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. This can be especially true in attractive markets. in particular. entry to required acceptability of the company. new global technological ventures).g. to undertake particular projects that are considered to be too large for individual companies to handle alone (e. and access to supplies of raw materials. and political requirements may make a joint venture the preferred or even legally required solution. These may be formed directly with State-owned enterprises or directed toward national champions. access to distribution. where the local partner may have access to the required funds.
especially when wholly owned subsidiary alternatives may occur for the multinational enterprise with access to the joint venture market. For example. the multinational enterprise may have a very different attitude to risk than its local partner. the objectives of the participants may well change over time. Another serious problem occurs when the objectives of the partners are. Everyone knows that joint ventures are the number one. fastest growing. and may be prepared to accept short-term losses in order to build market share. Many joint ventures fail because of a conflict in tax interests between the partners. Problems occur with regard to management structures and staffing of joint ventures. or to spend more on advertising. Similarly. to take on higher levels of debt. incompatible. most profitable form 37 . CONCLUSION Finding Joint venture partners has not been easy until now. or become.
More importantly though. 38 . is the ingredient that makes a joint venture become profitable and work and that is to actually have a joint venture partner to create a joint venture alliance with. however building joint venture alliances can be time consuming and unproductive if you don't know what to do or where to find them.of marketing strategy in the world.
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