1.

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

1

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 2005-2006 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

2

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.

3

What is a 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: 1. Two parties, (individuals or companies), incorporate a company in India. Business of one party is transferred to the company and as consideration for such transfer, shares are issued by the company and subscribed by that party. The other party subscribes for the shares in cash. 2. The above two parties subscribe to the shares of the joint venture company in agreed proportion, in cash, and start a new business. 3. Promoter shareholder of an existing Indian company and a third party, who/which may be individual/company, one of them non-resident or both residents, collaborate to jointly carry on the business of that company and its shares are taken by the said third party through payment in cash. 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. Foreign companies are also free to open branch offices in India. However, a branch of a foreign company attracts a higher rate of tax than a subsidiary or a joint venture company. The liability of the parent company is also greater in case of a branch office.

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, while the members of a partnership have joined together to run "a business in common". 4

Each member of the joint venture retains ownership of his or her property. And each member of the joint venture shares only the expenses of the particular project or venture. Tax-wise, there are also differences between joint ventures and partnerships. As a member of a joint venture, you will receive a share of the profits which will be taxed according to whatever business structure you have set up. So, for instance, if you operate a sole proprietorship, your joint venture profits will be taxed just as any other business income would. Joint ventures enjoy tax advantages over partnerships, too. Capital Cost Allowance (CCA) is treated differently. While those in partnerships have to claim CCA according to partnership rules, those in joint ventures can choose to use as much or little of their CCA claim as they like. And joint ventures don’t have to file information returns, unlike partnerships. 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. If you need help getting started with this, look at the four things a joint venture can do that I've listed at the beginning of this article, pick one, and then develop a goal that is as specific as possible.

Then it's time to look for the like-minded - people or firms that might be interested in the

same goal or goals you want to pursue. Look in the business groups you already belong to, both in person and virtually. Use your social networking connections. Study business listings in the phone book or on Web sites to find those that might share your goals.

And be open to being asked. Once you start talking to other people about what you might

do together, a joint venture idea you haven’t even thought of might pop up - one with a lot of potential.

5

Once you've found the people to share in a joint venture, be sure to have it all put into

writing in a joint venture agreement. I strongly recommend hiring a legal professional to do this. So instead of dismissing an opportunity as out of your reach, start thinking instead about how you could participate with a joint venture. Properly planned and executed, joint ventures can help your small business go where it's never been able to go before. 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, the more the Joint Venture will have the potential to be profitable. The key for you here is to create the type of Joint Venture that absolutely no one can say no to. A joint venture is an agreement in which two or more businesses work on a project for a set period of time. 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. 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. 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 Venture E-mail Promotions There are many vendors and retail golf shops you work with that own large golfer databases. Create joint venture partnerships, network online, for more detail visit www.joint-venture-guide.com and get articles in rezones. It is a joint economic venture of twenty one thousand financial institutions.

These industries need marketing like direct mail, letterbox flyers, newspaper/magazine inserts, websites (with much thought given to key word phrases), joint venture partners (or

6

alliance partners). You could joint venture or cross promotion deal with other businesses. 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, as well as special commission rate. These involve partnerships, joint-ventures, venture loans or equity. You can even form a joint venture to work with someone. 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. 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. Many of the new list-building communities are nothing more than old 'safe list' programs cloaked as Joint Venture communities. In an Equity Joint Venture, the parties are obligated to divide their respective contributions to the joint venture (whether in cash or in kind) into discrete ratios, for more detail visit www.joint-ventures-secret.com which ratios must be strictly adhered to when apportioning profits both during the venture’s operation and after liquidation. Internal joint venture marketing- You probably offer complimentary products within your own business. Are you ready to start a joint venture? Joint venture marketing is rising in popularity everyday, but it does take some skill, good planning and foresight to execute. You pay your joint venture partner a commission for each sale that is generated from the partnership. You can construct most joint venture deals with little or no money. When looking for joint venture partners, you need to be mindful of certain things. You can make a joint venture (agree to work together), get more done, and in turn earn more money. ”Use this blueprint to create behaviors that lead to activities like more follow up purchases, higher contributions levels, increased qualified employment applications, new joint venture proposals or a big boost in capital contributions.

Government Approvals for Joint Ventures...
All the joint ventures in India require governmental approvals, if a foreign partner or an NRI or PIO partner is involved. The approval can be obtained from either from RBI or FIPB. In

7

case, a joint venture is covered under automatic route, then the approval of Reserve bank of India is required. In other special cases, not covered under the automatic route, a special approval of FIPB is required. 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. An application to the Reserve Bank of India is required. Please see Foreign Investment in India - Sector wise Guide for sector wise guidelines under automatic route. Besides the 37 high priority areas, automatic approval is available for 74% foreign equity holdings setting up international trading companies engaged primarily in export activities. Approval of foreign equity is not limited to 74% and to high priority industries. Greater than 74% of equity and areas outside the high priority list are open to investment, but government approval is required. 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. Full foreign ownership (100% equity) is readily allowed in power generation, coal washeries, electronics, Export Oriented Unit (EOU) or a unit in one of the Export Processing Zones ("EPZ's"). For major investment proposals or for those that do not fit within the existing policy parameters, there is the high-powered Foreign Investment Promotion Board ("FIPB"). 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. Foreign investment is also welcomed in many of infrastructure areas such as power, steel, coal washeries, luxury railways, and telecommunications. The entire hydrocarbon sector, including exploration, producing, refining and marketing of petroleum products has now been opened to foreign participation. 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

8

goods. In view of the country's improved balance of payments position, this requirement may be eliminated. How to Enter into a Joint Venture Agreement? Selection of a good local partner is the key to the success of any joint venture. 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. 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. Before signing the joint venture agreement, the terms should be thoroughly discussed and negotiated to avoid any misunderstanding at a later stage. Negotiations require an understanding of the cultural and legal background of the parties. Before signing a Joint Venture Agreement the following must be properly addressed:
• • • • • • • • • • • • • •

Dispute resolution agreements Applicable law. Force Majeure Holding shares Transfer of shares Board of Directors General meeting. CEO/MD Management Committee Important decisions with consent of partners Dividend policy Funding Access. Change of control

9

• • • • • •

Non-Compete Confidentiality Indemnity Assignment. Break of deadlock Termination.

The Joint Venture agreement should be subject to obtaining all necessary governmental approvals and licenses within specified period. Drafting International Joint Venture Agreements Madaan & Co. has helped US companies & Foreign companies in setting up their Joint Venture operations in India and other countries. Business Joint Ventures are more likely to be beneficial if Joint Venture Entry Strategies are carefully formulated. Negotiating Joint Ventures properly is very important for a win-win Joint Venture. Proper drafting of Joint Venture Agreements are very important for the success of any joint venture. We can help you in setting up your Joint Venture: from entry strategies, to negotiations to drafting agreements to compliance programs.

INTERNATIONAL JOINT VENTURES
TYPES OF BUSINESS 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. Before embarking upon a joint venture, a technology owner should examine the relative advantages and disadvantages of the other vehicles for foreign market entry. In addition to joint ventures, the methods of exploiting a technology in a foreign market include exports, licensing and other contractual arrangements, and direct investments. It is important at the outset to distinguish a joint venture from other types of business arrangements so that the advantages and

10

disadvantages of a joint venture can be viewed in proper perspective. Certain business arrangements often are incorrectly referred to as joint ventures. 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. 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. 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, if successful, to perform such a contract by dividing the prescribed tasks in accordance with the respective qualifications of the parties. This kind of association is sometimes called a "consortium" or a "teaming arrangement." Furthermore, a joint venture is not merely a patent and technology agreement calling for the conveyance of rights and the physical transfer of technology. A joint venture often contains some or even all of the foregoing contractual ingredients, 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. Regardless of the scope of the undertaking, the nature of the joint venture entity, or the respective degrees of equity or management involvement, there must be (1) a separately identifiable joint venture entity, (2) an ownership interest in such entity by each joint venturer, and (3) an active management involvement. A joint venture is neither suitable nor appropriate for all purposes. In circumstances where there is little or no interest in management involvement or in long-term earnings, a straightforward contractual arrangement is frequently preferable. There may be no justification for the complexity and collaborative effort of a joint venture if the receipt of royalties for rights in technology is sufficient. Similarly, if the proceeds of a single contractual effort can be fairly divided among the parties performing discrete and identifiable portions of the work, there is no need for a more comprehensive business relationship. On the other hand, a joint venture contemplates a pooling of resources, a sharing of risks, a blending

11

of expertises, and a uniting into a common entity for the achievement of objectives that would be exceedingly difficult, if not impossible, for any one of the joint venturers acting alone. 2.0 THE NATURE OF A JOINT VENTURE

1.

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. Research and development activities that require a substantial initial cost outlay may best be carried out through such a joint venture operation. 2. 3. The parties may wish to pool technology and expertise, 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. with which it has no familiarity. A joint venture partner ("JVP") that is well-established in the locale, knowledgeable in the local business customs, and equally at risk, may provide the most satisfactory mechanism for establishing a viable foreign presence. 4. 5. 6. 7. Parties may wish to share the risks of new ventures. Easier to obtain project financing. Investment Spread. Government Policies

There are two types of joint ventures, the equity joint venture and the contractual joint venture. 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. The relative contributions, as well as degree of ownership and control, are largely matters for negotiation. They relate to the value each party places, and the other party accepts, on the contributions, and reflect the objectives of the venturers. Such a valuation frequently can be a difficult and tedious exercise, particularly where contributions involve technology. If the joint venture is to be located in a country with a controlled economy, valuation may be quite

12

problematic, especially if the JVP from that country is contributing land or goods in kind that may not have readily ascertainable free market values. The 50/50 arrangement is common in joint ventures. Such equal participation has a number of advantages. Each JVP is equally at risk, and is not subservient to the other partner, as would be the case where majority control is vested in one party. Such a sharing of interest and control raises the possibility, however, of deadlock and early termination of the joint venture before its objectives have been accomplished. Many corporations nevertheless subscribe to this form to ensure an equal commitment by the other partner, while retaining maximum control over the conduct of the enterprise. It should be noted that joint ventures are characterized by extreme flexibility, so that if one partner is uncomfortable with coequal status in one phase of the business enterprise, the joint venture can be structured to accommodate the particular need. For example, 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, the JVP may insist upon more than a coequal role in that phase of the joint venture's business. Such objectives can be reconciled by careful planning at the inception of the joint venture. 2.1 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. Basic features are: 1. 2. 3. Free transferring of shares, exclusively to companies owned by the partners, with Management by a Board of Directors. Cash Injection preferential right to purchase shares vested in the respective companies.

Advantages

13

A U.S. corporation is basically a creature of state statute. Because of this, incorporation generally involves greater expense and formality than other forms of association and, during the existence of the corporation, requires adherence to continuing statutory obligations and formalities. However, provided the statutory formalities are followed, innumerable variations are possible in setting up and operating the corporation. Under general corporate law principles, a corporation is deemed to be an entity legally separate from its incorporators, shareholders, and officers. Many consequences and advantages logically follow from this attribute. 1. Advantages The primary advantage of the corporate form of association is the fact of limited liability. Except in the unusual case in which the "corporate veil is pierced" (e.g., for inadequate capitalization, failure to follow corporate formalities, or use of the corporate form to perpetrate a fraud), those who invest in a corporation are not personally liable for corporate debts. Their risk is generally limited to the value of their stock. This is an important advantage in the context of the inherently speculative nature of many technology joint ventures, and such limited liability may be a critical factor in attracting a JVP. 2. A further advantage of the corporate form is that a corporation's stock may normally be freely transferred. Although affecting voting power and control, such transfers do not affect the corporation's existence. Conversely, and of more importance in this context, reasonable restrictions can be placed on the transferability of the stock, thereby preventing unknown third parties from entering into the joint venture. 3. Through issuance of different classes of stock, the corporate form also provides a simple method for differentiating among the rights of its shareholders. A corporation can issue different classes of stock (e.g., Class A common and Class B common, common and preferred, or common and different classes of preferred), with different rights and

14

preferences, including different voting, dividend, redemption, and liquidation rights. Accordingly, the corporate form has built into it a simple and flexible mechanism for allocating such rights, which may be as complex or straightforward as the situation demands. In the event disparate treatment of shareholders is not necessary, the capital structure may be simplified to one class of common stock. On the other hand, if called for, several classes of common and preferred may be used to differentiate among the rights of the shareholders. 4. Another attribute of a corporation is that it has a generally recognized management structure. Centralized management is provided by a corporation's board of directors, which is charged with overseeing the general management of the corporation's business and operations. The shareholders of a corporation exercise control over the operation of the business through their power to elect the board of directors. Formal shareholder approval is normally necessary only for fundamental or extraordinary corporate actions, such as amendments to the corporate charter, mergers, and dissolutions. Accordingly, 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. 5. A further advantage of doing business as a corporation is the availability of fringe benefits for corporate employees. Some such benefits receive advantageous U.S. tax treatment, thereby serving as an inducement for attracting top level management personnel. These benefits may include qualified pension and profit-sharing plans, stock options, and group insurance plans. However, a partnership format may offer comparable tax-benefited plans. Disadvantages 1. 2. 3. Suspicions as to liability implications Duplication of Resources Taxation- Profits could be subject to tax at the joint venture and shareholder levels.

4. 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

15

minimal tax effect than in the case of a partnership. Careful planning is required to deal with this problem. 5. 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, as well as the federal securities laws, at a substantial cost. 6. As compared to some other forms of organization, a corporation also is subject to greater governmental regulation both at the state and federal level, and is subject to greater difficulties in transacting business across state lines. A corporation must conduct its business with greater formality than other forms of association. Such corporate formalities include incorporation formalities, capitalization requirements, the maintenance of appropriate books and records, the scheduling of meetings of shareholders and directors, notice requirements, minutes and other record-keeping requirements, and the compliance with quorum and majority rules. In the event these corporate formalities are not strictly followed, it is possible that the corporate form will be disregarded. For example, state laws generally vest in the board of directors the authority to manage the affairs and operations of the corporation. To the extent the shareholders attempt to "usurp" control of the business operations, a court may determine that the corporate form is merely a sham and "pierce the corporate veil," thereby subjecting its shareholders to unlimited liability. 2.2 Contractual Joint Ventures Generally, U.S. courts have defined a contractual joint venture as an association of two or more persons (whether corporate, individual, or otherwise) combining property and expertise to carry out a single business enterprise and having a joint proprietary interest, a joint right to control, and a sharing of profits and losses. Although joint ventures normally are governed by the substantive law of partnerships under U.S. law, they differ from partnerships in that partnerships contemplate the operation of a general business, not a specific undertaking. The joint venture need not be formally organized as a corporation or other business entity, but in more substantial undertakings, it is customary to do so. What form the association takes—partnership, general business

16

corporation, or close corporation—depends on several factors, including the objectives of the parties. The motivations for forming a joint venture are several and often overlapping. Basic Advantages Regardless of the motivating force, the joint venture provides a means of achieving business and economic objectives potentially beyond the capabilities of either JVP acting alone. This is the primary advantage and hallmark of the joint venture form of association—the ability to combine the strengths, expertise, technology, and know-how of separate businesses with the concomitant benefit of sharing investment costs and risks. In deciding whether a joint venture is the appropriate vehicle to implement the intent of the parties, it is important to weigh the relative advantages and disadvantages of this form of business association. 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. Accordingly, a company can experiment with larger projects or enter into new areas without making a permanent commitment or risking capital beyond its means. 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. Moreover, the financing arrangements of the new joint venture entity may not appear on the balance sheets of the parent companies. 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. However, there are also certain disadvantages in the joint venture form of organization. First, a joint venture involves co-ownership and co-management and thus creates a risk that problems will develop in the decision making process. This is particularly true in the case of

17

50/50 ownership where there is an increased probability of management deadlocks that can effectively stalemate all activities. Second, a joint venture may have its effectiveness undermined by negotiated compromises between JVPs replacing the certainty of a single management. Although recognition of this problem at the outset allows the JVPs to provide for dispute resolution mechanisms, the disruptive potential remains the JVPs at the commencement of their economic "marriage" may not, without guidance, consider realistically or give sufficient credence to, this serious problem. Given the close cooperation necessary for effective operation of the joint venture, a substantial unity of interest between JVPs is a prerequisite for success. 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, a joint venture requires continuing agreement between the JVPs as to the nature and scope of the enterprise. If the basic objectives of the individual JVPs are incompatible at the outset or if they change over time, these differences can create significant problems and bring about the premature termination of the venture. 3.0 PLANNING THE JOINT VENTURE The formation of an international joint venture can be an extremely complex process. The goals of the enterprise must be defined, the structure must be negotiated, numerous legal issues must be recognized and resolved, and potential areas of conflict between the JVPs must be identified and reconciled. Careful planning is required at all stages. The planning stages essential to the formation of a joint venture are outlined below. The important considerations relevant to each stage are discussed in detail in later chapters of this book. 3.1 Identifying Objectives

18

At the outset of every proposed joint venture, it is necessary to have an understanding of the basic objectives of the proposed enterprise. This includes identification of the nature and scope of the proposed undertaking, as well as the company's expectations and goals. For example, if a company is seeking a short-term arrangement to measure the potential market for a product in a foreign country, a licensing or straightforward contractual arrangement might be preferable to a joint venture, which generally contemplates a longer term and more substantial commitment. 3.2 Selecting a Partner If a joint venture is deemed desirable, one of the first considerations is the selection of a compatible partner. A concern may initially seek a co-venturer of equal business stature and with comparable corporate policies, philosophies, and financial resources. Through the process of active negotiation, involving business people as well as lawyers, the JVPs should determine whether their objectives are compatible. This process may be difficult, but it is important, particularly in the context of multinational joint ventures, given the cultural, linguistic, political, and social differences between the parties. Similarly, there may be legal, accounting, and tax differences between the countries of the JVPs. Since all of these differences may give rise to misunderstandings, they must be reconciled. 3.3 Choosing the Business Form The next step is to choose the basic structure of the business venture. A variety of complex legal and practical considerations are involved at this stage. 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. Frequently, one JVP looks tor a capital infusion and, in return, shares its technology expertise, and know-how. 3.4 Identifying Legal Problems

19

At the beginning of the process, counsel must identify and resolve major legal issues and potential problem areas, including governmental regulatory matters. 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. For example, the parties may have to deal with differing tax objectives resulting from fundamentally different business goals or, more commonly, from different constraints of the tax laws and accounting practices of the home country. Early recognition of these issues may allow the parties sufficient flexibility to structure the joint venture to avoid these problems. 3.6 Drafting the Joint Venture Agreement Finally, after the goals, structure, and legal issues have been identified, it is necessary to draft the joint venture agreement. As will be seen in later chapters of this book, international joint ventures often involve unique features, and careful draftsman ship is required. 1.0 TYPES OF BUSINESS ARRANGEMENTS 1.1 Joint Ventures 1.2 Exports 1.3 Licensing & Other Contractual Arrangements 1.4 Direct Investments 2.0 THE NATURE OF A JOINT VENTURE
2.1 Equity Joint Ventures 2.2 Contractual Joint Ventures

3.0 PLANNING THE JOINT VENTURE
3.1 Identifying Objectives 3.2 Selecting a Partner 3.3 Choosing the Business Form

20

3.4 Identifying Legal Problems 3.5 Identifying Conflicts Between Partners 3.6 Drafting the Joint Venture Agreement 4.0 A HYPOTHETICAL JOINT VENTURE 5.0 INTERNATIONAL JOINT VENTURES 5.1 Identifying a Suitable Partner 5.2 Information Exchange Agreement 5.3 Letter of Intent or Memorandum of Understanding 5.4 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

5.5 Tax Planning 5.6 Ancillary Agreements ¨ ¨ ¨ ¨ ¨ ¨ ¨ Patent, 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?

21

Joint ventures are not uncommon in the oil and gas industry, and are often cooperations between a local and foreign company (about 3/4 are international). A joint venture is often seen as a very viable business alternative in this sector, as the companies can complement their skill sets while it offers the foreign company a geographic presence. Studies show a failure rate of 30-61%, and that 60% failed to start or faded away within 5 years. (Osborn, 2003) It is also known that joint ventures in low-developed countries show a greater instability, and that JVs involving government partners have higher incidence of failure (private firms seem to be better equipped to supply key skills, marketing networks etc.) Furthermore, JVs have shown to fail miserably under highly volatile demand and rapid changes in product technology Some countries, 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. Brokers In addition, joint ventures are practiced by a joint venture broker, who are people that often put together the two parties that participate in a joint venture. A joint venture broker then often make a percentage of the profit that is made from the deal between the two parties. Reasons for Forming a Joint Venture Internal Reasons Build on company's strengths Spreading costs and risks 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

22

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, 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, such as distribution channels, technology, or finance, joint ventures are becoming an increasingly common way for companies to form strategic alliances. Sustainable Competitive Advantage In a joint venture, two or more "parent" companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control.

23

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 - checking the credentials of the other party ("trust and verify" - trust the

information you receive from the prospective partner, 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.g. 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;

by misunderstanding the significance of appreciated property, companies can fundamentally weaken the economics of the deal for themselves and their partners.
• •

special allocations of income, gain, 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. You all strategies and contracts must be planned properly in accordance with the law. Joint venture association can be used effectively in a business-based technology, especially where the Intellectual Property assets concerned. In a joint venture associations, businesses work together and share resources, knowledge, benefits and / or geographic market. 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. Various forms of joint ventures. Joint venture technology can be of various forms. In one scenario, the organization in May to join together to form a joint venture that is its own entity

24

with the ownership shares and rights. This usually happens in a multi-national company or a larger business. This form of a joint venture with technology in general to the merger of two separate companies from the law itself. In another method, a more general, a joint venture agreement that formed between the business for a particular purpose, such as one campaign or individuals to share resources and bring about increasing benefits and / or client base to increase. Establish joint ventures with this mode of joint venture technology may be for the initial phase of a more permanent business relationship. Points to be consider while planning a joint venture technology. If you are planning a joint venture, 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. The main focus is to create a joint venture company to create innovative companies or joint-venture, which will help in increasing the value of new business or to form a body that is able to manage the business. The joint venture is focused technology partners to manage, they provide access to resources, capital, resources intellectual property, technical resources and so forth. 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. When you make your contract, a joint venture technology, 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. The requirements for completing these objectives must also be clearly stated in the agreement. The problem of laws on tax issues and legalities related to the Anti must also be stated clearly. In short, detailed information that is clear and the details relating to the special role in the joint venture and your skills, etc. should be clarified as part of the joint venture technology.

Global Competition: What's the First Move? For multinationals, competition is a complex series of moves and countermoves on a global landscape. But what's the best opening move?

25

Competing with multinationals can be considered a big game of chess, with each engagement with a competitor broken into an opening, a middle game, and an endgame. In this excerpt, the authors set out best moves for an effective opening. 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. We call this approach "competing under strategic interdependence," or CSI. And where this strategic interdependence exists, the complexity of the competitive situation can quickly overwhelm ordinary analysis. As strategists have learned from game theory, the results of any move a player makes stem in large part from the choices his opponent makes. Often those results are nonlinear—that is, out of proportion to the events that provoke them. Furthermore, they might happen far away from the apparent sphere of competition, like the proverbial butterfly that flaps its wings in New York and causes a tsunami in Japan. Most business strategists are terrible at anticipating the consequences of interdependent choices, and they're even worse at using interdependency to their advantage. With the following mapping tools and techniques, you can learn to see the whole chessboard —that is, 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.

To uncover—and ultimately exploit—the interdependencies between you and your competitors, you need a clear understanding of your own product categories and the geographic arenas you operate in. 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. For an example of this, let's consider Unilever, a European consumer-goods manufacturer. The company's well-known brands include Knorr soups, Dove soap, and Snuggle fabric softener. Unilever competes in three principal product categories—foods, personal care, and fabric care—and in three major global geographic arenas—Europe, the Americas, and the AsiaPacific-Africa region. In most of those categories and in all of those territories, Unilever's

26

principal rival is U.S.-based Procter & Gamble, makers of Folgers coffee, Pampers diapers, and Tide laundry detergent. Unilever's CSI table, shown below, indicates that the company competes in nine different product and geographic arenas (each represented by a cell in the table). Unilever's executives could then drill down further and draw up CSI tables for each product group, for specific types of products within those groups, and for different geographic arenas. For instance, if the company's personal-care group were thinking through its global positioning prospects, a manager in that unit might look at the competition more narrowly, by product type. The personal-care group is responsible for products in the following categories: oral care, grooming, infant hygiene, feminine hygiene, and senior hygiene. So if we continue analyzing Unilever's business opportunities in the same three geographic regions (for simplicity's sake), we see that the personal-care group competes in fifteen different arenas, as shown below.

Once you've created your tables, 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. The best way to do that is to analyze three important factors: your competitor's potential reactiveness to increased pressure in that arena; the arena's attractiveness to you; and the relative clout each of you brings to the table. Reactiveness measures how much incentive your competitor has to counter your move. It is based on several sub factors, including your competitor's market share in a particular business arena (the larger the share, the greater the arena's importance to your competitor) and the arena's profitability (the more profitable the arena, the more incentive your rival has to defend it). The final sub factor, your competitor's emotional attachment to the arena, is more difficult to ascertain, but it can be as critical a consideration as share and profitability. Essentially, you should be looking for any noneconomic factor that would make your competitor more likely to want to protect the arena—for instance, national or corporate pride, the historical significance of the arena, and any significant sunk costs.

27

Attractiveness, in this scheme, is the mirror image of reactiveness. It's the measure of how important the arena is to you and is based on the same subfactors as reactiveness: How much market share do you have in the arena? How profitable is it? How emotionally attached to it are you? Relative clout, the third factor, measures who's in a better position to launch, or defend against, a strategic move in the arena. Clout can be determined by looking at the relative sales of a company and its competitor, then adjusting for other factors such as each party's distribution dominance or technology advantages. (Clout measures the ability to fight back, while reactiveness measures the propensity to fight back.) We've set up a Web site that offers our methodology and formulas for measuring reactiveness, attractiveness, and relative clout based on publicly available information— things like a company's individual product sales, a product division's performance compared with that of the rest of the organization, the company's sales in a particular region of the country or the world, and so on. The end result will be numerical ratings for reactiveness, attractiveness, and clout—numbers you can use in the third step of the CSI process, mapping the competitive terrain on a bubble chart. To do this, first plot your competitor's reactiveness along the horizontal axis. Reactiveness increases from left to right, so bubbles further to the right indicate arenas that are more important to that competitor, also known as the defender. Then plot the arena's attractiveness to you along the vertical axis. The higher the bubble, the more attractive the arena is to you. The size of a bubble indicates the defender's market clout —the bigger the bubble, 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. For instance, bubble b in the upper left appears to be the most appealing arena for the instigator, the company that wants to make an opening move. 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. Conversely, the least appealing arena for the instigator is represented by bubble

28

e, 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. Choices get more difficult when comparing bubbles like d and e. Bubble d suggests that this arena would prompt less of a reaction by the defender than bubble e would, but the defender has more clout in this product or geographic arena. The instigator would have to make a judgment call about which arena, d or e, it would best be able to defend from a competitor's retaliation. The ultimate purpose of this mapping technique is to help managers plan competitive campaigns in multiple markets, but it is useful for other reasons. First, it allows a company to look at its world through its competitor's eyes. Second, the mapping technique can be employed at several levels of granularity to expose competitive opportunities and weaknesses that might not otherwise be evident. Companies can build charts that focus on smaller geographic areas, such as states or even cities, if the data are available. Even in highly concentrated industries such as consumer soft drinks, where Coca-Cola and Pepsi control 76 percent of the U.S. market, competitive battles are planned down to the level of individual supermarkets in individual cities; 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. For companies with less global reach than Unilever, P&G, Coca-Cola, and Pepsi, charting will likely start at a national or regional level. It's also possible to plot several competitors in each arena to fully understand the dimensions of the competitive landscape. The vertical axis would continue to measure only the instigator's attractiveness scores. The reactiveness scores would then be used to place different competitors along the horizontal axis of the chart, using different colors to identify each competitor. Bubble size would indicate each competitor's clout relative to the instigator —not relative to the other competitors. Excerpted with permission from "Global Gamesmanship," Harvard Business Review, Vol. 81, No. 5, May 2003.

29

Sydney, Australia: Origin Energy and Micron Technology Establish Joint Venture Australia integrated Energy Company, Origin Energy and Micron Technology, Inc. has formed a 50:50 joint venture with a focus on the development of photovoltaic technology. Micron is a US listed company and one of the world’s leading providers of advanced semiconductor solutions. Micron’s President and Chief Operating Officer, Mr Mark Durcan said, “As we have looked to leverage our core strengths in other markets, photovoltaic energy technology is a natural area of investigation. Origin is a company with a significant interest and history in renewable energy technologies. Combining our semiconductor manufacturing expertise with Origin’s solar experience could result in a strong partnership.” Origin’s Executive General Manager, Major Development Projects, Mr Andrew Stock, said, “We are pleased to joint venture with Micron as a global semiconductor leader to further explore the potential of solar photovoltaic technology. “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,” Mr. Stock added. 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; Royalty payable being limited to 5 per cent for domestic sales and 8 percent for export, subjected to a total payment of 8 per cent on sales over 10 year period. 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. In case of technology transfer, payment of royalty subsumes the payment of royalty for use of trademark and brand name of the foreign collaborators.

30

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).This is chaired by the secretary, department of Industrial Policy and promotion, Ministry of Commerce and Industry.

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. Technology can either be developed through own research and development or it can be purchased through indigenous or imported sources. India has opted for a judicious mix of indigenous and imported technology. Purchase of technology is commonly called “Technology transfer” and it is generally covered by a technology transfer agreement. ‘Technology transfer’ means the use of knowledge and when we talk about transfer of the technology, 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. So, 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. Technology generally would comprise the following elements: Process Know how Design Know how

31

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; Royalty payable being limited to 5 per cent for domestic sales and 8 percent for export, subjected to a total payment of 8 per cent on sales over 10 year period. 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. In case of technology transfer, payment of royalty subsumes the payment of royalty for use of trademark and brand name of the foreign collaborators. 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).This is chaired by the secretary, department of Industrial Policy and promotion, Ministry of Commerce and Industry.

32

Procedure for approvals- Technology transfers by SIA All others proposals of foreign technology agreement, not meeting the any or all of the parameters for automatic approval, are considered for approval, on merits, by the Government. Applications in respect of such proposals should be made submitted in form FC/IL (SIA) to the secretariat for Industrial Assistance, Department of Industrial Policy Promotion, Ministry of Industry, Udyog Bhawan, New Delhi. No Fees is payable. Approvals are normally available within 4 weeks of filing the application. Scope for foreign collaboration Government of India issues from time to time lists of Industries “where foreign investment may be permitted”. The list so issued is illustrative only. No doubt, a broad technology base has been created in the country, yet a need to update the production technology may arise due to constant technological advancements in developed countries .Government of India (foreign investment Promotion Board) may consider import of technology in Industries other than those listed in priority list Annex 4A.

Finding Joint Venture Partners Just Got Easy
Finding Joint venture partners has not been easy until now. Everyone knows that joint ventures are the number one, fastest growing, most profitable form of marketing strategy in the world, however building joint venture alliances can be time consuming and unproductive if you don't know what to do or where to find them. In the past, people have hired joint venture brokers, 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. More importantly though, 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.

33

In the past, 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. This does not create new customers fast enough and can leave your sales stagnating and your customers wondering where you are. So, of course the entrepreneur started to turn to the internet to find joint venture partners. Sites like Facebook and MySpace can be great for helping you to build a loyal customer following, but not if you do not have the right connections or do now know how to use them correctly. 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. Most entrepreneurs do not have the luxury or time then need to make these networking sites produce even one joint venture partner. If you are an entrepreneur and you are trying to make the most of your resources, you have to realize that there are tens of thousands of people just like you, who want to meet you and joint venture with your company. 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, that's where a joint venture club comes in. A joint venture club such as the Private JV Club can help you to reach, and surpass, your goals. A joint venture club, like the Private JV Club, gives you access to entrepreneurs, from all over the world, just like you waiting for you to make an alliance with them. There is no having to get past the gate keepers. No making hundreds of phone calls to get to your dream guru. 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. They offer this for free so you no longer have to pay to take a joint venture course. This insures the success of your joint venture transactions and provides your company with credibility to other

34

Private Joint Venture Club Members In a joint venture club such as the Private Joint Venture Club, you have business mentors and multi-millionaires who share their secret strategies for free. 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. This is all part of belonging to a Private JV Club. In a joint venture club, you are no longer the lone entrepreneur. There are entrepreneurs who you can create alliances with and build your network of colleagues as fast as you are building your customer network. You can create products with other entrepreneurs, launch them together, create profits, gain market share and never pay a joint venture broker again. Save your money, in a club you can have access to all of that simply because you are a member. Membership has its privileges. 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, safest, friendliest way to learn about, have access to and create a joint venture empire. 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, the more the Joint Venture will have the potential to be profitable. The key for you here is to create the type of Joint Venture that absolutely no one can say no to. A joint venture is an agreement in which two or more businesses work on a project for a set period of time. 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. 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.

35

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 Venture E-mail Promotions There are many vendors and retail golf shops you work with that own large golfer databases. Create joint venture partnerships, network online, for more detail visit www.joint-venture-guide.com and get articles in rezones. It is a joint economic venture of twenty one thousand financial institutions. These industries need marketing like direct mail, letterbox flyers, newspaper/magazine inserts, websites (with much thought given to key word phrases), joint venture partners (or alliance partners). You could joint venture or cross promotion deal with other businesses. 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, as well as special commission rate. These involve partnerships, joint-ventures, venture loans or equity. You can even form a joint venture to work with someone. 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. 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. Many of the new list-building communities are nothing more than old 'safe list' programs cloaked as Joint Venture communities. In an Equity Joint Venture, the parties are obligated to divide their respective contributions to the joint venture (whether in cash or in kind) into discrete ratios, for more detail visit www.joint-ventures-secret.com which ratios must be strictly adhered to when apportioning profits both during the venture’s operation and after liquidation. Internal joint venture marketing- You probably offer complimentary products within your own business. Are you ready to start a joint venture? Joint venture marketing is rising in popularity everyday, but it does take some skill, good planning and foresight to execute. You pay your joint venture partner a commission for each sale that is generated from the partnership. You can construct most joint venture deals with little or no money. When looking for joint venture partners, you need to be mindful of certain things.

36

You can make a joint venture (agree to work together), get more done, and in turn earn more money. ”Use this blueprint to create behaviors that lead to activities like more follow up purchases, higher contributions levels, increased qualified employment applications, new joint venture proposals or a big boost in capital contributions. There are Two Methods of Marketing Using Joint Ventures Both Joint Venture parties are excited, enthusiastic and passionate about the Joint Venture, it will almost certainly work very well. There are two Methods of marketing using Joint Ventures: External joint venture marketing- You combine your marketing with that of another business that uses a product or service that compliments your own. 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. A joint venture is only limited by the creativity of the parties involved. However, it has the additional advantage of enabling you to support each other’s business in other ways that will present more joint venture opportunities, and other business benefits such as expanding each other’s network of quality friends, associates and business partners. "Such an offer is called a joint-venture offer. These involve partnerships, joint-ventures, venture loans or equity. The Joint Venture between the merchant and these marketers can be structured in many ways (in fact, each may be unique), but let's just play out a typical scenario for the purpose of an example. Your aim is to find credible centers of influence that you can joint venture with over and over again. And finally, devise a back-up system of your very important files such as your mailing list, customer list, your joint venture partners and your "products" on the design table. Affiliate Programs: Some will debate that there has to be some exclusivity, some limited number of partners - to qualify as a Joint Venture.

37

Then you are going to care about the leveraging and joint venture aspects of the project. I hope this tips can help you setting up your own joint venture. A popular guest speaker and participant in industry conferences internationally, a joint venture between the Universal Music Group and Penguin Putnam, and sits on numerous international charity and industry boards of directors. Write down your goals and desired outcome be sure to have specific, measurable and actionoriented goals for your joint venture, along with a realistic time frame for their execution. A joint venture is formed when you not only have an alliance but you come up with a strategy to find customers together. 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. Make joint venture deals that will support it. You will then want to contact them to propose a joint venture deal by offering them complementary products and/or services. What might have started out being a joint venture could lose its joint venture advantage by being deemed a partnership, and inherit the disadvantages of a partnership instead. Now let’s look at the many resources available to you to generate the traffic you need to run a successful website; search engines, affiliate programs, content submissions, email campaigns, joint venture partners, link exchanges, blogs, pay-per-click advertising and a whole host of other resources too numerous to mention here. She is not someone to approach for a 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. 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. 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.

38

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 Joint ventures may provide specialist knowledge of local markets, entry to required

acceptability of the company.

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

39

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.

40

CONCLUSION
Finding Joint venture partners has not been easy until now. Everyone knows that joint ventures are the number one, fastest growing, most profitable form of marketing strategy in the world, however building joint venture alliances can be time consuming and unproductive if you don't know what to do or where to find them. More importantly though, 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.

41

Sign up to vote on this title
UsefulNot useful