Group 3: Joint ventures

CY

Tan

Fong

Melinda

Pravina

Rosheeni
Definition of joint venture
• 2 or more parties have a same target and willing to share ownership, return and risk.
• Usually join because want to access new market, have same target.

• When they Joint venture is successful those parties who took part will share the profit based
agreement and howmuch each party contribute
• Countries that are common and famous for joint venture is India and China.

Example: sony and Telefonaktiebolaget LM Ericsson = sony Ericson

• Geely and proton
• Ford and mazda
Example:
• sony and Telefonaktiebolaget LM Ericsson = sony Ericson

They partnered in the early 2000s with the aim of being a world leader in mobile phones.

After several years of operating as a JV, the venture eventually became solely owned by Sony.

• Geely and proton

• Ford and mazda

• in 2016, Microsoft Corporation (NASDAQ: MSFT) sold its 50% stake in Caradigm, a JV it had

created in 2011 with General Electric Company (NYSE: GE)

Requirements for Joint Ventures
The key elements to a joint venture may include (but are not limited to):
•The number of parties involved
•The scope in which the JV will operate (geography, product, technology)
•What and how much each party will contribute to the JV
•The structure of the JV itself
•Initial contributions and ownership split of each party
•The kind of arrangements to be made once the deal is complete
•How the JV is controlled and managed
•How the JV will be staffed
Benefits of Joint venture

• New insights and expertise

Starting a joint venture provides the opportunity to gain new insights and expertise. Think about it; the

market is now way easier for you to understand given the short-term partnership that you have forged.

• Better resources

Forming a joint venture will give you access to better resources, such as specialized staff and technology.

All the equipment and capital that you needed for your project can now be used.

• Both parties share the risks and costs

In case the joint-group project fails, you are not alone when bearing the costs of its failure. Because you

two had volunteered to share the expenses, you both will also support the losses.
 Disadvantages of a Joint Venture
• Lack of clear communication

As a joint venture involves different companies from different horizons with different goals, there
is often a severe lack of communication between partners.
• Clash of cultures

A clash of cultures and management styles may result in poor co-operation and integration.
People with different beliefs, tastes, and preferences can get in the way big time if left
unchecked.
• Flexibility can be restricted

There are times when flexibility is restricted in a joint venture. When that happens, participants
have to focus on the joint venture, and their individual businesses suffer in the process.
Three main reasons why companies form joint ventures:
• Leverage Resources

A joint venture can take advantage of the combined resources of both companies to achieve the goal of the
venture. One company might have a well established manufacturing process, while the other company might have
superior distribution channels.
• Cost Savings

By using economies of scale, both companies in the JV can leverage their production at a lower per-unit cost
than they would separately. This is particularly appropriate with technology advances that are costly to implement.
Other cost savings as a result of a JV can include sharing advertising or labor costs.
• Combined Expertise

Two companies or parties forming a joint venture might each have unique backgrounds, skillsets, and expertise.
When combined through a JV, each company can benefit from the other's expertise and talent within their
company.
In Short;
• Joint Venture refers to that kind of business which is formed when two businesses
combine together and meet their different skill set to achieve a common business
objective
• A joint venture is not a business organization. It is an agreement between parties for
a particular purpose and usually a defined timeframe.
• The reasons behind forming a joint venture include business expansion,
development of new products, moving into new markets, particularly overseas, cost
saving and combined expertise.
• The business relationship in a joint venture will typically last any where form 5-7
years and generally dissolved once the specific goal has been achieved.
• In a partnership, partners agree to share the profits and take the burden of loss incurred.
However, in joint venture, it is not just profit that binds the parties together. ... Shared profit
and loses.
• A common use of JVs is to partner up with a local business to enter a foreign market.
• Sony and Ericson’s example is also a good example of Joint Venture as they joined hands to
manufacture smartphones and gadgets. After several operating years, Sony eventually
acquired Ericson mobile manufacturing division.
• A joint venture can be a great way to build a new business faster when your organization lacks
the capabilities to do so on its own. JVs also can help your business access foreign markets or
reduce the risk of a new venture.
Key Features of Joint Venture
• Agreement: Two or more firms come to an agreement, to undertake a business, for a definite
purpose and are bound by it.
• Pooling of resources and expertise: Firms pool their resources like capital, manpower,
technical know-how, and expertise, which helps in large-scale production.
• Sharing of profit and loss: The co-venturers agree to share the profits and losses of the
business in an agreed ratio. Access to advanced technology: By entering into joint venture
firms get access to various techniques of production, marketing and doing business, which
decreases the overall cost and also improves quality.
• Dissolution: Once the term or purpose of the joint venture is complete, the agreement comes
to an end, and the accounts of the coventurers, are settled, as and when it is dissolved
THANK YOU