Joint venture
A joint venture (JV) is a business arrangement where a minimum of two parties agree to put their resources together for the purpose of accomplishing a specific task. The task can be a new project or an already existing business activity. Each participant in a JV is responsible for profits, losses, and costs associated with it. However, the venture is its own entity, separate from the participants’ other business interests.
KEY TAKEAWAYS
- A joint venture (JV) with two or more businesses decides to combine their resources in order to fulfil an enumerated goal.
- They are a partnership but can take on any legal structure. Corporations, partnerships, limited liability companies (LLCs), and other business entities can all be employed.
- A common cause of JVs is to partner up with a local business to enter a foreign market., or to join forces to manage a bigger project.
Most JVs are for the purpose for short term, for production or for research, one can also be formed for a continuing purpose. JVs can combine large and small companies to take on one or several projects and deals.
Within the Joint Venture, you are joining expertise to have a stronger foundation for the project or research you are part of.
There are 4 types of Joint Ventures
Overall, joint ventures increase efficiency, reduce cost, and improve risk management. There are four common types of joint ventures: project-based, functional-based, vertical, and horizontal.
1. Project-based joint venture
A project-based joint venture has two or more parties working on a specific project. This agreement is usually temporary, lasting until the project’s completion.
2. Functional-based joint venture
A functional-based joint venture is a business relationship where two or more parties share resources and expertise to support each other’s operations. The partnership is usually ongoing, lasting for as long as both parties find it beneficial.
3. Vertical joint venture
A vertical joint venture takes place between buyers and suppliers. These agreements are often preferred when bilateral trading isn’t beneficial. A vertical joint venture creates economies of scale and reduces costs for both parties.
4. Horizontal joint venture
A horizontal joint venture occurs between two or more companies operating in the same industry. The goal is to pool resources to gain a competitive edge. It has a lot of similarities with vertical joint ventures, but the difference is the two partners may be competitors.
With our connections in the global market, we might have just the right partner for you.