International Joint ventures Case Study
Advantages International Joint ventures allow for much faster and less costly access to foreign markets than can be achieved by purchasing an existing company in the Jurisdiction or starting a new venture. Jobs provide quick access to channels of distribution, and they provide access for the non-resident partner to knowledge and know-how of the local marketplace, which substantially enhances the probability of success for the denture.
The resident partner also often has existing relationships with key suppliers and customers, and proficiency in the local language and customs.
These benefits can be especially critical to a small or medium-sized business that does not have the capital, resources or expertise necessary to pursue the opportunity unless it is able to share the risks and the costs through an alliance such as an international Joint denture. Jobs allow the partners to move quickly, cost effectively and with credibility provided by the reputation of the resident partner) in the local marketplace. The parties to an JP can also take advantage of complementary lines of business and synergies that may exist between the two companies. Disadvantages
An international Joint venture can result in a frustrating experience and ultimately a failure if it lacks adequate planning and strategy. Factors such as marketplace developments, technology issues, regulatory uncertainties and economic downturns can be difficult to anticipate and can have a debilitating impact on Jibs.
By their nature (and like all partnerships), profits derived from an JP are diluted because they are shared. Management issues can arise, in spite of having adequate mechanisms in place to resolve disputes, because of different management philosophies of the ratters.
The partners also may discover that they do not share expectations and are not flexible enough to change and accommodate the evolving needs of the business. Loin ventures are often difficult to capitalize as an entity, particularly in respect to debt, because they are finite in their duration and therefore lack permanence. Unless an JP is adequately capitalized, its debt financing, if available at all, may have to be guaranteed, in whole or in part, by the Joint venture partners, which can increase their level of risk in the venture.
