Joint venture | Habefast
Joint venture : definition
The term joint venture is actually an anglicism used in the economic field to define a joint company between several companies, each of which holds the same number of shares.
In short, it is the joint creation, often by two partners of different nationalities, of an industrial or commercial company. It is set up with a significant participation in the capital of a foreign company established on the targeted export market.
Why implement a joint venture strategy?
Creation of a synergy at low cost
The goal that companies seek to achieve with the implementation of a long-term or limited-term partnership strategy is simple. The goal is to achieve synergy through the pooling of both companies’ skills and technical knowledge. All this while limiting the costs and risks generated by investing alone in a new market.
Penetration of foreign markets
Another major argument is that of market penetration. Indeed, to reach certain new markets, especially foreign ones, it is sometimes preferable to join forces with local companies. For example, to penetrate the market in China, India, or the United Arab Emirates, this is a necessary criterion.
Easy integration to foreign markets
The creation of a joint subsidiary with local companies is also envisaged in order to allow foreign players to settle permanently in a market. In order to acclimatize to the various legislations, cultural or commercial differences, or administrative differences, which make it difficult for them to succeed on these markets. This is notably the case in Brazil or Japan.
Examples of joint ventures
Here are some examples of famous joint ventures:
- Kellogg’s cereal brand’s agreement with Wilmar International Limited allowed both companies to enter the Chinese market.
- Also, the cab company UBER and the powerful car manufacturer Volvo have set up a joint venture to develop driverless cars.