If you own a business, big or small, you might come across an opportunity for a joint venture (JV). Businesses can use joint ventures to strengthen long-term relationships or to collaborate on short-term projects. A famous and very successful JV was with Google and NASA and their development of Google Earth. However, as with all business dealings, joint ventures do come with some risks. Let’s review the pros and cons of embarking on a JV.
The benefits of joint ventures
- Access to new markets and distribution networks
- Increased capacity
- Sharing of risks and costs with a partner
- Access to greater resources, including specialized staff, technology, and finance
A joint venture can also be very flexible. For instance, a joint venture can have a limited life span and only cover part of what you do, thus limiting the commitment for both parties and the business’ exposure.
Joint ventures are especially popular with businesses in the transport and travel industries that operate in different countries.
The risks of joint ventures
Partnering with another business can be complex. It takes time and effort to build the right relationship. Problems are likely to arise if:
- The objectives of the venture are not 100 per cent clear and communicated to everyone involved
- The partners have different objectives for the joint venture
- There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners
- Different cultures and management styles result in poor integration and cooperation
- The partners don’t provide sufficient leadership and support in the early stages
Success in a joint venture depends on thorough research and analysis of aims and objectives. This should be followed up with effective communication of the business plan to everyone involved.