Joint Venture Essay

Joint gauges are business ventures formed by two or to a greater extent companies to achieve aspecific, but limited, objective. An example would be the development of an offshore oil field, where a group of companies combines to seduce and operate a drilling platform and related pipeline. The project is owned equally by the assort enterprises and its focal point could be controlled either by one of the collaborationists or by a separate direction could be controlled either by one of the partners or by a separate management institution established just for the project. The venture may be organised as a partnership ,a peck ,a joint-stock company or some some other legal form, and it can contunieindefinetly.The rational for a joint venture is usually to diversify risk among the members and or to combine expertise and assets that none of the participants provide alone. Roy L.Crum,Eugene F.Brigham& joel.F.Houston.(2005)Fundamentals of international finance.1st edn.THE ADVANTAGES OF common VENTURES* Access to expertise and contacts in local markets, each partner agrees to ajoint venture to gain access to the other partners skills and resources. Typically the international partner contributes financial resources, technology or products. The local partner provides the skills and knowledge required for managing a business in its country.* Reduced market and political risks* Economies of scale by pooling skills and resources(resulting in e.g. lower marketing costs)* May avoid local tariffs and non-tariffs barriers* Shared risk of failure* by chance better relations with national governments through having a local partner.THE DISDVANTAGE OF JOINT VENTURES* Objectives of the respective partners may be incompatible ,resulting in conflicts* Contributions to joint ventures can become disproportionate* Los of control over foreign operations* Completion might overburden a companys staff* Partners may become locked into ache term investments from which it is difficu lt to withdraw * Cultural differences may result in possible differences in management culture among participating firms * Problems of management structures and dual parent staffing of joint ventures. * Transfer pricing problems as practised pass between partners Sven hollensen.(2004)global marketing(adecision-oriented approach).3rd edn.