Joint Venture Consultancy

Every joint venture has two or more co-venturers. The co-venturers contribute to the joint venture with tangible and intangible assets. Hence, the co-venturers influence the joint venture through the following ways:

Formal agreement

Several legal documents are prepared and maintained along with the joint venture agreement which spells the scope of the venture, types of decisions, approvals, percentage of votes, etc. Also, some terms and conditions are set for day to day working of the venture.

Staffing

The co-venturers mutually decide amongst them as to how the staff required for the venture would be resourced. Also, the staff is introduced to each other for efficient working between them.

The employment of the existing staff is preferable as the venturers are known to them and their working style.

Technology sharing

The co-venturers provide available technology and knowledge. Also sometimes the technology is hired and employed for the joint venture

• A joint venture has a limited period of duration as they are formed job specific
• The partners of Joint venture are called as co-venturers
• The sharing of profit and loss amongst the coventurers is pre-decided in the specific ratio
• The initial capital may or may not be introduced by the co-venturers
• Once the purpose of a joint venture is completed, the same is dissolved
• The financial accounts of a joint venture are settled at the time of dissolution

The transactions of businesses that are normally done through a joint venture are constructing bridges, roads, dams, seasonal purchase and sale of goods, film production, purchasing land to divide it into plots and sell, etc.

However, the motive behind forming joint venture are listed below:

• Domestic and global competition: Joint venture helps enhances the capability to complete both domestically and globally as companies with different expertise and different areas come together to achieve a common goal.
• Increased market value and better product line: Joint venture helps in diversification of business and also increases the market value of the business.
• The pooling of licensing and know-how technologies: A project sometimes requires specialization in multiple areas and it is not possible for a single person to possess all such expertise. Therefore, JV is formed to pool the expertise and know-how technologies.
• New Market Penetration: JV helps in smooth entry into new market as all the requisite knowledge and competency is possessed by the local player. Local players also help in completion of all legal requirements. Therefore, a new player can easily enter and survive in a new market.
• Gaining access to expertise, managerial experience, finance, raw materials, etc
• Getting opportunities for economies of scale of marketing, production, research, and development
• Sharing investments of the high-end projects: Few projects require huge funds. A company may obtain funds through various finances but the same involves a lot of risk, increases fixed cost and also reduces net worth of the business. Therefore, one of the easy ways to accomplish the high value project is through Joint Venture. Co-ventures share investment and in return share profit and loss of the JV.
• Sharing the capabilities and skills of co-venturers

The joint venture is work and job-specific. And so is very useful for turnkey projects. The major advantages of forming a joint venture are as follows:

• Since the resources, capacities, and capabilities of different entities are merged and pooled together, the joint venture lets the project start without any delays due to legal and other formalities. Generally, local players help in completion of all legal formalities and possess all requisite licences.
• Diversification in another business line or products is easier through a joint venture as experience and expertise of other ventures can be banked upon.
• Exploring a new market is one of the beneficial aspects of a joint venture as local player as co-venture possess all expertise which are required for survival in new market.
• Additional gains, higher profitability, growth are some more advantages of a joint venture.
• If the joint venture requires the existing setup, then underutilized plant and equipment can be optimized while the formalities of setting up are also reduced.
• Backward and forward integration can give access to resources, a captive market, etc
• The existing marketing and distribution of the co-venturers can be accessed