Joint ventures promote collaborative innovation.
Joint venture is an Anglicism that refers to a joint company . It is a temporary company that arises from a strategic alliance or a cooperation agreement to develop a specific action.
When a joint venture is established, the participating companies retain their legal and operational autonomy . They join forces for a specific project and share the responsibility associated with investments, profits and losses.
Main features
A joint venture is the result of the association of two or more entities that, without losing their individuality, act together in a specific activity, sharing obligations and rights . This means that each partner continues to operate on their own within their usual field, but at the same time works together and in a coordinated manner with the other members that make up the alliance in a particular field. It is therefore not a business merger or acquisition, but rather a joint venture.
The joint venture is born with the signing of a contract that establishes the initial contributions of each member and the distribution of costs, benefits, etc. It is important to note that the contribution established in the joint venture contract is not always money: it may be services, technologies or goods, for example.
Another important feature is that the existence of the joint venture is tied to the scope of the initiative in question. While it may be long-term, it is not presented with an unlimited duration .
In short, a joint venture is a consortium that appeals to business synergy with a shared investment, a shared risk and also a shared benefit. This collaborative project can be part of a market strategy or an international expansion plan, to mention a few possibilities.
Companies from different countries can establish an international joint venture.
Types of joint venture
Depending on their characteristics, several types of joint venture can be distinguished:
- Joint venture contract o per project: La colaboración empresarial gira en torno a objetivo en común, dividiéndose riesgos y ganancias entre las partes.
- Joint venture : Focuses on the joint contribution of assets or funds.
- Vertical Joint Venture : This partnership arrangement is often established by multinational companies with SMEs. The smaller company uses the infrastructure of the larger corporation to streamline its operations and increase profits, while the transnational firm benefits from the expertise of its partner's specialists.
- Growth joint venture : Brings together small companies that are committed to sharing certain efforts and expanding their reach.
A joint venture allows for joint project management between two or more companies.
Advantages and disadvantages
A joint venture can bring multiple advantages. Partners can reduce costs and risks by sharing or dividing them. The alliance also allows them to gain competitiveness and access new markets .
The joint venture also facilitates the acquisition of knowledge and experience . These resources can be transferred to independent operations and remain an asset for the company once the alliance is dissolved.
On the negative side, a joint venture can lead to conflicts when it comes to decision-making . Defining a new corporate culture is a challenge and conflicts of interest can even arise between partners.
The difficulties are more pronounced when the objectives of the agreement are unrealistic or unclear . If, in addition, one or more partners do not comply with the agreement or do not show the same effort as the rest, the problems become more acute.
Examples of joint ventures
Examples of joint ventures can be found in many commercial sectors and industries. The aerospace sector is one of the most fertile in this type of agreement.
Delta Airlines y LATAM, por ejemplo, iniciaron una joint venture en 2019. El pacto inicial incluía terminales compartidas en diferentes aeropuertos, acceso recíproco a sectores VIP y un acuerdo para la acumulación y el canje de puntos y millas. Luego ambas compañías sumaron conexiones para incrementar frecuencias y asientos.
United Airlines, Lufthansa,Air Canada, Eurowings,Austrian Airlines, Brussels Airlines ySWISS, por su parte, crearon laAtlantic Joint Venture en 1996. Estas siete aerolíneas trabajan juntas para ofrecer numerosas rutas con flexibilidad y más opciones para sus clientes.
In the entertainment industry, The Walt Disney Company , Viacom 18 Media and Reliance Industries have agreed to a joint venture to operate in India . The alliance means that this joint venture can exclusively distribute Disney films and series in the vast Indian market.
Another example of a joint venture is Flexis , a Renault and Volvo venture. These manufacturers have joined forces specifically for the production of electric vans.
Coca-cola y Nestlé, por su parte, crearon en 1991 una joint venture que se conoce comoBeverage Partners Worldwide. A través de esta iniciativa lanzaron la marca de té Nestea que opera en el mercado global.
We can even find joint ventures in sports. LaLiga ( Spain 's main football competition) and Globant (a company that provides technological solutions) joined forces to invest in joint innovation . Meanwhile, the German club Bayern Munich signed a joint venture with the American franchise Los Angeles FC to seek out and develop new talent.