Joint ventures promote collaborative innovation.
Joint venture is an Anglicism that refers to a joint venture . 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 . What they do is join together on a specific project and share the responsibility associated with investments, profits and losses.
Main features
A joint venture arises from the association of two or more entities that, without losing their individuality, act together in a specific activity, distributing obligations and rights . This means that each partner continues to operate on their own in their usual field, but at the same time works in common and in coordination with the other members that make up the alliance in a particular field. Therefore, it does not constitute a business merger or an acquisition, but rather a joint venture.
The joint venture is born with the signing of a contract which establishes the initial contributions of each member and the distribution of costs, benefits, etc. It is important to indicate that the contribution established in the joint venture contract is not always money: it may be services, technologies or goods, for example.
Another important characteristic is that the existence of the joint venture is tied to the extension of the initiative in question. While it may aim for the long term, it does not come 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
According to their characteristics, several types of joint venture can be distinguished:
- Contractual joint venture o per project: La colaboración empresarial gira en torno a objetivo en común, dividiéndose riesgos y ganancias entre las partes.
- Co-investment joint venture : It focuses on the joint contribution of goods or funds.
- Vertical joint venture : This partner agreement is usually 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 takes advantage of the knowledge of its partner's specialists.
- Growth joint venture : It brings together small companies that are committed to sharing certain efforts and expanding their reach.
A joint venture allows joint project management between two or more companies.
Advantages and disadvantages
A joint venture can provide multiple advantages. Partners, by sharing or dividing costs and risks, manage to reduce them. The alliance , likewise, allows them to gain competitiveness and access new markets .
The joint venture also favors the acquisition of knowledge and experience . These resources can be moved to independent operations and remain an asset to the company once the alliance is dissolved.
Among the negative aspects, the joint venture can lead to confrontations when making decisions . Defining a new corporate culture is a challenge and may even lead to conflicts of interest between partners.
The difficulties are more marked when the objectives of the agreement are unrealistic or unclear . Furthermore, if one or more partners do not comply with what was agreed or do not show the same effort as the rest, the problems become more pronounced.
Examples of joint venture
Examples of joint ventures can be found in numerous business sectors and industries. The aerospace sector is one of the most fruitful in this type of agreements.
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 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 immense Indian market.
Another example of a joint venture is Flexis , a venture of Renault and Volvo . These manufacturers came together specifically for the production of electric pickup trucks (vans).
Coca-cola y Nestle, 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 together to bet on joint innovation . For its part, the German club Bayern Munich signed a joint venture with the American franchise Los Angeles FC to search for and develop new talents.