Joint Venture Essay

Joint ventures are clientele ventures make by two or more companies to achieve aspecific, but limited, objective. An modelling would be the development of an offshore oil field, where a group of companies combines to chassis and operate a drilling platform and related pipeline. The project is owned equally by the affiliated enterprises and its counselling could be controlled either by one of the partners or by a severalize management could be controlled either by one of the partners or by a separate management organisation established just for the project. The venture may be organised as a partnership ,a corporation ,a join-stock company or some otherwise legal form, and it can contunieindefinetly.The rational for a joint venture is usually to diversify fortune among the members and or to combine expertness 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 JOINT 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, engineering 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* Possibly 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 inappropriate operations* Completion might overburden a companys staff* Partners may become locked into long term investments from which it is difficu lt to visit * Cultural differences may result in possible differences in management culture among participating firms * Problems of management structures and dual parent staffing of joint ventures. * imparting pricing problems as good pass between partners Sven hollensen.(2004)global marketing(adecision-oriented approach).3rd edn.