Chapter 13. Joint Ventures PDF

BUSINESS ENGLISH BILJANA NAUMOSKA-SARAKINSKA 2024-2025 Chapter 13. Joint ventures  Joint venture:  a business activity undertaken by two or more persons or organizations to share the expense and profit of a particular business project;  it is not a business...

BUSINESS ENGLISH BILJANA NAUMOSKA-SARAKINSKA 2024-2025 Chapter 13. Joint ventures  Joint venture:  a business activity undertaken by two or more persons or organizations to share the expense and profit of a particular business project;  it is not a business organization in the sense of an ownership, partnership, or corporation;  it is an agreement between parties for a particular purpose and usually a defined timeframe;  may be very informal, such as a handshake and an agreement for two firms to share a booth at a trade show, or  may be extremely complex, such as a consortium of major electronics firms joining to develop new microchips;  the key factor in a joint venture partnership is its single, definable objective. Chapter 13. Joint ventures  usually formed for the ultimate purpose of saving money;  their appeal lies in that they allow companies to share both risks and costs;  joint venture = a business arrangement in which two or more parties agree to combine their resources for the purpose of achieving a specific task;  can be a new project or any other business activity;  each of the participants is responsible for profits, losses and costs associated with it. Chapter 13. Joint ventures  The key elements to a joint venture may include the following:  the number of parties involved;  the extent in which the joint venture will operate (geography, product, technology);  what and how much each party will contribute to the joint venture;  the structure of the joint venture itself;  initial contributions and ownership split of each party;  the kind of arrangements to be made once the deal is complete;  how the joint venture is controlled and managed;  how the joint venture will be staffed. Chapter 13. Joint ventures  Types of joint ventures: depending on what the aim of the business is, with the most common types of joint venture being:  Limited co-operation – an agreement to collaborate with another business in a limited and specific way;  for example, a small business with an exciting new product might want to sell it through a larger company's distribution network;  Separate joint venture business – a separate joint venture business is set up, possibly a new company, to handle a particular contract;  this can be a very flexible option - the partners each own shares in the company and agree how they should manage it;  Business partnership – in some cases, instead of a joint venture, a business partnership or a limited liability partnership may be formed, or even a merger of two businesses.  A joint venture is not the same as a partnership.  Chapter 13. Joint ventures Joint Ventures Business Partnerships  an agreement with a contract that joins together  represents an association of two or more persons two or more parties for the purpose of carrying out to carry on as co-owners of a single business a particular business undertaking; enterprise for profit;  all the sides involved agree to share the profit and  generally speaking, the differences between a loss of the enterprise; joint venture and a (business) partnership are not enormous, and a joint venture may even be  an association of two or more persons formed to considered as a form of partnership, the two are, carry out a single business enterprise for profit in nevertheless, two separate concepts, different which they combine their property, money, efforts, from each other; skill, and knowledge;  the contributions of the respective parties do not need to be equal or of the same character, but there must be some contribution by each side involved in the enterprise;  the joint venture joins several different business  the business partnership represents a single entities (each of which may be any type of legal business entity formed by two or more people. entity) into a new entity  Chapter 13. Joint ventures Joint Ventures Consortiums  an agreement with a contract that joins together  a looser arrangement between several different two or more parties for the purpose of carrying out and distinct business entities; a particular business undertaking;  unlike a joint venture, a consortium does not  all the sides involved agree to share the profit and create a new entity; loss of the enterprise;  an association of two or more persons formed to carry out a single business enterprise for profit in which they combine their property, money, efforts,  in the travel industry, for example, a consortium of skill, and knowledge; travel agencies allows memberships with benefits  the contributions of the respective parties do not = the consortium would negotiate on behalf of its need to be equal or of the same character, but members for special rates from hotels, resorts, and there must be some contribution by each side cruise lines. involved in the enterprise;  the joint venture joins several different business entities (each of which may be any type of legal entity) into a new entity Chapter 13. Joint ventures  Benefits of a joint venture  New insights and expertise;  Better resources;  It is temporary;  Shared risks and costs;  Flexibility;  Personal stakes can be sold individually;  Success is more likely:  Creates relationships and networks;  Limitless potential; and  Money is saved by sharing advertising and marketing costs. Chapter 13. Joint ventures  Risks of a joint venture  Vague, unclear or unrealistic objectives;  No such thing as equal involvement;  Great imbalance;  Clash of cultures;  Limited outside opportunities;  A lot of research and planning are necessary;  It may be difficult to exit the partnership:  Unreliable partners;  Flexibility can be restricted; and  Reputations may be destroyed.