In 2012, Microsoft and American conglomerate General Electric took healthcare by storm with Caradigm, a strategic joint venture to simplify public health management. Caradigm was a joint venture, leveraging Microsoft’s expertise with large-scale data platforms and GE’s prowess in developing healthcare applications. The joint venture invests and helps the partners to reduce the cost of the project. If the investment cost is high as it relates to the capitalization of the sponsor, the judgment mostly on the funding of the project by one’s own funds may seriously jeopardize the future of the sponsor. Other brands like the New Delhi-based start-up Lithion Power are fast emerging as swapping solution providers for both electric 3Ws and 2Ws.

What are the 3 types of joint ventures?

  • Limited co-operation. This is when you agree to collaborate with another business in a limited and specific way.
  • Separate joint venture business.
  • Business partnerships.

Date of starting of business Capital to be contributed by each partner. The name should not be too similar or identical to an existing firm doing the same business. The location of any other places where the firm carries on business. Bharti Airtel Ltd. acquired Zain Telecom through a leveraged buyout strategy. The acquisition of Zain Africa International BV was majorly financed through borrowed funds. Bharati Airtel formed a Special Purpose Vehicle and the deal was structured through the SPV.

Advantages of FDI (Foreign Direct Investment) :

The two corporations lack in certain areas of successful business and through synergy, provide for each other the missing aspect so that both can be successful. For example, If company X has good marketing strategies but no novel service to offer. Company Y has a brilliant idea but lags in its marketing skills; both can collaborate and produce a novel product with good marketing. Privacy and information sharing – A joint venture invariably involves some degree of knowledge sharing, which can result in a loss of control over your intellectual property. Non-disclosure agreements should be in place from the start to prevent trade secrets or other sensitive corporate information from becoming public.

advantage and disadvantage of joint venture

Ownership of the new project or undertaking, project costs, profits and/or losses are shared among the parties involved in the joint venture. Joint venture agreements generally restrict partner companies’ outside activities while the project is in progress. Exclusivity agreements or non-compete agreements that impact existing relationships with suppliers or other business contacts may be expected of each company participating in a joint venture. Unless a separate business entity is established for the joint venture, the contract under which joint ventures are formed may subject each company to the liability inherent in a partnership.

Documents for Registration of Partnership

Such joint ventures are comparatively rare and happen for exclusive reasons such as if the collaborating companies want to foray into a new arena. The target audience for a joint venture refers to the section of the consumer base for which they are producing and launching a product or service. Almost all the efforts are directed towards luring and retaining the target audience. Lastly, A joint venture is a common business strategy used by companies that want to achieve a common goal or reach a specific consumer market.

Intellectual Property Provisions – The IJV agreement or a separate attached document should clearly delineate all rights to IP, technology, software and the like. In addition, an appropriate licensing agreement should be executed in respect to those “knowledge” items. The IJV agreement should clearly delineate ownership of intellectual property upon dissolution or termination of the joint venture. An international joint venture can result in a frustrating experience and ultimately a failure if it lacks adequate planning and strategy.

What is the joint venture agreement process:

If the firm’s assets are insufficient to pay the debt, then the partners will have to pay off the debt from their personal property to the creditors. The partnership firm has to adhere to very few compliances xabcd pattern as compared to a company or LLP. The partners do not need a Digital Signature Certificate , Director Identification Number , which is required for the company directors or designated partners of an LLP.

advantage and disadvantage of joint venture

An increase in total output of a product reduces the fixed cost per unit. Reduced Competition – Horizontal merger results in reduction in competition. Competition is one of the most common and strong reasons for mergers and acquisitions. Relative Contributions of Partners – The agreement should describe in as much detail as possible the respective contributions of the parties, both tangible and intangible. Depending on tax considerations, it may be appropriate to specify values for the respective contributions of the parties.

FDI is more preferred than FII, but why?

But this increased amount of effort doesn’t translate to a greater share of profit for that organization. Such gaps can eventually lead to conflict among the participating entities and result in lower returns overall. The biggest disadvantage of the partnership firm is having an unlimited liability of the partners. The partners have to bear the loss of the firm out of their personal estate. Whereas in a company or LLP, the shareholders or partners have liability limited to the extent of their shares. The liability created by one partner of the partnership firm is to be borne by all the partners of the firm.

Which of the following is an advantage of joint ventures quizlet?

​Which of the following is an advantage of joint ventures? They help companies avoid tariff and non-tariff barriers to entry.

Taiwanese electric two-wheeler manufacturer Gogoro, the only brand to have expanded across South Asian markets with its battery swapping platform, has partnered up with Hero MotoCorp. Hero will utilise Gogoro’s battery swapping technology for its upcoming e-scooters. Competition is introduced during the bidding stage, thereby bringing the benefits of market procurement (this is a kind of “competition for the market”).

Joint Venture: Meaning, Advantages, Disadvantages

Till date, this remains one of the best-known examples of a successful joint venture. Such findings are the study and implementation of various project taxes and multiple legal problems, such as stock issue documents and consequent ownership of the project, borrowing documents, etc. Specifically, the chemical and oil companies joining a joint project that face substantial expense as a consequence of their failure to comply with laws and regulations surrounding the venture. Bounce Electric became the first electric two-wheeler to offer a battery swapping service model, stating its intent to install kiosks across city streets where customers could swap batteries. Before selling its scooters, Bounce had partnered up with to extend its battery-swapping infrastructure in India across NoBroker locations in India. Tesla’s build quality has frequently come under criticism, with panel gaps and overall finish being touted as a weak point for the brand.

  • When this occurs, participants must focus on the joint venture, and their individual businesses suffer as a result.
  • B)If the contractual provisions are established to ensure that the program’s free cash flow is provided to provide that the debt is serviced in full under reasonable terms.
  • If this is the case then the focus should be on making a careful assessment of alternative project options to be sure that the projects that are selected are the best ones economically and financially.
  • India’s economic growth is attracting various business houses across the globe as evidenced by significant growth in the inflow of FDI in India in recent past years through various modes of alliances.
  • An unincorporated joint venture can be either by contract or through partnership.
  • The registration of a Partnership Firm in India can take up to 12 to 14 working days.
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