A joint venture is a well-known term in the world of business. It refers to an agreement between parties, two or more, to merge or combine their initial resources to achieve a singular business goal. Joint Ventures are generally short-lived and are done for a specific purpose. The best part about this venture is that when parties come together with their resources for a limited duration, the business goals are easier to meet, mostly because of the efficiency and effectiveness that comes with the combination. A combined effort is always better than individual effort, and joint ventures are a perfect example of that.
In general, the agreements of a joint venture are signed by all the parties involved. A proper venture should cover all the purpose of forming the collaboration. It should specify the rewards according to the contribution, the terms, and conditions in case a party wants to terminate their contribution and the specific government rules regarding the nature of the work.
There are a few key benefits of forming a joint venture. The total access to key technologies and the local distribution network is something any company would love to do. When you’re entering a new market, you will need proper knowledge of the local customers and their preferences, and joint ventures enable the chance of knowing it. Through joint ventures, you get to know about the core information of other companies that would deem as pretty useful. Moreover, the liability is limited too, so much less risky than individual ventures.
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Everything You Need to Know About Joint Venture
There are a number of different joint ventures, but we have identified the most common and essential ones in the list below:
1. Basic Joint Ventures
These are the most common types of joint ventures. All you have to do is to create a win-win situation with other companies and start the venture. It would be a very good deal for beginner companies and the ones who want to take their companies to the next level.
Basic joint ventures begin with companies coming together with their resources to fulfill one singular goal. They will definitely be for a limited timeframe.
2. Affiliate Partnerships
These are joint venture agreements that have very low barriers to entry. This means in order to be a part of this venture you don’t have to face a lot of barriers and issues. It is a very good option for newly started companies seeking an audience. Affiliations are kind of like commissions for salespersons, only that it enhances your company’s fame and helps grow a brand. The Internet marketing industry is literally built on affiliated partnerships. It’s mostly marketing and promotion to sell your products to the right audience.
3. Financing Agreements
This is the kind of joint venture that includes more risk and more gain at the same time. Before you even begin initiating this agreement, you better hire a business lawyer to make sure your legal rights are protected. This venture involves funding from private parties or business centers.
In agreements like this, both the fund-givers and the fundraisers share the risk. It helps the business owner be more creative and more flexible, leaving room for new ideas and strategies. Lump-sum flows of cash can be an example of financial agreements.
4. Vertical Joint Venture
When you’re in the importing business, vertical joint ventures are very useful for you. These ventures enable you to share the risk of entering new markets. Here you basically share the industry knowledge, distribution duties, and funding- altogether. The sole purpose of this joint venture is to find an effective way of the importing business for reaching the milestone.
5. Project-Based Joint Venture
The title would give you a little insight into the type here. This special venture generally is a single goal-based project, and after that goal is met the venture ends. The kind is pretty popular in businesses that work in the ever-emerging sectors. Here, two or more parties collaborate together to research and bring an outcome.
Also, if a company tends to expand their business into another one, then this venture would work wonders as they will get access to valuable data from other companies. It’s a win-win for both parties because they both get the important data and it’s entirely up to them as to what they will do with it.
6. Application Programming Interfaces (API)
This is the era of technology, and what’s a technology without a bit of programming? This venture is about programming interfaces, a very futuristic approach to businesses and ventures. Companies can collaborate with each other by combining software and technologies. The API’s are generally available in public.
The API collaborations are mostly done to enhance or upgrade products. It can also be done to figure unique data out and try out new technologies. There are a lot of software companies that began with API ventures. If you’re a young tech-company and want to enhance your products while keeping the intellectual property right intact, API is your bid.
7. Retargeting and Republishing
These are not exactly joint venture types. These are basically tools for tech-based companies to create joint ventures. Republishing refers to using existing content to a completely new audience. Through this, the content creators can get new traffic and brand exposure while the other party, the publishers get new content to ensure they don’t lose out on the audience.
Retargeting is another smart and effective technique for identical or similar industries. If you see that another business is overlapping on your audience, you can retarget the audience by putting on advertisements of a different business. This will make sure the audience never leaves and you can use the data you got from paid ads.
8. Functional Based Joint Venture
This is the last but one of the most effective ventures of the list. Here, the companies don’t combine their products, they combine the expertise. The target is very simple- increase efficiency. Industries like food and health frequently go on joint ventures like these.
Say, a company has the resources to produce a good but doesn’t have the resources to promote and make sales. Another company lacks the production unit but excels in sales. These two can combine in a functional-based joint venture and fill each other’s gaps.
So these are the joint ventures that you need to know before your company goes for a joint venture of its own!