Exactly why strategic alliances are essential to business expansion

Exactly why strategic alliances are essential to business expansion

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There are various joint venture methods, each suitable for a specific function. Here's all you have to know.

Company growth is an ambitious objective that any entrepreneur thinks about at some time during their professional career, however, it can be an extremely stressful and pricey process. It is for these factors that some business owners go with joint ventures when trying to get into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can considerably increase the opportunities of success as partners pool their resources and connections in an effort to increase effectiveness. For instance, a company wanting to expand its distribution to new markets and areas can benefit from partnering with local businesses. This way, it can gain from an already existing local distribution network, not to mention having access to understanding and expertise on the target audience. Beyond this, regulations in certain jurisdictions restrict access to foreign companies, suggesting that a JV arrangement with a regional entity would be the only way to gain admittance.

There's a long list of joint ventures that spans various sectors and businesses around the world, a few of which have actually culminated in the development of the world's most prosperous companies. That stated, there are different types of joint ventures and selecting the best one considerably depends upon the objectives of the entities included and the nature of their respective organisations. For instance, project-based joint ventures are a kind of partnership that unites 2 entities from different backgrounds to reach a common objective. This could be a JV in between a commercial entity and a university or short-term partnership in between an entrepreneur and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for expansion as these unite two entities that co-exist in the very same supply chain like buyers and vendors, and they offer increased growth opportunities for both parties.

For decades, joint ventures in international business have actually culminated in mutually helpful outcomes, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are numerous reasons companies go into joint ventures but potentially the most crucial of which is to leverage resources and access expertise that one company may be missing out on. For example, one business might have exceptional marketing and distribution channels but does not have a streamlined manufacturing hub. By partnering with a business that has a well-established production process, both entities benefit greatly. Another reason why JVs are popular is the fact that companies share costs and risks when starting a joint venture. This makes the partnership more enticing as here both parties would share the expense of labour and advertising, and they both benefit from lower production expenses per unit by leveraging their capabilities and integrating expertise.

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