Why strategic alliances are essential to business expansion

Why strategic alliances are essential to business expansion

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There are various joint venture methods, each fit for a particular function. Here's all you need to understand.

There's a long list of joint ventures that covers different sectors and companies around the world, some of which have culminated in the creation of the world's most successful companies. That stated, there are various types of joint ventures and picking the right one considerably depends on the goals of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a kind of partnership that combines two entities from different backgrounds to reach a common goal. This could be a JV in between a business entity and a university or short-term collaboration in between a business person and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for growth as these combine two entities that co-exist in the exact same supply chain like buyers and wholesellers, and they offer increased growth opportunities for both parties involved.

Business expansion is an ambitious goal that any business owner considers at some point throughout their career, nevertheless, it can be a very difficult and costly procedure. It is for these reasons that some business people choose joint ventures when attempting to get into brand-new markets and areas. 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 drive to maximise performance. For example, a company wanting to expand its distribution to brand-new markets and areas can benefit from partnering with local businesses. In this manner, it can take advantage of an already existing local distribution network, not to mention having access to knowledge and know-how on the target audience. Beyond this, regulations in certain jurisdictions limit access to foreign companies, suggesting that a JV contract with a regional entity would be the only way to gain admittance.

For decades, joint ventures in international business have culminated in mutually advantageous outcomes, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are numerous reasons why businesses go into joint ventures however perhaps the most essential of which . is to take advantage of resources and access expertise that one company may be missing. For example, one company might have outstanding marketing and distribution channels but lacks a streamlined manufacturing center. By partnering with a business that has a well-established manufacturing process, both entities benefit significantly. Another reason why JVs are popular is the truth that businesses share costs and risks when embarking on a joint venture. This makes the collaboration more enticing as both parties would share the cost of labour and marketing, and they both benefit from lower production costs per unit by leveraging their abilities and integrating knowledge.

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