Question

A local independent laboratory has been producing negative margins for two years. The laboratory is struggling to compete in the market with the National laboratories primarily in the area of technology. Physician’s are demanding electronic results delivered directly into their medical record and are threatening to move their business to a larger, National Laboratory that can provide this technology to the physician at no cost. Another independent laboratory has offered to provide this technology for 80% ownership in the failing laboratory. Should the failing laboratory enter into a joint venture? Why or why not? What are the potential benefits and risks of this strategic alliance?

Answer 1

Joint venture is a business entity created by two or more parties , generally characterised by shared ownership,shared returns and risks,and shared governanance.Companies typically persue joint venture for one of 4 reasons.to access ner market,particularly emerging markets, to gain scale efficiency by combining assets and operations ,,to share risk for major investments or projects , or to access skills and capabilities.   

• in this case, local idependent hospital definitly enter in to joit venture,because it very essential to overcome its present crisis.More over through this alliance,they can access a strong distribution net work,specialist employee and finantial resourses

Benefits of joint venture

• It provides laboratory to gain expertise in new technology.
• Enables to enter new business.
• Provide access to new resourses including specialised staff and technology
• Shares risk with venture partner.
• Enable flexibility-joint venture can have limited life span and only cover part of what you do thus limiting both your commitment and business expossure.
• Companies can gradually seperate business from the rest of the organizationand eventually sell it in to another parent company.

Disadvantages

• It takes time and effort to build the right relationshipand partnering with another business can be chalanging.Problems are likely to arise if,

​​​​​​​ ~ The objectives of business are not 100% clear and communicated to everyone involved.

~ There are are some imbalance the level of expertise,investment or assets brought in to the venture by the different parties.

~  Different culture and management style result in poor integration and co-operation.

• Creating joint venture may result inmore complex taxarrangements.
• Success in joint venture depends on thorough research and analysis of the ojective.
• creating joint venture is more costly than a consortium.