Question

What are the advantage and disadvantages of forming joint ventures? Discuss in detail.

Answer 1

The advantages of joint venture are :

1. No firm needs to spend alone on investment and advertising ,hence reducing the risk.
2. Firms if joins together , they can put both of their best parts into effect and provide a better result.
3. With joint ventures you build long lasting business relations, which is always beneficial in future.
4. It is generally flexible, you can move out of it any time you like.
5. If you join hands with a renowned brand , you are most likely to learn new technology and also succeed.

The disadvantages of joint ventures are :

1. Two firms may have different objectives, if not stated clearly it may lead to conflict between them.
2. Your flexibility may be restricted, you may not be allowed to carry out any other business ventures, when you are in a joint venture.
3. Generally the joint ventures are of separate nature, so there may be lack of confidence among the firms which leads to less dedication.
4. A huge amount of research and technology is required to make joint venture a success.
5. If two firms are from different cultures , then there may be clash of cultures and can become a hurdle in success.