Question

Why do joint ventures often fail?

What are the major problems associated with licensing?

Answer 1

1) Joint ventures are a type of business ventures whereby two or more firms pool their resource together to accomplish particular tack. In most of the case the joint ventures will turn to big failures. The some of the important reasons for the same are:

* cultural differences

The parties involved in the joint venture will have different culture , values etc. Sometimes there will be difference in the languages spoken by them. It leads to improper communications and conflicts. The parties will fail to accept the culture of others and it turn to the failure of the venture.

* conflict for achieving control

The controlling power will be a common interest for all the parties involved in the joint venture. Both the companies will be interested in getting the right to decision ,making. It will be difficult to appoint he board of directors in joint ventures. It leads to interpersonal conflicts.

* Competing parties

The joint ventures will be starting between the firm which works in the similar areas in majority of the cases. The competing interest of the parties involved will then leads to mistrust. Even if the companies come together with a common agreement, they will have a competition among themselves. It will lead to failure of the venture.

* Lack of adequate funding

In the cases where any one of the party involved in the joint venture have insufficient money to meet the business needs and they fails to contribute money for common interest it will lead to conflict among partners.

* Lack of proper agreement

An proper agreement is essential for success off every joint ventures. The lack of such agreement will gradually leads to conflicts. Each and every matters should be mentioned in the joint venture. Otherwise there is high chance of misunderstandings and conflicts.

2) problems related to licensing

* chances of intellectual property theft is high

When thee parties enter into licensing agreement licensor communicates everything reading the product to the licensee. This increase the chance of intellectual property theft, misuse and piracy. The licensor will not have any control over licensee. It is the ,manor problem associated with the agreement.

* loss off reputation

In the situation where the relationship between the licensee and licensor is mismanaged then the reputation of the firm will decreases. The brand reputation of the intellectual property will be negatively affected due to mismanaged relationships.

* It does not guarantee revenue.

The royalty is the income or revenue generated by the licensor through eh agreement. But it never guarantee continuous income to the party. There is the chance of occurring payment related issues and conflicts among parties. Delayed payment is also another important problem regarding licensing.

* Delayed payments

The licensee pays royalty only after selling thee product. Thus the licensor need to wait till the end to receive the royalty. Sometime the payment will not be made due to poor sales.

* Government restrictions

The licensor will not bee able to perform certain rights due to government restriction upon licensing. It reduces the power of licensor over licensee. The restriction of government on royalty payment etc causes huge loss to the licensor.

* interpersonal conflicts and misunderstandings.

There is high chances of occurrence of conflicts among licensor and licensee. The extent of territorial coverage of licensee, marketing efforts, interpretation of exclusivity etc are major areas of conflicts and misunderstandings that may occur in every licensing deals.