Question

What were the pros and cons of forming another strategic alliance (i.e., the Mazda-Toyota partnership) to compete in the automotive industry?

Answer 1

A joint venture agreement is an agreement between two or more individuals or companies usually entered into with a specific goal in mind. Each party who enters into a joint venture agreement will want to maintain their separate business/entity and will enter into the business arrangement with a strategic goal in mind. In a joint venture, each party is responsible for their debts accrued and profit is typically divided between the parties under the terms of the agreement. It is prudent to draft a joint venture agreement governing the relationship and setting out the parties’ objectives and management of the project (including financial). A joint venture agreement differs from a partnership arrangement as it has a definite end.

Parties can structure the joint venture as either an unincorporated joint venture (i.e. the joint venture agreement includes the terms) or an incorporated joint venture (i.e. a separate company is incorporated with the parties each becoming shareholders in the company).