Question

(CO G) List any five characteristics of joint ventures.

Answer 1

Joint venture definition:-
Joint Venture is a business preparation in which more than two organizations or parties share the ownership, expense, return of investments, profit, governance, etc.

Characterstics of a joint venture:-

1) Creates Synergy: A joint venture is entered between two or more parties to extract the qualities of each other. One company may possess a special characteristic which another company might lack with. Similarly, the other company has some advantage which another company cannot achieve.

2) Risk and Rewards can be Shared: In a typical joint venture agreement between two or more organization, may be of the same country or different countries, there are many diversifications in culture, technology, geographical advantage and disadvantage, target audience and many more factors to overcome. So the risks and rewards pertaining to the activity for which the joint venture is agreed upon can be shared between the parties as decided and entered into the legal agreement.

3) No Separate Laws: As for joint venture, there is no separate governing body which regulates the activities of the joint venture.

4) Economies of Scale: Joint Venture helps the organizations to scale up with their limited capacity. The strength of one organization can be utilized by the other. This gives the competitive advantage to both the organizations to generate economies of scalability.

5) Access to New Markets and Distribution Networks: When one organization enters into joint venture with another organization, it opens a vast market which has a potential to grow and develop.