Why strategic alliances are necessary to business expansion

Why strategic alliances are necessary to business expansion

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There are different joint venture methods, each fit for a particular purpose. Here's all you need to know.

There's a long list of joint ventures that spans different sectors and companies across the globe, a few of which have culminated in the creation of the world's most prosperous companies. That stated, there are various types of joint ventures and choosing the best one greatly depends on the objectives of the entities involved and the nature of their respective organisations. For example, project-based joint ventures are a kind of partnership that combines two entities from different backgrounds to reach a shared objective. This could be a JV in between a business entity and a university or short-term collaboration between a business owner and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular means for expansion as these combine 2 entities that co-exist in the same supply chain like buyers and suppliers, and they offer increased growth opportunities for both parties involved.

Business growth is an auspicious goal that any entrepreneur thinks about at some time during their career, however, it can be a very stressful and expensive process. It is for these factors that some business people go with joint ventures when attempting to get into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can considerably increase the opportunities of success as partners pool their resources and connections in an attempt to maximise effectiveness. For instance, a company wishing to broaden its distribution to new markets and territories can take advantage of partnering with regional players. In this manner, it can . gain from a currently existing regional distribution network, not to mention having access to understanding and expertise on the target audience. Beyond this, guidelines in particular jurisdictions limit access to foreign businesses, indicating that a JV arrangement with a regional entity would be the only way to gain admittance.

For years, joint ventures in international business have actually culminated in equally advantageous results, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are many reasons businesses go into joint ventures but possibly the most important of which is to take advantage of resources and gain access to proficiency that one business may be missing. For example, one business might have exceptional marketing and distribution channels however lacks a streamlined production center. By partnering with a business that has a reputable manufacturing process, both entities benefit greatly. Another reason why JVs are popular is the truth that businesses share costs and risks when starting a joint venture. This makes the collaboration more enticing as both parties would share the expense of labour and marketing, and they both benefit from lower production expenses per unit by leveraging their capabilities and combining knowledge.

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