Getting More Value from Joint Ventures
Joint ventures and alliances are effective approaches for entering new markets, gaining expertise, increasing production capabilities, and expanding distribution.Read the report
In many situations, a company may prefer to partner with another organization instead of buying it outright. Joint ventures and alliances allow one organization to tap into another’s expertise, infrastructure, or customer base without shouldering all of the risk or committing all of the resources.
Alliances are collaborations in which two or more companies jointly invest in an activity and share the risks and potential returns, while remaining independent economic agents. Some alliances, such as joint ventures, involve the creation of a new legal entity. But most alliances are simply contractual relationships of longer duration and greater complexity than traditional customer-supplier relationships.
Both joint ventures and alliances can be extremely useful in situations characterized by high uncertainty or unpredictability, or in markets with growth opportunities that a company can’t or doesn’t want to pursue entirely on its own. But unclear governance, operational inefficiencies, and lack of commitment can offset any advantages of shared risk. It’s essential that alliances are carefully managed every step of the way.