Exactly why strategic alliances are important to company expansion

Exactly why strategic alliances are important to company expansion

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Much like any other commercial endeavour, joint ventures have advantages and disadvantages. This post will list the most notable ones.

Company growth is an ambitious goal that any entrepreneur considers at some point throughout their professional career, nevertheless, it can be a really stressful and costly procedure. It is for these reasons that some businessmen opt for joint ventures when attempting to break into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can considerably increase the chances of success as partners pool their resources and connections in an effort to maximise efficiency. For instance, a company wanting to expand its distribution to brand-new markets and areas can gain from here partnering with regional businesses. By doing this, it can take advantage of an already existing local distribution network, not to mention having access to understanding and proficiency on the target audience. Beyond this, regulations in particular jurisdictions limit access to foreign businesses, implying that a JV arrangement with a local entity would be the only method to gain admittance.

For decades, joint ventures in international business have actually culminated in mutually advantageous results, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are lots of reasons why businesses go into joint ventures however possibly the most important of which is to take advantage of resources and access know-how that one company may be missing out on. For instance, one company may have outstanding marketing and circulation channels however does not have a streamlined production center. By partnering with a business that has a well-established manufacturing process, both entities benefit considerably. Another reason why JVs are popular is the reality that companies share costs and risks when starting a joint venture. This makes the partnership more enticing as both parties would share the expense of labour and marketing, and they both benefit from lower production costs per unit by leveraging their capabilities and integrating expertise.

There's a long list of joint ventures that spans different sectors and companies around the world, some of which have culminated in the development of the world's most successful businesses. That stated, there are various types of joint ventures and selecting the best one significantly depends on the objectives of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a type of partnership that brings together two entities from different backgrounds to reach a common goal. This could be a JV in between a commercial entity and an academic institution or short-term partnership in between a business person and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular means for growth as these unite two entities that co-exist in the very same supply chain like buyers and wholesellers, and they offer increased growth opportunities for both parties.

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