Bacoconsultants
Joint ventures occur when two businesses agree to work closely together on a particular project and create a separate business division to do so . This is not the same as a merger ; but it can lead to mergers of the businesses if their joint interests coincide and if the joint venture is successful.
Reasons:
- The reasons for joint ventures are :
- Costs and risks of a new business venture are shared – this is a major consideration when the cost of developing new products is rising rapidly ;
- Different companies might have different strengths and experiences and they therefore fit well together ;
- They might have their major markets in different countries and they could exploit these with the new product more effectively than if they both decided to go it alone.
Risks:
- Such agreements are not without their risks :
- Styles of management and culture might be so different that the two teams do not blend well together ; Errors and mistakes might lead to one blaming the other for mistakes ;
- The business failure of one of the partners would put the whole project at risk .