International Markets:

Market Entry Strategies:

Joint Venture

Both partners in a JV have some common goals such as

• Introducing a new product in a new market,
• Risk sharing,
• Sharing of technology
• Manufacturing if new product
• Following JV rules and regulations of host country

Joint Ventures bring many other benefits such as help in increasing political connections and improving one’s distribution channel.

Advantages of Joint Venture:

JV is often a very attractive option under following circumstances. 

• When goals of both the partners converge without being competitive to each other
• When resources, size of market, and size of both partners are smaller than leading players in the market
• When both partners are able to leverage each other’s strengths in the most effective manner

Most important areas in a JV are holding of each partner, nature of control, agreement period, easy transfer of technology, ability of local partner to cobble together efficient infrastructure, etc.

Disadvantages of Joint Venture:

Despite being a very good model of business, there are certain drawbacks.

• Disputes over new investments by both partners
• Distrust over local partner regarding use of proprietary knowledge
• Incomplete support from the foreign partner
• Ego problems and political clashes

There are always pressures on both the local and foreign partner in a JV to continue or end a JV when it approaches its completion. Also, the junior partner always feels like competing with the senior partner.

While both partners strive hard to make the JV a success, they also work to strengthen their respective positions. Though both are required to share resources, they try to save resources as far as possible. JV succeeds through a series of coordination and negotiation endeavors. It is seen that both partners try to gain an upper hand in these exercises.