Advantages of Joint venture
The advantages of Joint Venture are:
1. Increased Resources and Capacity
By collaborating or teaming up, one can increase capacity and resources, which helps joint venture companies grow and expand more quickly and efficiently. Joint venture results in the pooling of financial, physical, and human resources of two or more firms. With this, companies take advantage of new opportunities and face new challenges in the market.
2. Economies of Scale:
In joint venture strength of one organization can be utilized by the other. It helps businesses to expand despite their limited resources. In a joint venture, the businesses split operating costs, labour costs, advertising, marketing, and promotion expenses. The organization can reduce its cost and maximize its profits. This gives a competitive advantage to both organizations to produce economies of scale.
The cost of raw materials, labour, and technical workforce (CA, engineers, lawyers, or scientists) is comparatively low in India. As a result, many foreign firms can get the benefit of lower costs of production, getting products of the required quality and specifications by entering into joint ventures with Indian companies. So, India is becoming an important global source of different products and competitive in the market
3. Innovation
Today’s market is demanding new and innovative products. Joint venture proves to be useful in providing new and innovative products. It provides the benefits of updated technology for goods and services. Advanced technology helps make high-quality goods at low costs. Moreover, international partners in a joint venture often generate new ideas, which can help to produce innovative products in our country.
4. Gaining Access to New Markets and Distribution Networks
When a company forms a joint venture with the other, it unlocks a vast market with the potential for growth and development. For example, when a firm from the United States of America forms a joint venture with an Indian company, the joint venture gives the American company access to a huge Indian market. It is simple for them to sell their products in new areas after they have attained saturation in their original markets.
It also provides the benefit of an established distribution channel, i.e., retail outlets in the domestic market. Otherwise, opening their retail shops may prove expensive. On the other hand, the Indian company can access a diverse American market.
5. Brand Exposure
When two or more parties form a joint venture, the established brand name of one company can be used by another organization to acquire a competitive gain over the other traders. It saves a lot of investment in developing a brand name for the products as there is a ready market waiting for the product to be launched. For example, if an Indian company enters into a joint venture with a foreign company, the Indian company can get the benefit of goodwill and the brand name of the foreign company in the market.
6. Access to Technology
Technology is one of the major reasons for most businesses to enter into a joint venture. With advanced technology, high-quality goods can be produced that save time, energy, and resources. It also adds to efficiency and effectiveness. When a joint venture is formed, one can get access to the same technology as other businesses as there is no need to develop own technology. Thus there is no need for further investment.