Benefits of Joint Venture
The benefits of Joint venture are as follows:
1. Establishing Entry into New Markets and Distribution Networks: When one company forms a joint venture with another, it opens up a wide market with the potential to expand and flourish.
For example, when a firm from the United States of America forms a joint venture with another company from India, the company from the United States has access to enormous Indian markets with different variants of paying capacity and diversification of choice.
At the same time, the Indian firm has the benefit of being able to reach markets in the United States that are widely separated and have a high-paying capacity where the product’s quality is not compromised. Unique Indian products have large global markets.
They can also make use of established distribution channels, such as retail outlets in various local marketplaces. Otherwise, building their own retail shops might be too expensive.
2. Access to Technology: Technology is an alluring reason for companies to form joint ventures. Advanced technology combined with one organisation to generate higher quality products saves a significant amount of time, energy, and resources, as there is no need to develop its own technology. Superior quality products are also produced which adds to the efficiency and effectiveness of the organisation by reducing the cost of production.
3. Economies of Scale: Joint Venture helps companies with limited capacity to scale up. One organization’s strength can be utilized by another. This provides both firms with a competitive advantage in terms of generating economies of scalability.
4. Innovation: Joint ventures provide an additional advantage in terms of technologically upgrading products and services. Marketing may be done through a variety of innovative platforms, and technological advancements help in the production of high-quality products at a low cost. International corporations can develop new concepts and technologies to decrease costs and produce higher-quality products.
5. Low Production Costs: When two or more firms join hands, the primary goal is to deliver products at the lowest possible cost. And this is possible when manufacturing costs are decreased or service costs are controlled. A real joint venture simply aims to provide the best products and services to its customers.
6. Established Brand Name: The Joint Venture can be given its very own brand name. This contributes to the brand’s distinct appearance and recognition. When two companies form a joint venture, the goodwill of one firm that is already established in the market can be used by another to gain an advantage over other market competitors. For example, A large European brand entering into a joint venture with an Indian firm will provide a synergistic benefit because the brand is already well-known throughout the world.