Why strategic alliances are important to business expansion

Why strategic alliances are important to business expansion

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

There's a long list of joint ventures that covers various sectors and companies around the world, some of which have culminated in the development of the world's most prosperous businesses. That stated, there are different types of joint ventures and choosing the right 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 kind of partnership that brings together two entities from various backgrounds to reach a common goal. This could be a JV in between a business entity and an website academic institution or short-term partnership between a businessman and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for growth as these unite two entities that co-exist in the exact same supply chain like buyers and vendors, and they offer increased development opportunities for both parties.

Business growth is an ambitious goal that any entrepreneur thinks about at some time during their professional career, however, it can be a very demanding and expensive process. It is for these reasons that some entrepreneurs opt for joint ventures when trying to get into brand-new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the opportunities of success as partners pool their resources and connections in an drive to maximise performance. For instance, a business wanting to expand its distribution to brand-new markets and areas can take advantage of partnering with regional businesses. In this manner, it can take advantage of a currently existing regional distribution network, not to mention having access to understanding and proficiency on the target market. Beyond this, regulations in specific jurisdictions restrict access to foreign companies, meaning that a JV agreement with a local entity would be the only method to gain admittance.

For years, joint ventures in international business have culminated in mutually helpful outcomes, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are lots of reasons why companies go into joint ventures however perhaps the most essential of which is to leverage resources and gain access to proficiency that one business may be missing out on. For example, one business might have outstanding marketing and circulation channels but lacks a structured manufacturing center. By partnering with a business that has a well-established production process, both entities benefit greatly. Another reason JVs are popular is the reality that companies share expenses and risks when embarking on a joint venture. This makes the partnership more appealing as both entities would share the cost of labour and marketing, and they both gain from lower production costs per unit by leveraging their capabilities and integrating expertise.

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