Should You Start a Joint Venture?

If you are a manager or a business owner who aims to boost the revenues or profitability of your company, you would not stop to explore options to earn more. There are several practical and logical strategies you could take. Do you think every important company is getting into a joint venture? Is the competition getting more and more intense? Perhaps you just do not want to jump into the bandwagon; you might want to bolster the profitability and growth of your business. Thus, a joint venture could be a viable and significant option for you.

You should start a joint venture with another company or with other businesses if you humbly admit the fact that your business is lacking specific resources, expertise, and scale to get into more areas you could not possibly reach with your current status. You could form a joint venture with other companies within your industry or in other industries. You could also form such a venture with a foreign firm or a much larger/smaller one. In a joint venture, you would form another entity or a project.

Is your business competitor too strong and too huge to be beaten by your company? Raising more capital may not be the sole solution to your problem. A joint venture with another huge business would do. The deal could give you the necessary resources, technical capability, reach, and scale to equal or challenge a current industry or market leader. The joint venture could also take a broader or wider coverage than your business’ current reach.

Another reason to get into a joint venture is your lack of know-how and technical expertise or capability. Your company’s marketing, operational scale, production, and R&D component may not be enough to compete head on with other giants in the industry or in the market. Other companies may have the resources, capital, and technical expertise to complement your own. You should persuade such companies to get into a joint venture agreement with your business.

If you are comfortable about combining or sharing your resources with other businesses, you are ready for a joint venture. Modern firms could not possibly function in solitary these days. At one point, every business should consider forming joint ventures with other companies. Competitors and market stalwarts could act together to share a significant market pie. You could opt to own 25% of a $200 million joint venture. It could be more ideal than fully owning a $1 million small business that may eventually collapse due to scale and capital issues.

Lastly, if you are aiming to further please your company’s shareholders, you could use any joint venture proposal involving other companies to do so. Share owners definitely prefer it if a company would be able to establish a new source of lucrative income without spending huge resources. Cooperating and forming alliances with other businesses is now very crucial. You and your firm definitely would take pride being a part of a joint venture that tops and dominates an industry.

It could be a way to boost shareholders’ morale and confidence in the management.


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