Life cycle of joint venture

2. What is Joint Venture?
 A business entity created by two or more parties.
 Both parties share ownership, share returns, share risks
and share governance.
 Reasons for creating Joint Venture:
 To access new market.
 To gain scale of efficiencies by combining assets
and operations
 To share risk for major investments and projects.

3. What is International Joint Venture?
 It occurs when two businesses based in two or more
countries form a partnership.
 A company wants to explore international trade without
taking responsibilities of cross border business
transactions.
 Elements of International Joint Ventures:
 Contractual Agreement
 Limited Purpose & Duration
 Joint Property Interest
 Market Access

4. Types of Joint Venture
 Equity Joint Venture: It has limited liability. Foreign
investors provide majority of funds.
 Co-operative Joint Venture: It is of both types limited
liability & unlimited liability.
 Wholly Foreign Owned Enterprise: These are
limited liability enterprise but the liability of
Directors, Managers, Advisers, Suppliers, etc
depends on the rules govern by ministries.

5. Elements to form a Joint Venture
 Contractual Agreement: It is a consideration in a
legal form regarding various possibilities, rules and
also clauses to manage or avoid dispute.
 The Parties: There must be two or more than two parties.
 Reasons & Objectives: Both parties must mutually
agree to the objectives of venture.
 Contribution of funds, assets & risks: The contribution of all
the aspects and profit & loss should be 50:50.

6. Dissolution of Joint Venture
 Aims of original venture met OR not met.
 Either one or both parties develop new goals.
 Time agreed for joint venture has expired.
 Legal or financial issues.
 Inappropriate or irrelevant aim as per dynamic market
conditions.
 One party acquires to another.

7. Advantages of Joint Venture
 It enables companies to share technology and
assets for production of goods & services.
 Sufficient finance & skills for smaller organization as it is an
effective method of obtaining the necessary resources to
enter new market.
 It reduces political friction and improves national
acceptability of the company.

8. Disadvantages of Joint Venture
 Problems occur regarding management control &
staffing of joint ventures.
 Joint ventures are very difficult to integrate into a
global strategy.
 The objectives of partners becomes different and
incompatible.
 Its not a permanent structure.

9. Sony Ericsson (Joint Venture)

10. Sony Ericsson (Joint Venture)
Sony Ericsson is a joint venture between ‘Sony’ and
Swedish company ‘Ericsson’ which is
telecommunications manufacturing companies, while
Sony is a mobile phone manufacturing company. Ericsson
used to get chips from Philips and once it was destroyed
by fire and then formed a joint venture with Sony in March
2002. And on February 2012 Sony acquired Ericsson’s
share in the venture and renamed it as ‘Sony Mobile
Communications’.

11. Bibliography
 www.wikipedia.org
 www.investopedia.com
 www.referenceforbusiness.com
 www.infomory.com

12. Thank You!