2. Joint Venture
• A joint venture is when two or more companies perform a
business project together for a set period of time.
• Joint Venture is a win /win collaboration between two or
more Companies, sharing resources to solve common
problems and achieve goals.
• It can be called a Strategic Alliance or Partnering as well.
3. Types of Joint Venture
1) Domestic Joint Venture: The Domestic Joint
Venture means all partners with the same
nationality.
2) International Joint Venture: The international
Joint Venture set up by partners of different
nationalities.
4. Advantages of Joint Venture
• Participating in joint ventures has the following advantages:
1. Helps an organization to enter in to new markets or new product lines
2. Access to increased resources and improved expertise & technology
3. Helps to build credibility with a particular target market by choosing a
well established and credible partner in that market
4. Reduces risk involved in business due to sharing of losses and
expenses.
5. Exiting from the business in case of failure is easier as compared to
solely owned businesses.
6. Partners in Joint Ventures get preference in buying out the shares of
other partners and take over the company.
5. Disadvantages of Joint Venture
• Entering into Joint Venture agreements may pose certain threats or
disadvantages to the participating organizations:
1. It is time consuming and difficult to set up a Joint Venture and poses many
challenges.
2. The objectives of the JV may not be clear and understood by all if the
partnering organizations do not state and communicate them clearly.
3. Differences in the cultures and management styles of the organizations may
lead to a lack of cooperation and coordination.
4. Lack of thorough research and feasibility studies in the beginning of the JV
may lead to failure of the JV.
5. The individual partners may not treat the JV as an integral part of their
business and may lead to lack of attention being given to the JV
6. There can be an imbalance in levels of expertise, investment or assets
brought into the venture by the partners
6. Steps in formation of Joint Venture
Planning
Partner
Search
Feasibility
Study
Incorporation
7. Important Clause of Joint Venture
• The proportion of shareholding in the joint venture company
• Specify nature of shares, indicate their transferability conditions.
• Composition of the Board of Directors, Appointment of Chairman ,Quorum of Board
meetings ,Casting vote provisions.
• General meeting.
• Appointment of CEO/MD.
• Appointment of Management Committee
• Important decisions with mutual consent of partners
• Dividend policy
• Funding provisions
• Access conditions.
• Change of control/exit clauses.
• Anti-compete clauses
• Maintaining Confidentiality
• Indemnity clauses.
• Assignment.
• Break of deadlock.
• Dispute Resolution
• Applicable law.
• Force Majeure.
• Termination provisions.
8. • Successful Joint Ventures
• VOLVO – EICHER JV
• TATA – DOCOMO
• Failed Joint Ventures
• Chrysler – Diamler AG
• Yamaha – Escorts
• JVs Leading to Takeover by one partner
• Hero Honda (Takeover by Hero Group)
• Virgin – TATA ( Takeover by TATA)
