Joint ventures are business arrangements that are used by a lot of successful companies in Minnesota. A joint venture is an agreement between parties to work together to accomplish a predetermined task.
A joint venture is different from a merger even though it involves the combining of two companies’ resources. Joint ventures always have a specific goal and a plan to terminate as soon as that goal is met.
Combining resources and expertise
Joint ventures may allow two business entities to combine their unique resources and expertise for the benefit of both companies. For example, one business may have excellent manufacturing processes and quality products but lack marketability and distribution channels. A business like this might benefit from a joint venture with a company that can help them get their products into stores.
Joint ventures can do other things besides just sharing resources. Sometimes, joint ventures come together to create something totally new by pooling their expertise and skillsets. Research into new technology is often done by joint ventures. Some benefits of a joint venture can include:
• The ability to share the costs of labor and advertising.
• The ability to leverage combined resources and scale up faster.
• Freedom to enter new markets without as many legal restrictions.
Using a joint venture to enter a foreign market
It can be difficult for some companies to enter foreign markets where they have no connections. Oftentimes, joint ventures are used by U.S. companies that want to expand their distribution networks abroad. Dealing with business law can be complicated in foreign countries, but a joint venture might make things easier.
The joint venture agreement
When joint ventures form, both parties must sign a legal contract called a joint venture agreement. This contract is very important as it lays out the rights and responsibilities of both parties.