Overview Of Joint Venture Example
- Joint Venture refers to that kind of business which is formed when two businesses combine together and meet their different skill set to achieve a common business objective.
- The joint venture is just like any other business like companies or partnerships the difference between it is that joint venture is only owned by two different persons or parties. It is just like a business agreement in which both partners agree to share a profit in a specific ratio of their ownership. The partners in the business are also known as co-ventures. A joint venture is generally formed to achieve a specific project or a goal.
- Joint ventures also create synergies and give the companies cost and benefit advantage. It can be formed because of different reasons to enter a new market or geography, to enter into a new business line altogether. Also for joint ventures, there are no separate governing bodies as they decided to enter into a new agreement.
Examples of Joint Venture
The following are examples of Joint Venture:
Google’s parent company and the pharma company Glaxo and Smith decided to enter into a joint venture agreement to produce bioelectric medicines the ratio of the ownership was 45%-55%. The joint venture lasted and was committed for 7 years with a capital of Euro 540 million.
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Another example of a joint venture is the joint venture between the taxi giant UBER and the heavy vehicle manufacturer Volvo. The joint venture goal was to produce driverless cars The ratio of ownership is 50%-50%. The business worth was $350 million as per the agreement in the joint venture.
Sony and Ericson’s example is also a good example of a Joint Venture as they joined hands to manufacture smartphones and gadgets. After several operating years, Sony eventually acquired Ericson mobile manufacturing division.
The 2008 Joint venture of NBC Universal Television Group (Comcast) and Disney ABC Television Group (The Walt Disney Company). The objective of the joint venture was to create a video streaming application or a website named “HULU”. This product provides streaming quality content which is on computers, laptops, or mobile phones. The product became a huge success with the offering lining upto $1 billion.
Another famous example of joint venture formation is the agreement between Kellogg and Wilmar International Limited. Kellogg International entered the market in order to expand its presence in the Chinese market to sell cereals and other snack foods to consumers in China. Joining hands together with Wilmar resulted in a profitable synergic relationship for both the companies as Wilmar International provided extensive distribution and supply chain network to Kellogg International and also Kellogg managed to enter into a new geography with this agreement and relationship.
A limited and B limited have both different skill sets. A has a spare land where also he has manpower and labor supply in abundance. On the other hand, B limited has expertise in the construction of commercial and residential complexes for housing but needs land to construct in upon. Hence this becomes a pure example of a true joint venture where A Limited and B Limited decide to enter into a joint venture agreement and do business.
Entering into a joint venture agreement provides with the following benefit:
- Diversification of business product line and entrance into new markets and geographical locations.
- It helps the company to establish a new relationship and acquire new customers, associates, and referrals.
- A joint venture agreement normally does not require a long-term commitment and it is also for a limited duration which provides no bounding on both the parties.
- The risk and rewards are shared between the companies.
Any two businesses can enter into a new joint venture agreement to prospect and make a profit which diversifies the product line of the company and makes them competitive among their peers. Joint ventures as a business alliance are growing rapidly and it has gained its importance in the market. The joint venture is similar to a partnership agreement and that is what makes it unique in the market and also at the end of a specific business objective the joint venture can be seized or liquidated at once and the partners can take home their share of profit.
This has been a guide to Joint Venture Examples. Here we discuss its definition and the examples of joint venture along with its detailed explanation. You can also go through our other suggested articles to learn more-