Why strategic alliances are vital to business expansion

Joint ventures can be beneficial to companies aiming to broaden to new markets and areas. Continue reading to find out more.

There's a long list of joint ventures that spans different sectors and businesses around the world, some of which have culminated in the development of the world's most successful businesses. That stated, there are different types of joint ventures and choosing the best one greatly depends on the objectives of the entities included and the nature of their respective organisations. For instance, project-based joint ventures are a kind of collaboration that combines two entities from different backgrounds to reach a shared goal. This could be a JV in between an industrial entity and a university or short-term collaboration between an entrepreneur and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are likewise another popular vehicle for growth as these bring together 2 entities that co-exist in the same supply chain like buyers and vendors, and they provide increased growth opportunities for both parties.

Business growth is an ambitious goal that any entrepreneur considers at some time throughout their professional career, however, it can be an extremely difficult and pricey process. It is for these reasons that some business people opt for joint ventures when attempting to get into new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the opportunities of success as partners pool their resources and connections in an effort to increase performance. For instance, a company wishing to expand its distribution to new markets and areas can benefit from partnering with local businesses. In this manner, it can take advantage of a currently existing local distribution network, not to mention having access website to understanding and know-how on the target audience. Beyond this, guidelines in particular jurisdictions restrict access to foreign businesses, suggesting that a JV arrangement with a local entity would be the only way to gain admittance.

For decades, joint ventures in international business have actually culminated in equally advantageous outcomes, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons why companies enter joint ventures however potentially the most crucial of which is to leverage resources and access know-how that one business might be missing. For instance, one business might have exceptional marketing and distribution channels however does not have a structured production center. By partnering with a business that has a well-established manufacturing process, both entities benefit significantly. Another reason why JVs are popular is the truth that companies share costs and risks when starting a joint venture. This makes the collaboration more appealing as both entities would share the expense of labour and marketing, and they both gain from lower production expenses per unit by leveraging their abilities and integrating expertise.