JOINT VENTURE

Shahid RazaPGDM – 5th Trim

•A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.

•An association of two or more individuals or companies engaged in a solitary business enterprise for profit without actual partnership or incorporation; also called a joint adventure.

•when two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are "co-venturers".

A joint venture is a contractual business undertaking between two or more parties. It is similar to a business partnership, with one key difference: a partnership generally involves an ongoing, long-term business relationship, whereas a joint venture is based on a single business transaction. Individuals or companies choose to enter joint ventures in order to share strengths, minimize risks, and increase competitive advantages in the marketplace. Joint ventures can be distinct business units (a new business entity may be created for the joint venture) or collaborations between businesses. In a collaboration, for example, a high-technology firm may contract with a manufacturer to bring its idea for a product to market; the former provides the know-how, the latter the means.

Advantages

• Provide companies with the opportunity to gain new capacity and expertise.

• Allow companies to enter related businesses or new geographic markets or gain new technological knowledge.

• access to greater resources, including specialised staff and technology.

• sharing of risks with a venture partner.

• Joint ventures can be flexible. For example, a joint venture can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business' exposure.

Disadvantage• It takes time and effort to build the right relationship and partnering with another business can be challenging.

• There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners.

• Different cultures and management styles result in poor integration and co-operation.

• The objectives of the venture are not 100 per cent clear and communicated to everyone involved.

• The partners don't provide enough leadership and support in the early stages.

EXAMPLES

Tata Motors has formed a 51:49 joint venture in bus body building with Marcopolo of Brazil. This joint venture is to manufacture and assemble fully-built buses and coaches targeted at developing mass rapid transportation systems. The joint venture will absorb technology and expertise in chassis and aggregates from Tata Motors, and Marcopolo will provide know-how in processes and systems for bodybuilding and bus body design. Tata and Marcopolo have launched a low-floor city bus which is widely used by Chennai, Chandigarh ,Delhi, Mumbai, Lucknow and Bengaluru transport corporations.Tata Motors also formed a joint venture with Fiat and gained access to Fiat’s diesel engine technology.[16] Tata Motors sells Fiat cars in India through a 50/50 joint venture Fiat Automobiles India Limited, and is looking to extend its relationship with Fiat and Iveco to other segments.

Tata with Marcopolo and Fiat

Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector. Both companies have stopped making their own mobile phones. 

Sony corporation with Ericsson

Virgin Mobile India Limited is a cellular telephone service provider company which is a joint venture between Tata Tele service and Richard Branson's Service Group. Currently, the company uses Tata's CDMA network to offer its services under the brand name Virgin Mobile, and it has also started GSM services in some states.

Bhilai Electric Supply Company Pvt. LimitedAnother SAIL-NTPC joint venture on 50:50 basis formed in March 2002 manages the 74 MW Power Plant-II of Bhilai Steel Plant which has additional capacity of producing 150 tonnes of steam per hour.

Metaljunction.com Private LimitedA joint venture between SAIL and Tata Steel on 50:50 basis, this company promotes e-commerce activities in steel and related areas.

SAIL-Bansal Service Center Pvt. Ltd.SAIL has formed a joint venture with BMW industries Ltd. on 40:60 basis to promote a service centre at Bokaro with the objective of adding value to steel.

UEC SAIL Information Technology LimitedThis 40:60 joint venture between SAIL and USX Engineers & Consultants, a subsidiary of the US Steel Corporation, promotes information technology in the steel sector.

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