The partners ideally complement each other in terms of skills, infrastructure, and resources, and contribute a wide variety of assets, such as operating facilities at different locations, land, qualified employees, relevant specialist knowledge, proven market knowledge, important contacts, and specific management skills. Joint ventures can benefit all parties to the agreement greatly, and often do. Together, supply chains can be designed more efficiently and market risks can be mitigated or even avoided. Medium-sized companies hoping to establish themselves internationally often choose this path. It could also simply be a matter of asserting common interests over third parties.Ĭompanies entering into joint ventures often pursue long-term goals, including new product developments or fundamental research.
Cooperations like these can also be helpful to give the business a better position against the competition or to open up new markets – e.g. The above-mentioned Airbus-Bombardier collaboration is an example of a majority joint venture: Airbus owned 50.01% of the joint company when it was founded, whereas Bombardier owned 31%.Ī joint venture is particularly suitable for implementing major projects that are difficult or impossible for a company to implement on its own. So, it is important to establish adequate co-decision rights – up to the corresponding veto rights of minority shareholders. This option is sometimes chosen in order to simplify decision-making processes or to curb (too) one-sided knowledge-sharing at the expense of the majority shareholder. If this is not the case and one of the partners dominates, it is referred to as a majority joint venture. One company may be efficient at producing while others may be good at marketing. A joint venture helps in extracting the qualities of each other. If the capital shares are equally distributed, this is known as a joint venture on an equal basis. Joint ventures are a commonly used company structure in China: many of the most well-known companies, such as McDonald’s, Starbucks, and most recently the Chinese ride-sharing unicorn Didi Chuxing have all adopted a joint venture (JV) company structure in China. Joint Venture offers various advantages to the groups involved for faster growth and increased productivity. They share the management functions and bear the financial risk of the investment or project in question. Sixty-eight percent said they expect their organizations to increase the number of joint ventures or large partnerships they participate in over the next five years. As described above, the partners each contribute capital to the joint venture. The last time we polled executives on their perceived risks for strategic partnerships, Observations collected in McKinsey’s 2015 survey of more than 1,250 executives. This excludes unlimited financial liability of individual partners.
a legally independent third-party company, usually in the form of a corporation. In an equity joint venture (EJV), the partners establish a joint subsidiary, i.e.
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