But this cost is bear by the consumers as they add it to the brand. It causes a price rise and induces the situation of inflation in the economy. It is a well-understood fact that new enterprises need new workers. So whenever an investor invests to build an enterprise in a foreign nation, he creates job opportunities in that country. Employment generation alleviates the problem of unemployment and the economy starts prospering.

  • Discussion of illegal activities such as software and music piracy and other intellectual property violations are not allowed.
  • Financial re-engineering involves the radical redesign of core business processes to achieve dramatic improvements in return on investments.
  • HU Consultancy offers financial re-engineering and debt restructuring …… Know More.

The attributes and provisions of such agreements are discussed in more detail later in this article. These articles, the information therein and their other contents are for information purposes only. All views and/or recommendations are those of the concerned https://1investing.in/ author personally and made purely for information purposes. Nothing contained in the articles should be construed as business, legal, tax, accounting, investment or other advice or as an advertisement or promotion of any project or developer or locality.


A joint venture is merely a temporary partnership between two companies. A joint venture between two companies or parties may have distinct backgrounds, professional skills, and knowledge & experience. In combination with a JV, each company can take auspicious day to buy gold in 2016 advantage of their company’s expertise and talent. In this article I discussed with you the 5 modes of entry into the international business which I discovered during my research of how to expand the business that I work for internationally.

advantage and disadvantage of joint venture

Joint venture agreement between two or more organizations, maybe of the same country or different countries. Thus the risks and rewards of the activity for which the joint venture is agreed can be shared among the parties as decided and entered into the legal agreement. ICICI Lombard General Insurance Ltd., Neumesh labs Pvt Ltd., are some flourishing JVs in India. Therefore, JVs are used to enter into new markets and to access their resources jointly with the other entities as the cost of failure might be too large to be borne single-handedly. JVs have become a major feature of the international business structure due to increased global competitiveness and technological innovation.

Meaning Of A Joint Venture

This way, developed countries have shed their hands on the problem of pollution. In FII, it is quite easy to enter and exit the stock market which means that as a portfolio investor, you can enter and withdraw whenever you want to! But unfortunately, that’s not the case with FDI, you cannot just enter and exit according to your will. Allocation of Risks and Rewards – In as much detail as possible, the parties should delineate who gets what, where, when, why and how.

  • Experts recommend thoroughly planning exit strategies before entering into a strategic joint venture agreement.
  • In the same street itself , local builders have constructed 4 2BHKS Apts in each of 1 ground plot.my father got that plot way back in 1980s.
  • It does not create a separate corporate body or render capital assets.
  • It refers to a legal entity that is formed between two or more parties to undertake an economic activity together.

However, there are some parallels between joint ventures and partnerships, the most notable of which is a liability. A partnership, unlike a joint venture, is usually intended to last indefinitely. Joint ventures are typically short-term and initiated for a specific project, but they have greater permanence than a simple licensing or distribution agreement, especially when larger companies are involved. A joint marketing venture can benefit from lower individual costs and a wider reach. This efficient technique is used by the majority of large enterprises or firms.

End-users may have to bear the burden of paying EMIs and rent, for longer. If the buyer plans to rent out the flat, his expected cash flow gets delayed. If interest rates rise in the interim period, the buyer’s EMI escalates. Moreover, delays due to infighting, may make it impossible for the buyer to sell the house.

Disadvantages of the JV

For example, If company X has good marketing strategies but no novel service to offer. Company Y has a brilliant idea but lags in its marketing skills; both can collaborate and produce a novel product with good marketing. In a project-based joint venture, the purpose of the collaboration is to accomplish a definite objective (called “project”) by the allying corporations. It is limited to this objective and the association will eventually end when the objective is fulfilled. Such joint ventures are comparatively rare and happen for exclusive reasons such as if the collaborating companies want to foray into a new arena. It helps the partnering companies to infiltrate more diverse markets and reach a wider consumer base, especially in countries whose laws do not equally support business activities by a totally foreign company.

Technological process differences is one of the most common issues in strategic acquisitions. You can retain the existing management of the newly acquired company to benefit from their expertise, knowledge and experience while having your team members positioned in the board of the company as well. The subtle nuance that I came across while recently creating a strategy was that a franchise setup would work well when you as a franchiser are a bigger brand in that particular product. I explored this strategy in the case where one of the established companies of the other country already had a loyal audience with them.

  • In the case of a company, it is required to publish its capital structure, constitution, accounts, etc. by filing such required documents with the registrar of the companies.
  • The type of alliance it chooses will depend on what its growth needs are and the time frame.
  • Almost all the efforts are directed towards luring and retaining the target audience.
  • They do not simply invest in a single firm but rather focus on fragmented investments to get benefits.

Alternative Dispute Resolution Provisions and Deadlock Provisions – Most joint venture partners will not choose to risk litigation in either of their respective forums. Detailed provisions and procedures for mediation and/or arbitration should be set forth. In addition, consideration should be given to impasse provisions short of mediation or arbitration as a way to resolve deadlocks that are not fatal to the joint venture. In structuring a joint venture, it is helpful to have chosen preliminarily joint venture management.

Non-debt foreign inflows-

Their benefits could include secret drug trafficking or money laundering etc. As lawyers know, you can choose only two among speed, quality and price. Hi team I have a doubt in the advantages of private company I can see the shares are transferable but why in the disadvantages it is mentioned the shares cannot be transfered. One of the main disadvantages of a Private Limited Company is that it restricts the transferability of shares by its articles. If the company undergoes financial distress because of whatsoever reasons, the personal assets of members will not be used to pay the debts of the Company as the liability of the person is limited.

advantage and disadvantage of joint venture

In general, this type of joint venture is entered into for a limited period or a particular purpose and does not join the parties for perpetuity. An unincorporated joint venture can be either by contract or through partnership. Real estate experts also feel that the regulatory regime has brought transparency and we can expect more JVs in future.

The liability of each shareholder is limited to the nominal value of the share issued to them at par. In the case of an unlimited company, the liability of the member is enforceable at the time of winding up only. A corporation is a legal entity, the corporation has designated rights, responsibilities, and privileges. When a corporation borrows money, it does so in its name, instead of the name of its assets founders or any other persons.

The liability of the members of a Private Limited Company is limited to the number of shares respectively held by them. One option before the buyer, is to reject JV projects and choose one, where the builder is also the land owner. Buyers, who opt for JV projects, should conduct proper due diligence and ensure that the developer has received the title to the land. Despite this due diligence, risks exist, as with any real estate project. A company is a separate legal person and it is independent of the members composing it. Since a company can only be dissolved by law thus doesn’t depend on the lifetime of a natural person and possess a continuity of existence.

Joint Venture: Meaning, Advantages, Disadvantages

The capital of a company is divided into small units or denominations called shares. The shares of a company are the property that is legally and freely transferable in the case of a public company. The company provides its members to sell their shares in the market and to get back the investment without having to withdraw the money from the company. The concept of transferability of shares provides stability to the company. In the partnership form of a business organization, a partner cannot transfer his shares unless he has the unanimous consent of all partners. There may be a joint venture between corporations, limited liability companies, partnerships, or some other form of the legal entity.

No Separate Laws

The company’s board of directors is also mentioned in the Joint Venture Agreement, and the relevant necessities can be mentioned in the company’s Article of Association. The parties to the Joint Venture may choose the appointment of the Managing Director on matters which are several Directors and the number of Directors who are required to sign the Joint Venture Agreement. Bharti AXA General Insurance Co Ltd is a joint venture between India’s leading business group Bharti Enterprises and French insurance, AXA. Other joint Venture examples between India and foreign companies are Tata Starbucks Pvt.

The parties to an IJV can also take advantage of complementary lines of business and synergies that may exist between the two companies. The form of business organisation in which there is separation of ownership and management is called _______. What kind of business organization you will suggest him_________________. The funding of the project is based on a series of contracts involving agreements with all project participants. Negotiations themselves can be very complicated and often costly to carry out.

Leave a comment