Joint ventures are real options to explore the available economic opportunities and are inevitable to business on many occasions. The success of joint venture depends on many factors and it should be diligently planned before executing it. It is important to conduct a feasibility study to understand how joint venture in going to impact on existing business and how it will improve the future prospects through this association. It is inevitable to find synergy between the parties and it should open new vistas to your existing business.
If the associating parties are not known to each other then it is better to conduct a background check before potential business association. The compatibility between the parties will decide probability of success in joint ventures. Hence the associating parties brand value, business strategy, culture, ethics and litigation history are all important aspects before deciding for a joint venture. The core competencies of the parties will decide the competitive edge of joint venture. The most potential question is that “why should we associate with a new business partner?” and the answer for this question is an affirmative and compelling ‘yes’, then there is real scope for Joint venture. Both parties should have real need for such an association to scale towards new heights in business.
The objective of joint venture is worth brainstorming over and over again while devising the joint venture strategy. Whether it is entry to new markets, cost reduction, gain expertise, leverage existing business, new business opportunities, product differentiation or any other objectives then it is important to understand whether these objectives are fulfilled through this association. Communication and negotiation during joint ventures should be open, transparent and both parties should thoroughly discuss about the legal implication due to this association. If the parties to joint venture are from two different countries then both countries respective business laws should be digested before entering into joint venture. The tax angle and tax treatment require careful scrutiny and the hurdles should be addressed in the most effective manner. Whether is it contractual or corporate joint venture , the parties should gain clear understanding about stakes in business, organizational structure, management team, exit policies. If the joint venture involves technology transfer then be careful about the manner in which such information are handled. Have proper Non-disclosure agreement and confidentiality clause while handling such information. A well-crafted and implemented joint venture can avoid costly legal battles , unfair practices and negative impacts on business.