Why strategic alliances are essential to business expansion

Why strategic alliances are essential to business expansion

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Joint ventures can be beneficial to organisations seeking to broaden to new markets and areas. Keep on reading for more information.

There's a long list of joint ventures that covers various sectors and businesses around the world, some of which have culminated in the creation of the world's most successful businesses. That stated, there are different types of joint ventures and choosing the ideal one greatly depends upon the objectives of the entities included and the nature of their respective organisations. For instance, project-based joint ventures are a kind of partnership that unites 2 entities from different backgrounds to reach a common goal. This could be a JV in between a commercial entity and a university or short-term collaboration between a businessman and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are likewise another popular vehicle for expansion as these bring together two entities that co-exist in the very same supply chain like buyers and suppliers, and they provide increased growth chances for both parties.

For decades, joint ventures in international business have actually culminated in mutually beneficial results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons businesses go into joint ventures but perhaps the most crucial of which is to take advantage of resources and gain access to know-how that one business might be missing. For example, one company may have exceptional marketing and distribution channels however does not have a streamlined manufacturing center. By partnering with a company that has a reputable manufacturing process, both entities benefit significantly. Another reason JVs are popular is the fact that companies share costs and risks when embarking on a joint venture. This makes the partnership more enticing as both entities would share the cost of labour and advertising, and they both gain from lower production costs per unit by leveraging their capabilities and combining knowledge.

Company growth is an ambitious goal that any entrepreneur thinks about at some point throughout their career, however, it can be a very stressful and expensive process. It is for these reasons that some entrepreneurs go with joint ventures when attempting to get into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the chances of success as partners pool their resources and connections in an drive to maximise efficiency. For example, a company wanting to broaden its distribution to brand-new markets and territories can benefit from partnering with local businesses. By doing this, website it can benefit from a currently existing local distribution network, not to mention having access to understanding and know-how on the target audience. Beyond this, regulations in particular jurisdictions limit access to foreign businesses, meaning that a JV arrangement with a local entity would be the only way to gain admittance.

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