Theralase Technologies Inc. V.TLT

Advantages & Disadvantages of a JV

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What are the Advantages of forming a Joint Venture?

• 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.
• In the era of divestiture and consolidation, JV’s offer a creative way for companies to exit from non-core businesses.
• Companies can gradually separate a business from the rest of the organisation, and eventually, sell it to the other parent company. Roughly 80% of all joint ventures end in a sale by one partner to the other.

The Disadvantages of Joint Ventures

It takes time and effort to build the right relationship and partnering with another business can be challenging. Problems are likely to arise if:

• The objectives of the venture are not 100 per cent clear and communicated to everyone involved.
• 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 partners don't provide enough leadership and support in the early stages.
• Success in a joint venture depends on thorough research and analysis of the objectives.