LEGAL MEMO

Date : September 19th 2023

To : PT IIDA GROUP HOLDINGS
From : Bill Clinton Simanjuntak S.H.
Re : Comparison of Joint Venture [JV] with Joint Operation[JO]

I. ISSUE
- How does a joint venture compare with a joint operation?
- How to choose the form of cooperation that is suitable for our company's business?

II. Analysis

① Comparison of Joint Venture [JV] with Joint Operation [JO]

No. Terms Joint Venture Joint Operation

1. Defenition of A type of long term cooperation in business
Purpose between two or more companies that aims
to achieve mutual benefits by
combining resources and expertise.
2. Structure and - New companies are formed jointly by
Level of Control business partners
- The business partners have joint control
and ownership of the new company
[separate organizational structures of
the two companies]
- Equality in presentation of ownership
and equal distribution of profits
- Business partners share risks and profits
according to the initial agreement before
the new company is founded
A type of ad-hoc/specific collaboration
between two or more parties with the aim of
running a business or project together.
- Companies run existing operations but
collaborate with other parties to complete
projects or achieve specific goals
- Each company retains control and
ownership of its own operations
[owned and organized by their respective
companies]
- Ownership presentation and profit
distribution are determined based on the
amount of contribution
- Business partners share risks and profits
according to the agreement that has been
made in working on a joint project

3. Types of - Companies usually form partnerships to - Each company can work together in
Business and work on a project or carry out a business implementing a project or business in a
Available that requires large resources and smaller amount and is flexible in nature.
investment to succeed.
4. Business - Full commitment from each partner to - Full commitment to each task and
Behavior achieve company goals collectively. responsibility that must be carried out.
- Fair distribution of risks and profits for - Good cooperation and coordination
each partner. between partners but maintaining
- Compliance with applicable laws and autonomy and independence.
regulations to maintain consistency in - Distribution of risks and profits according to
company operations. the contribution of each partner to the
project.
5. Possibility of Advantages : Advantages :
Advantages and - Able to control and expand reach in - Expanding Business Reach without making
Disadvantages Wider Market huge investments.
- Obtaining Unavailable Resources by give - Full Control in Operations:
access to resources that might not have - Expanding Capabilities and Expertise
available if it worked alone. expertise by collaborating with and learning
- Sharing Risk between partners will from business partners.
reduced the business risk
- Strengthening Expertise

Disadvantages :
- Difficulty in Making Decisions because
business partners must always consult
each other which slow down decision
making process
- Problems with Governance and Financial
due to divergent interest among partners
- Control Limitations and may have to
adjust way of business with the partner
Disadvantages :
- Greater Risk because the company is
responsible for all risks carried by the
operation.
- Companies should share profits with
business partners.
- Problems with Cost Control. In some cases,
the costs associated with a JO can be higher
than those incurred working alone.

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 ② Method to choose the form of cooperation/partnership that is suitable for our company's business.
The following is an three important aspects that need to be considered when determining the choice to join a JV or JO by
PT IIDA GROUP HOLDINGS :
• Types of Business and Projects
- In a JV, companies usually form a collaboration to work on a project or carry out a business that requires
large resources and investment to succeed.
- Meanwhile in JO, each company can work together in implementing a project or business in a smaller
amount and is flexible in nature.
• Suitability to Business Model
Choosing between JV and JO does not depend on the advantages of each cooperative business model. The success
of JV and JO depends on a good match with the business model that is already being implemented by each
company.
• Market Conditions
The choice of cooperation model must also be considered with current market conditions.
- JV are often chosen when the market is stable and there is a good chance of making big profits.
- Meanwhile, JO can be chosen when the market is relatively uncertain and flexibility is needed in dealing
with market changes that may occur.

Based on the review of company Business Identitiy Number (NIB). PT IIDA GROUP HOLDINGS covers activities Large
Trading Business, Manufacturing, and Owned or Leased Real Estate (not include construction). To choose a
JV or JO form of collaboration for that business activity, we recommend to following the following 3 important steps.

1. Examination and assessment on suitability of potential partners.

2. Measure company ability based on business activities and determine position and goals to be achieved by PT IIDA
Group Holdings in a cooperative relationship with other companies.
3. Determine the choice to join a JV or JO by PT IIDA GROUP HOLDINGS by considering types of business and
project, suitability with PT IGHD implemented business model, and market conditions.

III. Conclusion
- Regarding the comparison between a joint venture and a joint operation, both have advantages and
disadvantages.
- To determine the most profitable option between JV or JO, PT IGHD needs to consider the suitability of the partner
and pay attention to the type of business, suitability with the business model, and market conditions.

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