Topic

Submitted by :
1.Md. Riasat Arifin Tanim
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 A joint venture is a binding contract
between two venture partners to set up a
project either in home country or host
country or a third country

In this case both parties are committed

to joint risk taking and joint profit &
loss sharing
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 Joint ventures have been miserable failures in the
past. In the initial stage every venture promises
excellent opportunities to both the venture
partners. However, when the operation actually
starts, certain functional level grievances and
issues become inevitable.
 Therefore, it is absolutely necessary for both the
venture partners to understand all the aspects of
management, investment and regulations of the
countries where they operate. The business units
should have clear guidelines and operation
manuals wherein the role of everyone should be
clearly defined.
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 In-depth Analysis Before
Entering International Business
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1.Current and potential size of the market.

2.Level of completion for a specific product or service
3.Economic growth of the country and reform process
4.Purchasing power of the people
5.Political and legal environments and their impact in
business
6.Infrastructures like banking, insurance, port facilities etc
7.Socio-cultural background of the country
8.Availability of technical and non-technical work force
9.Foreign exchange reserve and repatriation facilities
 What is a Joint Venture?
 Joint Venture can be described as a cooperative
& temporary business arrangement, wherein
two or more independent firms come together
to form a legally independent undertaking, for a
stipulated period, to fulfill a specific purpose
such as accomplishing a task, activity or
project.
 A joint venture is not a business organization in
the sense of a proprietorship, partnership, or
corporation. It is an agreement between parties
for a particular purpose and usually a defined
timeframe.
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 Joint ventures are, basically:
 Separate companies with a shared interest
and goals
 Both companies have some proprietary
(ownership) basis for in this shared interest.
For example, two companies with online
patents for accounting apps might form a
joint venture.
 They agree to share income and expenses.
 Both companies in a joint venture maintain
their separate identities for all purposes
except those of the joint venture.
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 Why Form a Joint Venture?

Businesses form joint ventures for several reasons:

 To combine resources. A bigger entity may have more
clout in an industry or more resources to ensure the success
of a venture.
 To combine expertise. In technical businesses, one
company might have expertise in one part of a venture
while the second company might have expertise in another
part. For example, Company A might be good at creating
software, while Company B has experience creating the
hardware that's needed for a venture.
 To save money. Two companies might consider a joint
venture to save money on advertising, may be at a trade
show or in a trade publication.
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 Salient features of Joint venture
 1. Agreement : To undertake a business for a definite purpose,
two or more firms come to an agreement and are bound by it.
 2. Joint control: It exits over business assets, operations,
administration and even the venture.
 3. Pooling of resources and expertise: They pool resources like
capital, manpower, technical know-how and expertise for large-
scale production.
 4. Sharing of profit and loss: Agree to share profit and loss of
the business in an agreed ratio. The computation of it is usually
done at the end of venture or calculated annually if venture
continues for long duration.
 5. Access to advanced technology: Firms get access to various
techniques of production, marketing and doing business which
decreases overall cost and improves quality.
 6. Dissolution: After completion of the term or purpose, the
agreement comes to an end and the accounts of the co-
ventures, are settled, as and when it is dissolved. Then the co-
ventures are free to carry on their own business.

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 Objectives of joint venture
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* To enter foreign market & even new or emerging
market.
* To reduce heavy investment risk.
* To make optimum utilization of resources.
* To make optimum utilization of resources.
* To gain economies of scale.
* To achieve synergy.
The type of joint venture is based on various
factors like the purpose of formation, number of
firms involved & the term for which it is formed.
 How to have protection when entering
into a joint venture?
When venturing into emerging markets, it is vital to know what
are the possible risks to encounter before setting foot and doing
business. Moreover, before entering into agreements or
partnerships with new associates, it is essential to do homework
beforehand.
Due diligence is crucial as it allows to look ahead of all the risks
in order to decide whether to go or not
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It is necessary to ---
--determine the business classification of the company
--determine whether the company has acquired all the relevant
licenses
--see if the company has reported tax and investment correctly
--determine the number of employees
--determine the registered address
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 Conclusion
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 The joint ventures(JV) between companies (national or

international) is very important to overcome weak financial,
equipments or management skill problems.
 The usual purpose of JV is to share risks & costs in projects
and to pool resources in a way that permits to execute a
project.
 In the planning for a JV arrangement, it is important to
consider all important factors in order to deliver a project
successfully.
 Government has created more opportunities for companies to
engage in domestic and international joint ventures.
 Joint ventures have grown in popularity in recent years.
13 01/12/2019