Why strategic alliances are vital to business expansion

Why strategic alliances are vital to business expansion

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Much like any other commercial endeavour, joint ventures have advantages and downsides. This post will note the most notable ones.

For years, joint ventures in international business have culminated in equally advantageous results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons why businesses enter joint ventures but perhaps the most crucial of which is to leverage resources and gain access to proficiency that one company might be missing out on. For instance, one company may have outstanding marketing and distribution channels but lacks a streamlined manufacturing hub. By partnering with a business that has a well-established manufacturing process, both entities benefit significantly. Another reason why JVs are popular is the reality that companies share expenses and risks when starting a joint venture. This makes the collaboration more appealing as both parties would share the cost of labour and advertising, and they both benefit from lower production expenses per unit by leveraging their capabilities and integrating knowledge.

There's a long list of joint ventures that covers different sectors and companies across the globe, a few of which have culminated in the creation of the world's most successful companies. That stated, there are various types of joint ventures and choosing the best one considerably depends on the goals of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a kind of partnership that unites 2 entities from various backgrounds to reach a common objective. This could be a JV in between a commercial entity and a university or short-term collaboration between an entrepreneur and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for expansion as these combine 2 entities that co-exist in the same supply chain like buyers and wholesellers, and they provide increased growth chances for both parties involved.

Company expansion is an auspicious objective that any business owner thinks about at some time throughout their career, however, it can be a very stressful and costly procedure. It is for these reasons that some entrepreneurs go with joint ventures when trying to break website into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the chances of success as partners pool their resources and connections in an drive to increase efficiency. For example, a business wishing to broaden its distribution to new markets and areas can benefit from partnering with local businesses. This way, it can gain 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 certain jurisdictions restrict access to foreign businesses, implying that a JV agreement with a regional entity would be the only way to gain admittance.

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