Joint venture foundation
In conditions of limited access to some markets, it is more profitable for entrepreneurs to associate for a joint search for markets. A joint venture (JV) foundation is one of the forms of such an association.
Joint venture advantages:
- Decrease of production organization expenses
- Risk sharing with partners
- Direct control over the joint venture activities
At the same time, the key issues when founding a joint venture are the issues of joint venture investments, control over the joint venture activities and product protection.
Risks in foundation of joint ventures:
- Blocking key decision making
- Sudden partner withdrawal from the project
- Copying the joint venture product by partner and further self-release of the product
However, partners can level the risks out by concluding a corporate agreement when founding a joint venture. The corporate agreement will fix the terms of (about):
- Joint venture investments
- The order of formation of the joint venture management bodies
- The profit distribution order
- Conditions of withdrawal from the joint venture
- Conditions of competition between partners.
Cost - from $ 350