A joint venture is a popular way for most companies to raise their profit margins and to lessen the risks involved in going into business. Most likely you've tallied up the pros and cons and have decided to go into one to develop your business. However, now that you've got yourself a partner and are going into business with him, what should you be aiming for? Most people hit a dead end when this comes up. This article hopes to help them get over that hump.

Being a part of a joint venture is a great way for a business to develop a healthy profit margin but you have to know how to maximize the relationship between you and your partner. It can be a rocky road ahead but these few pieces of advice should help out a bit.

First of all, look out for your interests. Yes, you maybe partners but this doesn't mean that you should just merely cooperate like sheep. Take note of what can benefit you in your business dealings – try to build your company's strength while also shoring up your partnership.

This usually comes in the form of developing know-how and experience – remember that mosty joint ventures are a limited and you may eventually have to break off your relationship with your partner. It would be good to have people in your ranks that knows about some of the things that are usually out of your hands. Building up contacts in the market are also a good idea – cultivating your own stable of business pointment can help a lot when you've finally gone on your own.

Secondly, look at what you're putting into your partnership. Always remember that a joint venture is a partnership. Like a marriage, there should be an equal division of work; having your partner doing the easy part of the operation or not putting in the same amount of effort or resources into the business as you are will be detrimental to your company's future financial health. Take notice of such disparities and make your partner pay attention to it. Having your partner carry his own weight is a essential for success in a joint venture and its up to you to keep him honest.

Thirdly, pay attention to the venture itself. A joint venture is like an independent business. You should take a look at its profit margins and losses. Make sure that you're in the black and are well aware of the market forces that may affect your partnership. You should also pay attention to the “joint” part of a joint venture: make sure your relationship with your JV partner is both cordial and stable; this can make or break the partnership.

Remember that your partner is also looking at the bottomline and it would be best to work together to achieve that. You should also know when your partner's not being the best he could be – if he's being more of a hindrance than an assistance, it's best to just make a clean cut and end the partnership.

There you go – a few tips on helping you get the most out of your joint venture. Remember to always keep them in mind and you'll have a success on your hands in no time.

 


Nestle SA and Colgate-Palmolive formed a joint venture to develop and sell candy that can produce plague and clean teeth. IBM and Lenovo Group also formed a joint venture. IBM sold its PC Division to the China-based company that would make the latter the third world’s largest PC maker. Skype Software of Denmark and Tom Online of China developed a joint venture to distribute a simplified version of Skype's VOIP. Is joint ventures business hype or a way to achieve business strategies? Here are the reasons why many big business firms form joint ventures:

1. To develop new products - Examples of functional confectionary products are gum and candy that have health and beauty benefits. Sales of these products are growing for about 6 percent each year which is twice the growth rate of standard gum and candy. Nestle SA had no functional confectionary products prior to its joint venture with Colgate-Palmolive. Cadbury Schweppes, PLC's Adams, and Wm. Wrigley Jr. dominate the functional confectionery segment.

2. Allow companies to improve communications and networking - Kathryn Rudie Harrigan of Columbia University says that in today's business environment joint ventures are most appropriate to topple scarce resources, rapid rates of technological change, and rising capital requirements.

3. Effective way to enhance corporate growth - Strategic partnering like joint ventures are very important to enhance corporate growth. Eli Lilly host partnership training classes for their managers and partners. Starbucks recently joint venture with China's President Coffee and opened hundreds of new branches in China. Eli Lilly and Starbucks are just two of the 10,000 joint ventures formed annually.

4. Globalization - A major reason why firms are using joint ventures as a means to achieve business strategies is globalization. International joint ventures are very common today; one good example is Walmart's successful joint venture with Mexico's Cifra. Such alliance indicates how a domestic firm can benefit immensely by partnering with a foreign company to gain a global presence.

5. Technology - The Internet paved the way and legitimized the need for partnership and alliances. Corporate growth cannot happen without the help of state-of-the-art technologies.

How can a company determine if a joint venture is the best business strategy to pursue? Here are six guidelines:

1. When synergistically combining unique advantages like closed ownership of a privately owned company and access to stock issuances as a source of capital of a publicly owned company results to enhanced corporate growth, access to new technologies, greater market feedback and more long-term positive consequences.

2. When a joint venture provides the opportunity to reduce risk.

3. When the distinct competencies of participants complement with each other well.

4. When projects are profitable.

5. When two or more firms have difficulty in competing with larger firm.

6. When there exist needs to introduce a new technology quickly.

Other recent joint ventures not mentioned previously include Wachovia Brokerage and Prudential Brokerage. In the U.S. today, firms are acquiring foreign companies and forming joint ventures with foreign firms, and foreign firms are also acquiring U.S. companies and forming joint ventures with U.S. firms.