JOINT

VENTURES
PRESENTED BY:

SHALINI PATEL
SHIKHA GUPTA
SHARAD
SHRADDHA SARAF
SHWETA
SHWETA KUMARI
JOINT VENTURES
 Joint venture is an entity formed between two
or more parties to under take economic
activity.
 The necessary elements are:

 An express or implied agreement.

 formation of a new entity.
 A common purpose that the group intends to
carry out.
 Shared profits and losses.
 Each member’s equal voice in controlling in the
project.
RATIONALE BEHIND JOINT
VENTURES
 Internal reasons
 Buildon company’s strengths
 Improving costs and risks
 Economies of scale
 Access to new technologies and customers
 Access to innovative managerial practices
 Tax advantages
 Competitive goals
 Influencing structural evolution of the industry
 Pre-empting competition
 Defensive response to blurring industry boundaries
 Creation of stronger competitive units
 Improved agility
 Speed to market
RATIONALE CONTINUED…
• Strategic goals
• Synergies
• Transfer of technology/skills
• diversifications
KEY ISSUES IN THE JOINT VENTURE
1)Management Issues- The agreement should be
clear in terms of managing the J.V., clear assignment of
responsibilities among the directors.

2)Financing Issues- working capital needs ,

distribution of profits & sharing of losses , expansion
cost.

3)Issues Regarding Transfer Of Shares- In case of

winding up of J.V. , Intra group transfer, in case one of
the parties becomes insolvent.
CONTINUED…
 Issues Related To Termination- cases
where J.V. is automatically terminated, one of
the partners has the right to terminate.

 Contingency Issues- alteration in

government rules, change in market
,requirement of more funds.

 Commercial Issues- limitation and scope of

location, right of export and import
INTERNATIONAL JOINT VENTURES
 A joint venture is known as International Joint
Ventures if at least ONE of the partners is
headquartered outside the country of
operation.
OR
 If the venture has active presence in more
then one country.
 Examples: Birla Sun Life Distribution
(J.V. between Birla group of India and
sun life financial of Canada)
DIMENSIONS CRITICAL TO SUCCESS OF
INTERNATIONAL J.V.
 CHOOSING THE RIGHT PARTNER based on
 Taskrelated criteria- access to new market,
supplier, distribution channels
 Partner related criteria-size of partner’s co.,
partners goodwill, financial condition.
 GOVERNANCE AND CONTROL- the level of
control to be exercised by partners.
 PERFORMANCE- like profitability, growth
CHECK LIST FOR JV’S
 Contribution of joint venture partners
 Business of the joint ventures

 Self dealing

 Theft of joint venture opportunity

 Territory

 Funding requirements

 Management

 Profit distribution

 Selling out

 Dispute resolution
WHY JOINT VENTURES FAIL
 Cultural and ideological differences.

 Insufficient planning.

 Bad ideas.

 Inadequate capitalization.

 The managers of one company may be more

adept.
THANK YOU