Why strategic alliances are important to company expansion

Why strategic alliances are important to company expansion

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Joint ventures can be beneficial to organisations aiming to broaden to new markets and territories. Continue reading to learn more.

For decades, joint ventures in international business have culminated in equally beneficial results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are numerous reasons businesses enter joint ventures however potentially the most important of which is to leverage resources and gain access to expertise that one company might be missing out on. For example, one business might have outstanding marketing and circulation channels however does not have a streamlined production center. By partnering with a company that has a well-established production process, both entities benefit greatly. Another reason JVs are popular is the fact that companies share costs and risks when embarking on a joint venture. This makes the partnership more enticing as both parties would share the expense of labour and advertising, and they both gain from lower production costs per unit by leveraging their abilities and integrating expertise.

There's a long list of joint ventures that spans various sectors and businesses around the world, a few of which have actually culminated in the creation of the world's most successful businesses. That stated, there are different types of joint ventures and selecting the best one considerably depends on the objectives of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a type of partnership that unites two entities from various backgrounds to reach a common goal. This could be a JV between a business entity and an academic institution or short-term partnership in between a business owner and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are likewise another popular means for growth as these combine 2 entities that co-exist in the same supply chain like buyers and wholesellers, and they provide increased development chances for both parties.

Company expansion is an auspicious objective that any business owner considers at some time during their professional career, nevertheless, it can be a very demanding and costly procedure. It is for these factors that some business people go with joint ventures when attempting to break into brand-new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the opportunities of success as partners pool their resources and connections in an effort to maximise effectiveness. For example, a business wishing website to broaden its distribution to new markets and areas can benefit from partnering with local businesses. By doing this, it can gain from a currently existing regional distribution network, not to mention having access to understanding and proficiency on the target market. Beyond this, guidelines in specific jurisdictions restrict access to foreign businesses, suggesting that a JV contract with a regional entity would be the only method to gain admittance.

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