Exactly why strategic alliances are necessary to business expansion

Exactly why strategic alliances are necessary to business expansion

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Knowing when to embark on a joint venture and who to do it with is important. More here about this listed below.

Company expansion is an auspicious goal that any entrepreneur thinks about at some point throughout their professional career, nevertheless, it can be a really difficult and expensive process. It is for these reasons that some entrepreneurs go with joint ventures when attempting to break into brand-new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the chances of success as partners pool their resources and connections in an attempt to maximise effectiveness. For instance, a company wishing to broaden its distribution to brand-new markets and areas can benefit from partnering with regional players. In this manner, it can take advantage of an already existing regional distribution network, not to mention having access to understanding and proficiency on the target market. Beyond this, policies in specific jurisdictions restrict access to foreign businesses, implying that a JV agreement with a local entity would be the only method to gain access.

There's a long list of joint ventures that covers various sectors and businesses around the world, some of which have culminated in the creation of the world's most prosperous companies. That said, there are different types of joint ventures and choosing the ideal one greatly depends upon the goals of the entities involved and the nature of their respective organisations. For instance, project-based joint ventures are a kind of collaboration that unites 2 entities from different backgrounds to reach a shared goal. This could be a JV between a commercial entity and an academic institution or short-term collaboration between an entrepreneur and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for growth as these unite two entities that co-exist in the same supply chain like buyers and wholesellers, and they offer increased growth opportunities for both parties.

For decades, joint ventures in international business have culminated in equally beneficial outcomes, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are many reasons businesses enter joint ventures however potentially the most crucial of which is to leverage resources and gain access to competence that one business might be missing. For example, one company may have excellent marketing and distribution channels however does not have a streamlined manufacturing center. By partnering with a company that has a well-established manufacturing process, both entities benefit greatly. Another reason why JVs are popular is the reality that companies share costs and risks when embarking on a joint venture. This makes the partnership more attractive as both parties would share the cost of labour and advertising, and they both take advantage of lower production costs per unit by leveraging their abilities and combining expertise.

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