Why strategic alliances are necessary to company expansion

Why strategic alliances are necessary to company expansion

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Joint ventures can be beneficial to companies looking to expand to new markets and areas. Continue reading to learn more.

There's a long list of joint ventures that spans different sectors and businesses across the globe, a few of which have culminated in the development of the world's most successful companies. That said, there are different types of joint ventures and picking the ideal one significantly depends upon the goals of the entities involved and the nature of their respective organisations. For example, project-based joint ventures are a type of partnership that combines two entities from various backgrounds to reach a common objective. This could be a JV between a commercial entity and a university or short-term partnership between a businessman and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular vehicle for expansion as these unite 2 entities that co-exist in the very same supply chain like buyers and vendors, and they offer increased growth chances for both parties.

Company growth is an auspicious objective that any entrepreneur considers at some point during their career, however, it can be a really demanding and costly procedure. It is for these reasons that some entrepreneurs opt for joint ventures when attempting to get into new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can considerably increase the opportunities of success as partners pool their resources and connections in an attempt to increase efficiency. For instance, a company wishing to expand its distribution to new markets and areas can benefit from partnering with regional players. By doing this, it can benefit from an already existing local distribution network, not to mention having access to knowledge and proficiency on the target market. Beyond this, guidelines in particular jurisdictions limit access to foreign companies, suggesting that a JV agreement with a local entity would be the only way to gain admittance.

For decades, joint ventures in international business have culminated in equally helpful outcomes, and entities such as Geely and Concordium's recent joint venture is a fine example on this. There are numerous reasons why companies enter joint ventures but perhaps the most crucial of which is to leverage resources and access know-how that one company may be missing. For instance, one business might have outstanding marketing and distribution read more channels but lacks a streamlined production hub. By partnering with a business that has a reputable manufacturing process, both entities benefit considerably. Another reason JVs are popular is the reality that businesses share costs and risks when starting a joint venture. This makes the collaboration more appealing as both parties would share the expense of labour and marketing, and they both benefit from lower production expenses per unit by leveraging their capabilities and combining expertise.

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