Why strategic alliances are necessary to business expansion

Why strategic alliances are necessary to business expansion

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Understanding when to start a joint venture and who to do it with is crucial. A lot more about this listed below.

Company growth is an auspicious objective that any entrepreneur considers at some point throughout their career, however, it can be a very difficult and pricey process. It is for these factors that some entrepreneurs go with joint ventures when attempting to break into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can considerably increase the chances of success as partners pool their resources and connections in an drive to maximise performance. For example, a business wishing to broaden its distribution to new markets and territories can gain from partnering with local businesses. By doing this, it can take advantage of an already existing local distribution network, not to mention having access to knowledge and know-how on the target audience. Beyond this, policies in certain jurisdictions limit access to foreign companies, indicating that a here JV agreement with a local entity would be the only method to gain access.

For decades, joint ventures in international business have actually culminated in mutually advantageous results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are lots of reasons companies go into joint ventures but perhaps the most essential of which is to leverage resources and access knowledge that one business might be missing. For instance, one company may have outstanding marketing and distribution channels however lacks a structured 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 entities would share the expense of labour and advertising, and they both benefit from lower production expenses per unit by leveraging their abilities and combining expertise.

There's a long list of joint ventures that covers various sectors and companies across the globe, a few of which have culminated in the creation of the world's most prosperous businesses. That said, there are various 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 instance, project-based joint ventures are a kind of partnership that brings together two entities from various backgrounds to reach a shared goal. This could be a JV in between a business entity and an academic institution or short-term collaboration in between a business owner and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular means for expansion as these combine two entities that co-exist in the very same supply chain like buyers and vendors, and they provide increased growth chances for both parties involved.

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