Exactly why strategic alliances are essential to business expansion

Exactly why strategic alliances are essential to business expansion

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

Company expansion is an auspicious objective that any business owner considers at some time throughout their career, nevertheless, it can be a very demanding and costly process. It is for these reasons that some business owners go with joint ventures when trying to break into new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the possibilities of success as partners pool their resources and connections in an drive to maximise performance. For instance, a business wanting to expand its distribution to brand-new markets and areas can take advantage of partnering with regional businesses. This way, it can take advantage of an already existing regional distribution network, not to mention having access to knowledge and expertise on the target market. Beyond this, regulations in specific jurisdictions limit access to foreign businesses, indicating that a JV contract 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 many reasons companies enter joint ventures but potentially the most essential of which is to leverage resources and access competence that one business may be missing out on. For example, one business may have exceptional marketing and circulation channels however lacks a streamlined production hub. By partnering with a company that has a reputable production process, both entities benefit significantly. Another reason JVs are popular is the reality that businesses share expenses and risks when starting a joint venture. This makes the collaboration more enticing as both parties would share more info the expense of labour and marketing, and they both gain from lower production expenses per unit by leveraging their abilities and combining expertise.

There's a long list of joint ventures that covers different sectors and companies across the globe, a few of which have culminated in the development of the world's most successful companies. That stated, there are different types of joint ventures and choosing the right one greatly depends on the objectives of the entities included and the nature of their respective organisations. For instance, project-based joint ventures are a type of collaboration that combines 2 entities from different backgrounds to reach a common goal. This could be a JV between a business entity and an academic institution or short-term partnership between a business person and a 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 very same supply chain like buyers and wholesellers, and they offer increased development opportunities for both parties.

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