11 Reasons Why Companies Form Joint Ventures

Joint ventures are very common - and in fact, more common than you might think. Particularly, JVs are quite prevalent amongst big business. Oil and gas companies are common allies when it comes to forming joint ventures for drilling purposes. Electronics joint ventures, such as Sony Ericsson, fuel innovation and global access to untapped markets.

Here's a look at why big businesses form JVs. Do you see a similarity to your needs? Most likely you do. Learn from the global corporate giants and get an idea of how you can form your own JV right in your own city, state, region, or even on a national or global scale.

Internal Reasons to Form a JV

- Spreading Costs: You and a JV partner can share costs associated with marketing, product development, and other expenses, reducing your financial burden.

- Opening Access to Financial Resources: Together you and a JV partner might have better credit or more assets to access bigger resources for loans and grants than you could obtain on your own.

- Connection to Technological Resources: You might want access to technological resources you couldn't afford on your own, or vice versa. Sharing innovative and proprietary technology can improve products, as well as your own understanding of technological processes.

- Improving Access to New Markets: You and a JV partner can combine customer contacts and together even form a joint product that accesses new markets.

- Help Economies of Scale: Together you and a JV partner can develop products or services that reduce total overall production expenses. Bring your product to market cheaper where the customer can enjoy the cost savings.

External Reasons to Form a JV

- Develop Stronger Innovative Product: Together you and a JV partner may be able to share ideas to develop a product that is more competitive in your industry.

- Improve Speed to Market: With shared access to financial, technological, and distribution resources, you and a JV partner can get your joint product to market faster and more efficiently.

- Strategic Move Against Competition: A JV may be able to better compete against another industry leader through the combination of markets, technology, and innovation.

Strategic Reasons

- Synergistic Reasons: You may find a JV partner with whom you can create synergy, which produces a greater result together than doing it on your own.

- Share and Improve Technology and Skills: Two innovative companies can share technology to improve upon each other's ideas and skills.

- Diversification - There could be many diversification reasons: access to diverse markets, development of diverse products, diversify the innovative working force, etc.

Don't let a JV opportunity pass you by because you don't think it will fit in with your own small business. Small and big companies alike can benefit from the reasons listed above. Analyze how your company can benefit internally, externally, and strategically, and then find a joint venture partner that will fit with your needs.