Joint venture – the most important form of organization of the international activities of any state. Such enterprises are created in the form of joint ownership or licensing, which allows foreign parties to use trademarks or patents, trade secrets, carry out the production process in exchange for royalties or commissions.
Creation of joint enterprise involves the conclusion of a contract with a foreign company to manufacture its products in the state. The national company provides management experience and involved in marketing of finished products. Signing the management contracts, the company acts as a consultant for a foreign company. If there is joint ownership, the national company agrees to sell and the production of goods manufactured with foreign enterprise, which allows to reduce the new costs and spread risks.
Any joint venture, operating in the field of sales or production should be clear about the implications of overseas organizations with participation of foreign partners. Creation of joint enterprise appropriate in the presence of the following prerequisites:
- industrial enterprise does not have sufficient capital or production personnel appropriately trained for performing independent operations abroad;
- the company offers the possibility for cooperation with the company, which already occupies a strong position in the market;
- the company is no required number of source materials, raw materials or components for the expansion of production of competitive goods;
the company did not have modern technology and equipment, but has available the necessary labor resources, raw materials and materials for production of modern competitive products, which can find the maximum sales in the country with a production.
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In some States it is forbidden to create companies that are fully owned by foreign missions, and to enter the markets of these countries is required to organize a joint venture.
The benefits of joint ventures
The Partnership activities are the most profitable small businesses seeking to conquer several markets, but they lack sufficient financial resources. In practice, such enterprises do not have staff who meet international requirements, they do not have any information about the capacity and external market conditions. In exchange for the attributes of successful foreign trade activities of the company offer technical expertise.
Lacking financial assets, the company can work together with several foreign partners, producing in the sale of shares of the company. In this case it should be noted that such joint ventures can be controlled only by having more than 50 percent of equity.
In a foreign market to go much easier in partnership with local firm. For some countries the only possibility on the market only give a joint venture.
A joint venture can give a special effect in the presence of a mediator, which has an established system of relations with consumers and has an energetic business reputation in their market.
During the economic crisis, the creation of joint ventures can be of great assistance to industry and would overcome the difficulty that is important to the economy of the state.
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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."
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