Joint Ventures and Partnerships

A Joint Venture or Partnership is an agreement between two or more parties to work together in a business. The benefits, risk, resources and work involved in the joint venture is based on what has been agreed by all parties involved.

This is an example of a joint venture or partnership arrangement in action.

You have invented a new product that is unique in the market. However, since this is a startup company, your financial resources is not sufficient to bring this product to the market effectively. After careful thought, you have decided to partner with other companies to help bring your product to the market.

First of all, you forged a partnership agreement with a manufacturer who will help to produce the new product. After that, you signed a contract with a sales and marketing group who specializes in new products. With the help of the manufacturer, you build a small number of the products and had the product sold in the market.

The product was well received by the market and consumers loved the product. The sales and marketing group proposed some improvement based on consumer's feedback. The sales and marketing company also organized focus groups to look at the product and suggest improvements.

After including all the desired features to the new product, you created an alliance with an engineering firm who help to redesign the product to make the product easier to manufacture. This redesign needs to be done because you realized that in order to satisfy the demand for the product, the product has to built in larger quantities and to ease mass production, the product has to be redesigned.

Very often, an entrepreneur creates joint ventures and partnerships to leverage on the strength of others. Instead of carrying the burden himself, he distributes the work and at the same, the profits as well.

From this example, you can see that Joint Ventures and Partnerships helps an entrepreneur in several ways:-

Help to bring the new product to the market quickly Access to resources, support and experience that you will probably never have on your own Have more involvement in the ongoing success of the product without a need for licensing arrangement Acquire the expertise, experience and distribution channels that can be used for subsequent products Have access to good management and administrative support There are also several "downside" to a Joint venture and Partnership.

Lose some control over the way the product is made or marketed Cannot withdraw the product and start a new company on your own Your comment or feedback may not be accepted by the other partners and you cannot do anything about it You depend on another party to do their job properly for the product to be successful Most entrepreneurs uses the joint venture strategy to help them launch their product. Without a joint venture, the product will probably never reach the market because of lack of resources. If managed well, joint venture or alliance can be a great tool to propel your new business venture to a totally new level of success.

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