Why strategic alliances are important to business growth

Why strategic alliances are important to business growth

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Joint ventures can be beneficial to organisations aiming to expand to new markets and territories. Carry on reading to find out more.

For years, joint ventures in international business have actually culminated in equally advantageous outcomes, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons companies enter joint ventures however potentially the most important of which is to leverage resources and access knowledge that one business may be missing. For example, one business may have exceptional marketing and circulation channels but does not have a structured manufacturing center. By partnering with a business 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 embarking on a joint venture. This makes the collaboration more enticing as both entities would share the expense of labour and advertising, and they both gain from lower production here costs per unit by leveraging their abilities and integrating knowledge.

There's a long list of joint ventures that spans various sectors and businesses across the globe, some of which have culminated in the development of the world's most successful companies. That said, there are various types of joint ventures and selecting the ideal one considerably depends on the objectives of the entities involved and the nature of their respective organisations. For example, project-based joint ventures are a type of collaboration that unites two entities from various backgrounds to reach a common objective. This could be a JV between a business entity and a university or short-term partnership in between a businessman and a federal government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are also another popular means for growth as these bring together two entities that co-exist in the very same supply chain like buyers and wholesellers, and they offer increased development opportunities for both parties.

Company growth is an auspicious goal that any entrepreneur considers at some time during their career, nevertheless, it can be an extremely stressful and costly procedure. It is for these factors that some entrepreneurs choose joint ventures when attempting to get into brand-new markets and areas. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can greatly increase the opportunities of success as partners pool their resources and connections in an attempt to maximise efficiency. For instance, a business wishing to broaden its distribution to brand-new markets and areas can gain from partnering with local businesses. This way, it can benefit from an already existing regional distribution network, not to mention having access to understanding and proficiency on the target audience. Beyond this, policies in specific jurisdictions restrict access to foreign businesses, implying that a JV agreement with a local entity would be the only way to gain access.

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