When two businesses agree to join together for a common purpose and mutual benefit, it
gives rise to a joint venture.
The major benefits of entering into joint ventures are as follows
(i) Increased Resources and Capacity When two firms come together, it enables the joint venture company to grow and expand more quickly and efficiently as the new business pools in financial and human resources.
(ii) Access to New Markets and Distribution Networks When foreign companies from joint venture with companies in a host country, they gain access to the market of host country. They can also take advantage of the established distribution channels i.e., the wholesale and retail outlets in different local markets which may be very expensive for them otherwise.
(iii) Access to Technology Most businesses enter into joint ventures to get access to an advanced technology which is not possible or economically feasible to be developed on their own. Technology adds to efficiency and effectiveness. Thus, leading to reduction in costs and superior quality products.
(iv) Low Cost of Production When international corporations invest in developing countries through joint ventures, they are able to benefit from low cost of raw materials and labour. The international partner is thus able to produce the product of required quality and specifications at much lower cost than what is prevailing in the home country.
(v) Established Brand Name When two businesses enter into a joint venture one, of the parties benefits from the other’s goodwill already established in the market. In such cases, there is a ready market waiting for the product to be launched which saves- expenditure on marketing activities otherwise required to launch a new product.