This time we will discuss the definitions, characteristics and benefits of a joint venture company (joint venture) completely and clearly.
Do you have a business idea and want to work with others? Or maybe you are considering a joint venture business? What is a joint venture? … Happy reading …
Table of contents :
Definition of Joint Venture
Joint Venture Company
Joint Venture Regulations
Reasons for forming a Joint Venture
Internal reasons
Competition objectives
Strategy objectives
Example of a Joint Venture
Benefits of a Joint Venture
Types of Joint Ventures
Why Form a Joint Venture?
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Definition of Joint Venture
Joint Venture is a company established by two or more business entities to conduct business together for a certain period of time. The two companies are companies originating from within the country with companies from abroad (foreign).
Referring to Law no. 25 of 2007, this joint venture can be categorized as a form of foreign investment activity.
The main objective of establishing a joint venture is for companies that provide economic power to the parent company to gain mutual benefits.Definition of Joint Venture
Please note, a joint venture is different from a CV (capital venture). The difference is that the life of the joint venture is shorter than the CV. Members of a joint venture are usually called venture / partner / ally.
One of the joint venture companies in Indonesia is PT Nestle Indofood Citarasa Indonesia. PT Nestle Indofood Citarasa Indonesia is a combination of two companies, PT Nestle SA and PT Indofood Sukses Makmur Tbk.
Joint Venture Company
A joint venture is an entity formed between 2 or more parties to carry out joint economic activities. The parties agree to group by contributing equity ownership, and then a share in the revenue, expenses, and control of the company.
This company can only be for specific projects, or an ongoing business relationship such as a Sony Ericsson joint venture.
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This is the opposite of alliance strategies, which do not involve fair stakes by the participants, and the setup is less difficult.
This phrase generally refers to a group goal and not a group type. Then, a joint venture
it can be a legal entity, partnership, LLC, or other legal structure, depending on a number of considerations such as tax liability and losses.
Joint venture companies are common in the oil and gas industry, and are often legal entities between local and foreign companies (about 3/4 international).
Joint ventures often appear to be viable business alternatives in this sector,
because this company can perfect the prowess equipment while it offers a geographical presence to foreign companies.
Various studies show a failure rate of 30-61%, and 60% fail to start or gradually disperse within 5 years. (Osborn, 2003)
It is also known that joint ventures in low-development countries show great instability,
and joint ventures involving government partners are more likely to fail (private firms appear better equipped to support critical skills, marketing networks, etc.).
Some countries, such as the People’s Republic of China and further India, require foreign companies to form joint ventures with domestic companies to enter the market.
This requirement often encourages the transfer of technology and manager’s control to domestic partners. Most joint ventures fail in Asia because of cultural differences.
Joint ventures fail for a number of reasons, including a lack of communication and distribution of power between management.
Joint Venture Regulations
Joint Venture Regulations
Law Number 1 of 1967 Article 23 concerning Foreign Investment
PP Number 7 of 1993 concerning Shareholders of Foreign Investment companies
PP Number 20 Year Share Ownership in a company established for foreign investment
Decree of the State Minister for the Mobilization of Investment Funds / Chairman of the Investment Coordinating Board Number: 15 / SK / 1994 concerning provisions on the implementation of share ownership in companies established in the context of foreign investment.
Also Read: How To Quickly Learn Accounting
Reasons for forming a Joint Venture
Internal reasons
Build company strength
Spread the costs and risks
Increase access to financial resources
Economies of scale and power gains
Access to new technology and customers
Access to innovative manager practices
Competition objectives
Influencing the structural evolution of industry
The competition before it’s finished
Defensive response to abolish industry boundaries
Creation of strong competition units
Market speed
Adds dexterity
Strategy objectives
Synergy
Transfer of technology / skills
Diversification
Example of a Joint Venture
CW Television Network between CBS Corporation and Time Warner
The Baseball Network between ABC, NBC, and Major League Baseball
Prime Time Entertainment Network of the Prime Time Consortium, a joint venture between Warner Bros. Domestic Television and Chris-Craft group of independent stations.
XFL between NBC and World Wrestling EntertainmentCingular between SBC (now AT&T Inc.) and BellSouth
Bank DnB NORD between DnB NOR and NORD / LB.
Equilon between Texaco and Royal Dutch Shell
Shell-Mex and BP between Royal Dutch Shell and British Petroleum (1931-1975)
One1mobile between One1 and Netalizer
AutoAlliance International between Ford Motor Company and Mazda
Strategic Alliance between Northwest Airlines and KLM Royal Dutch Airlines
LG.Philips Components between the LG Group and Royal Philips Electronics
NUMMI between General Motors and Toyota
Penske Truck Leasing between GE and Penske Corporation
Sony Ericsson between Sony and Ericsson
Nokia Siemens Networks between Nokia and Siemens AG
Balfour Beatty Skanska JV between construction contractors Balfour Beatty and Skanska
Brewers Retail Inc. between Inbev, Molson Coors and Sapporo Breweries
Verizon Wireless between Verizon Communications and Vodafone
Benefits of a Joint Venture
Benefits of a Joint Venture
Some of the benefits of doing a joint venture are:
Risk limitation
Financing
Save energy
Rentability
Possible optimization know-how
Possible hindering kongkruensi (interdependence)
Also Read: Understanding Business Accounting
Types of Joint Ventures
There are two types of joint venture contracts, namely domestic and international joint ventures.
According to article 8 paragraph (1) Decree of the State Minister for the Mobilization of Investment Funds / Chairman of the Investment Coordinating Board Number: 15 / SK / 1994
concerning provisions on the implementation of share ownership in companies established for foreign investment, the business fields that are obliged to establish a joint venture company are:
Port
Production, transmission and distribution of electric power for the public
Telecommunication
Service
Flight
Drinking water
Public train
Atomic power plant
Mass media or mass media
Joint ventures are mandatory for foreign investment with domestic companies. This is because the business is classified as important for the country and affects the lives of many people.
Meanwhile, businesses that are prohibited from planting are in fields related to national defense, such as the production of weapons, machines, blasting equipment and war equipment.
Why Form a Joint Venture?
Why Form a Joint Venture
There are several reasons for several parties to establish a joint venture company, including:
Combining Resources
To run its operations, of course an entity needs more resources to ensure the success of its business. This joint venture business can combine the resources owned so that it can create a larger entity.
Combining Expertise
In the business world, usually a company has its own advantages. For that, the joint venture can combine the expertise of each entity. So that the new entity will have many advantages.
Saving Money
Having two entities or companies merging can save each other money, of course.
