Definition of Joint Venture

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.

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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)

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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.

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