Every large business in the world opened as small enterprise. In today’s lingo, they could be billed as startups. Excellent business acumen of owners saw them flourish and gain leading position in the market. These businesses could capitalize upon prevalent conditions in market and develop in-house core competencies while pouring funds whenever necessary. Some successful ventures were bought by larger companies while others expanded through joint ventures.
Every entrepreneur opens a business with the sole objective of making money. Else, it would be deemed as a charity. The only way to make money vital for sustaining and expanding the business is by venturing into new markets and innovating brand offerings. As American management guru, Peter F. Drucker rightly says: “Every business has two functions- marketing and innovation.”
Why Joint Venture
An excellent way to grow your business without pumping more cash through loans or self-finance is through joint ventures or JVs. Entering into JV means you retain full control of the business. Your company’s name is cobranded, meaning the identity of the JV partner gets included. A JV can be operated as separate entity or subsidiary of the two partners. It allows the two JV partners to benefit immensely and expand their mutual business.
Growing your Business with JV
There are several ways a joint venture partnership helps grow your business. For several small and medium businesses, JV is an ideal way to expand volume, record better profits and develop core competencies. Here we look at advantages of a JV to grow your business.
Adds Value to Brand
Generally, a joint venture adds immense value to your brand. This helps attract a larger clientele. Loyal customers of your brand will continue to patronize your business while those who are aware about the good reputation of the JV partner will be attracted to become your customers. A cobranded JV rightly imparts the impression that the two companies are serious about their business and are tied-up to provide better brand offerings for customers. This automatically translates as growth for your business through a wider customer base and higher brand value.
Expand to Newer Markets
JVs help the two partners to expand their business to newer markets. Every business, however small or large, operates with some geographical limitations. While your base market could be within a specific geographical location, that of your JV partner will be in another. Through partnerships, both businesses can expand into one-another’s territories without the need to deploy more manpower or invest on expensive infrastructure for offices, warehousing and staff.
Joint venture partnerships also enhance financial liquidity of your business. While financial standing of your business may be strong, having a JV partner helps. Better liquidity means both partners are able to bid for larger projects, which would not be possible if done singly. Larger projects mean higher income and profits. Participating as JV in a large project works wonders for reputation of both businesses. It increases confidence among clients, thus bettering chances of bagging larger ones in future.
Access to Technology
Every business gets access to better technology through JVs. While your business will be operating on a specific technology, chances are the JV partner will be using a different technological base. Through JVs, the two businesses can merge the two different technologies to create a third, mutually beneficial and highly efficient version that can help provide quicker solutions and ease processes. Better technology usually translates as higher productivity culminating as increase in profits.
Spreading your products to a wider audience is possible through JVs. This example is aptly highlighted by banks in India that have entered JVs to offer insurance products. Through these JVs, these state-owned banks are able to offer insurance products at affordable rates to customers who otherwise would never have bought a life, accident or healthcare cover. The JV also helps participating banks to sell products through their network of branches and those of associates. More retail points simply mean more business.
Sharing Risks and Financial Burdens
Businesses venturing into large projects often find it difficult when talking of risks and financial burdens. For innumerable businesses, a failed project can spell doom by means of financial losses and risks taken in its execution. A joint venture minimizes risks associated financial burden on both JV partners. The larger technology pool of a JV minimizes risks of failures. In the unfortunate event where a project fails, the financial burden is shared. Hence, JV partners exert extra efforts towards ensuring successful execution of every project.
Expand Brand Portfolio
JVs make it possible for both partners to expand their brand portfolio by drawing on one-another’s core competencies in a field. Such businesses are able to make innovative offerings to avoid mutual conflict between their existing brands. Hence, customers can access a whole new range of products and services while the businesses continue to cater clients with those already popular, without infringing on one-another’s markets. Newer lines help grow businesses for both JV partners and results in profits.
Often, businesses find it difficult to attract foreign partners or venture abroad since they lack adequate technologies and core competencies necessary. Entering into JV with a foreign partner helps overcome this hurdle. India is home to many successful joint venture companies and majority of JVs in India are successful because they combine their strengths to compete in the very competitive market. It enables a business from another country to enter India with ease and draw on local competencies of the partner. Similarly, Indian companies gain access to lucrative foreign markets through JVs and record higher profits.
The largest number of JVs in this country is in core sectors like defense, IT, hospitality, Fast Moving Consumer Goods, electronics and home appliances, vehicles, insurance and aviation, among others. Realizing the importance of tying up with partners in the same field, small and medium businesses in India are now also exploring JVs either with other domestic companies in the field or from abroad. The Make in India initiative launched by the Indian government also makes it easier for local businesses to open JVs with foreign partners. JVs in India are between two or more companies. JV opens several vistas for businesses to grow.