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Advantages and Disadvantages of Joint Venture

Find out Advantages And Disadvantages of Joint Venture which are listed below. So let us check it out some information on advantages and disadvantages to know more about Joint Venture.

Advantages of Joint Venture are:

  1. Joint Venture share cost as a result it allows to lower production cost.
  2. Joint Venture share risks between partners hence it helps to reduce risk involved in joint venture.
  3. In joint venture access to partner's local knowledge is possible.
  4. Joint venture also helps to gain access to marketing as well as distribution channels.
  5. Joint venture also allows to penetrate protected markets.
  6. Due to partner's familiarity with culture and knowledge, local resources and contacts can be easily available in Joint venture.
  7. Joint venture helps to set up cost-effective various facilities under local condition and minimize cost.
  8. Joint venture creates an opportunity for a newer business to increase its visibility in the market.
  9. Joint venture also helps to reduce market and political risk.
  10. Risk of failure is also shared between partners.
  11. The process or establishment of joint venture is generally simple.
  12. Significant control over operation is seen in joint venture.
  13. Both parties in joint venture will get some performance incentives.
  14. Reduction of concern about overpayment.
  15. A joint venture can also be very flexible.
  16. Joint venture helps to increase capacity of products or services.
  17. Joint venture helps to access resouces such as specialized staff and technology.
  18. Joint venture helps in neutralizing or blocking competitors.
  19. A joint venture is an attractive way for a new company to enter a new industry.
  20. Joint venture is one of the effective way to expand business.

Disadvantages of Joint Venture are:

  1. In joint venture profits are shared between partners.
  2. Sometimes problems of management structure and dual parenting is seen in Joint venture.
  3. In joint venture transfer pricing problems is also observed.
  4. Potential conflicts between partners is seen in joint venture.
  5. Potential loss of proprietary knowledge in joint venture.
  6. Neither partner has full control and performance incentive in joint venture.
  7. Risk of giving control of technology to partner in joint venture.

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