What is joint venture? Briefly explain its benefits.
A joint venture is the pooling of resources and expertise by two or more businesses, to achieve a particular goal. Such a partnership between two firms is formed to share capital technology, human resources, risks and rewards to attain a strong position in the market. The joint venture agreement will be automatically be terminated after completing the venture.
Benefits of joint ventures are :
1. Reduces Competition : When two companies join together, it results in reducing the competition as instead of wasting resources in competition they will strengthen their organisation.
2. Reduces risk : High risk involved in new and innovative ventures can be reduced when two companies join together to share the risk.
3. Advanced technology : By joining hands with foreign companies, Indian companies can get the benefit of advanced technology.
4. Large capital : In joint ventures, two companies together contribute capital. As a result, large capital can be arranged without much difficulty.