joint venture is an expression of English origin, which means the union of two or more companies existing in order to start or carry out a common economic activity, for a certain period of time and aiming, among other reasons, for profit.
The companies that join are independent legally and in the process of creating the joint venture they can define whether to create a new company or to form an association (consortia of companies).
This alliance commits the companies involved to share management, profits, risks and losses. To constitute a joint venture, it is necessary to complete several steps and establish objectives, structure and its form.
The motivations of companies to establish a joint venture: allows the parties involved to benefit from the know-how, managing to overcome barriers in a new market; benefit from new technologies; investigate and expand activities they have in common; compete more efficiently and expand markets aiming at internationalization.
There are two types of joint ventures
: joint venture contractual (non corporate), in which there is no formation of a new company (it does not have legal personality); and joint venture corporate, which implies the creation of a new company that has its own legal personality.Among the various companies that have made joint venture in Brazil, we have as an example the company BRF - Brasil Foods (food products company) which in 2012 joined the Chinese company DCH - Dah Chong Hong Holdings Limited with the objective of distributing fresh and processed food products in the Chinese market, and developing the Sadia brand in China. China.
Advantages and Disadvantages of the Joint Venture
One of the main advantages of joint venture is that the companies involved share the risks and costs of the projects, which is essential considering that many of these projects require a large investment in the initial phase. In addition joint venture offers the opportunity for different companies to learn from each other, overcoming challenges more efficiently and competing in the market more competently.
However, the joint venture may represent a greater risk of failure of the goals, because the work dynamic between two companies distinct is always more complicated, and the less competent company may be an obstacle to the success of the project. Within the scope of joint venture, starting and managing the projects requires much more time and the decision-making process becomes less flexible, as it is necessary to manage the ideas and wishes of the two (or more) companies.