Joint Ventures

What is Joint Venture

There are two types of Joint Ventures

1. Contractual Joint Venture
2. Equity Joint Venture

1. Contractual Joint Venture 

This type of joint venture normally for a specific period of time and for a particular project. The joint venture contract terminates terminates at the completion of project. The typical joint venture types is construction of huge project like a Dam or a housing society.

2. Equity Joint Venture 

The equity Joint venture is a long term arrangement and not for a specific project . Technically it is a joint investment of two entities and typically both party should have 50% investment .

Advantages of Joint Venture (Contractual Joint Venture)

1.Funds Availability  

Under the joint venture arrangement the more funds are available as more than one party is involved.

2. Speedy Work 

The second advantages the work is divided in different segments so everyone is performing its given tasks .

3. Improved Performance 

There is a sense of competition among the joint venture partners. this improves the quality of work.

4.Risks are Shared 

 Big project involves big risk , this arrangement allows the risk sharing among different partners in joint venture arrangement.

5. Introduction Management skill and technology 

This arrangement introduces new management skill to the entity and also helps to introduce the use of new methods and technology .

Disadvantages of Joint Ventures

1. Decision making process in not independent
2. high dependence on performance of other party
3. Sharing profit with other party

4. Difficult to coordinate