Why strategic alliances are important to business growth

Why strategic alliances are important to business growth

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Knowing when to embark on a joint venture and who to do it with is crucial. More about this below.

Company expansion is an ambitious objective that any business owner thinks about at some time throughout their professional career, however, it can be a very demanding and pricey process. It is for these factors that some entrepreneurs choose joint ventures when trying to get into new markets and territories. Launching a world-class joint venture such as Telkom Indonesia and Telstra's joint venture can significantly increase the possibilities of success as partners pool their resources and connections in an attempt to increase performance. For instance, a business wanting to broaden its distribution to new markets and areas can take advantage of partnering with regional players. This way, it can gain from a currently existing local distribution network, not to mention having access to understanding and proficiency on the target audience. Beyond this, regulations in specific jurisdictions restrict access to foreign companies, indicating that a JV arrangement with a regional entity would be the only way to gain access.

For years, joint ventures in international business have actually culminated here in equally beneficial results, and entities such as Geely and Concordium's recent joint venture is a good example on this. There are many reasons why companies enter joint ventures however perhaps the most essential of which is to leverage resources and access expertise that one business might be missing out on. For instance, one company may have outstanding marketing and distribution channels but lacks a structured production hub. By partnering with a business that has a well-established production process, both entities benefit significantly. Another reason JVs are popular is the fact that businesses share costs and risks when starting a joint venture. This makes the collaboration more enticing as both parties would share the expense of labour and advertising, and they both take advantage of lower production costs per unit by leveraging their capabilities and integrating knowledge.

There's a long list of joint ventures that spans various sectors and companies around the world, some of which have culminated in the creation of the world's most successful businesses. That said, there are various types of joint ventures and selecting the right one greatly depends on the goals of the entities included and the nature of their respective organisations. For example, project-based joint ventures are a type of partnership that unites 2 entities from various backgrounds to reach a shared objective. This could be a JV between a commercial entity and an academic institution or short-term collaboration in between a business person and a government such as Farhad Azima and Ras Al Khaimah's joint venture. Vertical joint ventures are likewise another popular means for growth as these unite 2 entities that co-exist in the exact same supply chain like buyers and wholesellers, and they offer increased development chances for both parties involved.

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