By sharing the vision and the profits, one company can make use of another
company's materials and assets to meet their sales goals without having to add
extra expenses or restructuring.
One of the internal reasons to
create a joint venture is to build on the strengths of both companies. For
example, if you are marketing an e-book or other internet related
materials, you might have a good customer base. If you go into a joint venture with a
partner who has experience selling and marketing on the internet, your company will
benefit from the knowledge that the other company has in marketing and they can
benefit because of the customer base that you have. Your profit will
be a direct reflection of the strength of your company and the other company’s
knowledge and strength. When you combine forces it just makes good business sense.
Another internal reason to go into a joint venture is to spread out the costs and the risks
for your marketing targets. If you are short of capital and you need the extra money to start your marketing strategy, then the money and resources of your venture partner will strengthen your plan. By having the joint venture partner absorb the costs of the initial marketing campaign, you will use less
of your capital and, in return, you take less of a risk in losing that capital. If your product does not sell well
or there are some flaws in your plan then you lose what you invested and the partner will lose his share and you will both still be in business.
When taking on a new project and securing financial resources, it
is a smart move to use
Someone else’s credit if your credit is not enough to cover
costs. If your joint venture partner has
better credit, you can adjust your percentage of the profit in exchange for
their good financial credit and backing.
And later on when you go to other companies or eventually lenders your
standing will look better.
Your joint venture partner may have the financial backing to finance the entire project, but expect a large portion of the profits to go to the person putting in the most money.
When you join with another company
it’s a win-win situation because the two of you are now one big force instead
of two smaller ones. The bigger you are
the more likely you will be noticed by potential customers and you can benefit
from being taken more seriously because of the reputation of the more
established company.
Over thirty percent of marketing failures come from the business not being in business long enough or the power of the name backing the business not having enough clout to complete in the market.
If you and your partner pool your customers, your customer base will be larger
and the potential for higher profits will be greater. Another advantage of size would be that there would be more potential for public awareness. A business that is joint ventured with another one enjoys more prestige
because of the increased customer base and the increased selling power and services in now offers. Size gains attention because most clients and services would rather do business with a larger, established giant, then the “small fry”.
Another reason for
joint ventures is to make use of established managerial practices and new
technologies. For example, if you are an
author you may have the product, a book, report, etc. but you may not have the
technology or the know-how to get the book printed, published and of course
marketed. A joint venture with a an
individual or company that has expertise in the above will give you the means
that the competitive edge you need to get the book to market and then both of
you profit.
The next category for reasons for a joint venture is for competitive reasons or goals. If you have a prototype product that will revolutionize an aspect of the industry, you need the size and the clout to get this new product to market. With a joint venture partner, you can combine resources and knowledge to lead this cutting edge technology to the markets you want to cover and at the same time you want to be able to have enough persuasion to break into existing companies in which your product would benefit.
A joint venture can also pre-empt your competition. If you have a competitor at the same financial strength that you have and one that has the same resources and skills, the joint venture partner that you bring into the deal may have more skill and resources and you can beat your competition to the punch and rake in the benefits of having your product or service on the market before them.
The product will also be seen as an innovation when it comes out with the right marketing and the right time.
A joint venture can also make your partnership a stronger competitive unit than either business that stands alone. The integrity and strength of your company lies on your bottom line of profit versus deficit. With a stronger
base of the combined companies, you will be able to beat competitors and in an open marketing battle, you will be able to persuade a lending institution
or a larger marketing firm to go on your side of the argument versus the side of your competitor.
You will be able to get your products to market faster if you pick a joint venture partner that has marketing capabilities. If you are lacking in anything that would hinder your product’s progress, you need to find that weakness and supplement with the strength of your future joint venture partner. This will improve your agility in the market and at the same time,
you will be able to use your new found ally to find new markets and to flood the ones that you have already structured.
Diversification leads to productivity and higher success. If you have a joint venture partner that has the tools you need, you product and your goal can diversify to meet the needs of your clients.
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