define joint venture explain it's characteristics
Answers
Joint Venture: a commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities.
Characteristics:
- Creates Synergy
- Risk and Rewards can be Shared
- No Separate Laws
1. Creates Synergy:
A joint venture is entered between two or more parties to extract the qualities of each other. One company may possess a special characteristic which another company might lack with. Similarly, the other company has some advantage which another company cannot achieve. These two companies can enter into a joint venture to generate synergies between them for a greater good. These companies can work on economies of large scale to give cost advantage.
2. Risk and Rewards can be Shared:
In a typical joint venture agreement between two or more organization, may be of the same country or different countries, there are many diversifications in culture, technology, geographical advantage and disadvantage, target audience and many more factors to overcome. So the risks and rewards pertaining to the activity for which the joint venture is agreed upon can be shared between the parties as decided and entered into the legal agreement.
3. No Separate Laws:
As for joint venture, there is no separate governing body which regulates the activities of the joint venture. Once they are into a corporate structure, then the Ministry of Corporate Affairs in association with Registrar of Companies keep a check on companies. Apart from that, there is no separate law for governing joint ventures.