The dictionary defines 'Joint Venture' as a legal entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or a continuing business relationship such as the Sony Ericsson joint venture. This is in contrast to a strategic alliance, which involves no equity stake by the participants, and is a much less rigid arrangement."
There doesn't have to be a high risk of failure involved and a new entity is not necessarily formed. Individuals and companies do joint ventures all the time... out in the brick and mortar world as well as in cyberspace. As a matter of fact, it is one of the better kept secrets of Internet marketing.
JV is an idea as old as time. The cavemen most likely figured out that buy pooling their efforts they could more easily feed and clothe themselves. By pooling talents and resources so much more can be accomplished than any one individual or company could accomplish alone. That's why so many individuals and companies enter into JV agreements. Joint ventures are the stuff that fortunes are made of.
One of the better known JVs of modern times is the one that Bill Gates, of Microsoft fame, entered into with IBM, the giant of the electronics industry. Bill Gates had developed DOS while IBM had market share. The rest, as they say, is history. Just think what our world would be like if that joint venture had never happened. Oh... and Bill Gates was a billionaire before he was 31.
Out in the 'real' brick and mortar world, joint ventures happen all the time and some of the big ones affect our pocket books and give us access to better technology as well. Many times very large and powerful international companies will join into a joint venture agreement. Mergers often require governmental approval but joint ventures do not. A JV is a simple agreement between companies (or individuals) to pool resources and talent on a single project.
For example: The Auto Alliance International (AAI) is a joint venture between Ford Motor Company and Mazda. In this Joint venture, Mazda first bought Ford's unused Michigan Casting Center for the purpose of producing of 626 sedans. Then Ford bought 50% of the plant back. The Auto Alliance International Company is located in Flay Rock, Michigan and today produces the Ford Mustang and the Mazda6.
Another example of a joint venture that may in some way affect individuals is what is now known as Sony Ericsson. This is a joint venture entered into between the Japanese company, Sony and the Swedish telecommunications company, Ericsson. In any joint venture, each party brings certain advantages to the agreement. In this case Sony brought global consumer marketing expertise and Ericsson brought technology expertise in the communications field. The joint ventures' purpose was the manufacture of mobile phones.
Verizon Wireless is the product of a JV between Verizon Communications (55%) and Vodafone Group (45%) and Cingular Wireless is a JV between AT&T Inc. (60%) and Bell-South (40%).
As you can see, huge International companies make use of the joint venture everyday. They do it because it is just good business. They can share capital, technology, human resources, risks and rewards when they form of a new entity under shared control.
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