Joint ventures and strategic alliance - Essay Example

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The agreement is aimed at cooperating on specific activities in the business. The aim of the alliance is to ensure that the parties to the alliance benefit from the strengths of one another. The…
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Download file to see previous pages It also fosters reduction of risks and costs between the parties in different areas. Such areas include relationships with suppliers and the development of new technologies. Strategic alliances are sometimes considered to have equal magnitudes as joint ventures. The difference between the two is where an alliance can accommodate parties that are competitors, and the engagement lasts for a short time as compared to a joint venture. A joint venture, therefore, is a business agreement in which the parties involved agree on certain factors towards the development of what looks like a new entity. The factors are development criteria, finite time, creation of a new entity and new assets by contribution of investment. The parties to the joint venture contribute equity. Per se, they share the expenses, assets and revenue on agreed on basis. Strategic alliances and joint ventures are critical to the organization for a number of reasons. The paper focuses on discussing these reasons and whether the reason enables the alliances and ventures to complement global mega-mergers as a global business strategy.
There are several critical reasons or important factors that necessitate for the formation of global strategic alliances and joint ventures. Per se, they are the benefits that international businesses may accrue from such alliances and ventures (Chou et al., 2014 p. 42). There are many motivational factors that may drive the firms to enter into the ventures or alliances. Per se, the use of strategic alliances and joint ventures is increasingly gaining popularity. A growing number of globally multinational firms are finding it better to carry their operations under such umbrellas. Firms argue that under such agreements, each party can bring to the table complementary strengths. Such powers enable the companies to gain significant competitive advantages (Chou et al. 2014, p. 42).
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