New Venture Capital - Thesis Proposal Example

The giant's sales in their traditional markets already reached a plateau due to market saturation. It will look into the financial feasibility of forming a joint venture company with one of those retailing giants based on an equitable mutually-agreed sharing formula. Financial aspects of the JVA will entail spelling out details on how each partner can increase its stake in the future without diluting the other partner's equity stake. The JVA agreement can be structured to include a program of divestiture over an agreed time frame if necessary if a partner wants out.

DiscussionEntering new markets is at best a risky proposition. This is because a new market entrant may not be familiar with the local customs, practices, geography, or language of that market. However, a way to reduce the risks and assure a higher degree of success is by tying up with a local partner firm. A joint venture agreement is often preferred over other modes of market entry such as starting from scratch (may take time) or by using merger and acquisition (considered risky these days if one is not familiar with the target market).

The majority of multinationals have now wizened up and taking a more conservative approach with their investments due to the prevailing financial crisis. Even conglomerates like GE and Groupe Danone have used this approach more often now (Deutsch, NYT, p.1).