TYPES OF JOINT VENTURE
There are four types of joint ventures which will help us to understand joint venture more precisely:
Under this, companies enter a venture to achieve a specific task, which can be an execution of any specific project or a particular service to be offered together, Assignments, etc. Such ventures are taken between companies for an exclusive and specific purpose only and cease to exist once the particular project is completed. These types of joint ventures are bound by time or a particular project.
Under this venture, companies come together to achieve a mutual benefit. Because of synergy in terms of functional expertise in certain areas. Together enables them to perform more effectively and efficiently.
Under this type, transactions take place between buyers and suppliers. It is preferred when bilateral trading is not beneficial or economically viable. Normally in this type of joint venture, maximum gain is captured by suppliers, while limited gains are achieved by the buyers. Under this, different stages of an industry chain are integrated within to create more economics of scale. Vertical joint ventures enjoy a higher success rate and also deepen the relationship between the buyers and the sellers, which ultimately help or give benefit to the businesses. In offering quality products and services to customers at reasonable prices.
Under the horizontal joint venture, the transaction happens between companies that are in the same general line of business. That may use the products from the joint venture to sell to their customers or to create an output that can be sold to the same group of customers. Managing a horizontal joint venture is usually inconvenient and often results in disputes as to the alliance is between partners that are into the same line of business. Also, these types of ventures suffer from opportunistic behaviour between the partners due to being in the same general line. This gain is shared equally by both parties.
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