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Home→The Westburn Dictionary of Marketing→J→joint venturing

joint venturing

Definition:
The formation of a partnership by two or more (but generally not more than three) individuals or organizations who choose to collaborate in a business activity. The partners share the costs and profits in agreed proportions. In INTERNATIONAL MARKETING, joint venturing is a form of greater participation in an overseas market than exporting or LICENSING. The foreign partner normally supplies technology and know-how (often marketing). The local partner usually has knowledge of the market and often useful political contacts or access to the local distribution system. Joint ventures are cheaper than wholly-owned subsidiaries and the political risk is reduced because of the partnership. They are potentially more profitable than merely exporting and offer quick access on a knowledgeable basis to the local market. They are, furthermore, more acceptable to many developing countries than wholly-owned subsidiaries and their numbers here are increasing. If a company lacks capital or personnel capabilities to expand its international activities, a joint venture may be very attractive. However, advantages tend to be short-term. Often the local partner, having acquired the technology will want to buy out the foreign partner. Another problem lies in the potential clash of interests between the partners. This is especially apparent when a MULTINATIONAL CORPORATION with a global perspective clashes with its joint venture partner who is likely to have local interest more at heart. The multinational's freedom of action is likely to be curtailed. In addition to two private sector partners, joint ventures may also be between private sector companies and (a) the public sector (either with a nationalized industry or a parallel organization like the National Enterprise Board or Scottish Enterprise); or (b) another holding organization like a bank, common in many developing countries where there is no alternative source of raising finance like a stock exchange.

Cross-References:
[licensing] [multinational corporation] [international marketing]

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© Westburn Publishers Ltd 2002, The Westburn Dictionary of Marketing edited by Michael J Baker, ISBN 978-0-946433-01-8. www.themarketingdictionary.com. Entry: [Joanna Kinsey and Michael J. Baker],.