Joint ventures enable a firm to make its products more available to consumers in new markets. As a result, a firm is able to use a convenient distribution format that provides goods to customers more effectively. Therefore customers obtain products promptly in different retail outlets; an approach that allows a firm to penetrate the foreign market easily.
A firm is able to satisfy the needs of its customers because it improves the quality of service it offers to consumers of its products. As a result, the firm gets more positive customer feedback because it consistently meets their needs (Hisrich, 2010, p. 29). A joint venture enables an international firm to utilise a pre-existing market structure to minimise risks associated with foreign.
A joint venture may make a foreign firm incur higher expenses to set up operations in a foreign country. Some countries have a lot of regulations that bar foreign firms from entering their markets to take advantage of available opportunities. An ineffective management structure is also one of the key problems a joint venture is likely to face. This slows down decision making processes in the joint venture because all parties have to agree before a specific decision is enforced.
Poor financial performance may also have a negative effect on a joint venture. Some local firms may use their favoured market position to make foreign firms pay more money to set up joint ventures. It is necessary for all business firms to assess all risks involved before agreeing to become part of a joint venture (Hisrich, 2010, p. 36). A joint venture offers business firms an opportunity to expand their operations and I believe that it is an effective way through which a firm can make an impact in foreign markets.
A joint venture between a design firm in the US and another partner in Germany has several benefits. The joint venture will enable the US firm to rely on the existing structure of the German firm to market its products. It also allows the US firm to overcome regulatory hurdles in the German market which comply with strict EU economic policies.
However, the firm may need to modify some its designs to ensure they comply with German specifications. The firm is likely to incur additional product development costs (Gaspar, 2011, p. 78). The ownership structure may also slow down decision making in the firm due to differences between managers from the two entities.
Gaspar, J. (2011). Introduction to global business: Understanding the international environment. Mason, OH: Cengage Learning.
Hisrich, R.D. (2010). International entrepreneurship: Starting, developing, and managing a global venture. London, UK: Sage Publications.