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Benefits of Joint Venture

Business enterprises within a country or in different countries may find beneficial to jointly launch a new company for the following reasons:

(i)    It enables the introduction of new technology. Thapar Du Pont Co. Ltd. (TDL) which set up a Nylon plant in Tamil Nadu is a joint venture between Thapar group and Du Pont Asia Pacific under which the latter brought latest technology into India.

(ii)    The amount of capital outlay for the joint venture is shared by the parties concerned. The problem of foreign exchange is solved to a great extent if the foreign partner brings latest machines and equipment from the other country.

(iii)    Increased sales through joint ventures help in reducing production and distribution costs.

(iv)    Multinational companies can enter into a developing country more easily through joint ventures with companies in that country.

(v)    Risks of joint venture are shared among the partners.

(vi)    Joint venture between two companies of the same country will check
competition between them.

(vii)    Small firms joining hands may compete with the large firms.

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