Joint venture – occurs when two or more businesses decide to split the costs, risks, control and rewards of a business project. In doing so, the parties involved in the joint venture agree to set up a new legal entity. For example, Coca-cola has a joint venture with San Miguel with shared ownership of Coca-cola’s bottling plant in the Philippines. Typically, a joint venture between two firms will involve a 50:50 split in costs, responsibilities and profits (or losses).
Other advantages of joint ventures:
• Spreading costs and risks
• Entry to foreign markets
• Relatively cheap
• Competitive advantage
• Exploitation of local knowledge
• High success rate