Teamwork can really pay off. So a joint venture with another company may be an excellent opportunity to grow your own business without the complexities of making an outright purchase of another company.
With a joint venture you make an arrangement with another company – possibly one of your competitors – to cooperate in a way that can improve the prospects of both businesses. Of course a formal agreement needs to be negotiated that specifically documents the roles of each company and how potential profits (or losses) will be shared.
Why Engage in a Joint Venture?
- Perhaps you have an established distribution channel another company could use to profitably sell its product. For example, Barnes & Noble once partnered with Starbucks to create in-house coffee shops in B&N stores.
- You might partner with a company in another country to supply products not available in that country.
- You might consider combining your capital with that of another company to enter new markets or fund growth. Three energy- and technology-related companies, including GE, NRG Energy and ConocoPhillips established a venture for funding smaller growth-stage companies interested in developing new, innovative energy technologies.