Four Challenges for a successful Joint Venture
There are four key challenges for the success of the launch, planning and execution of a Joint Venture or Alliance.
• Strategic Alignment
• Economic Independencies
Strategic Alignment: There can be conflicts among entities if the goals and vision for the Joint Venture isn’t clear at the time of launch. When two entities have different goals/vision this can cause a strategic misalignment for the JV, which can lead to a delay in the venture’s development.
Governance: It is important to have effective governance to look-over the Joint venture. There has to be a shared decision making among the corporate entities otherwise it can lead to potential failure.
Economic Dependencies: There has to be a good allocation of resources to avoid any duplication of costs. The contribution of resources must be agreed between the parent companies prior to the launch.
Organisation: To build an effective/successful Joint venture or Alliance, the leaders must be skilled to run the Joint Venture or alliance otherwise the Joint Venture will be exposed to higher risks. If the managers are not right for the JV then it can affect the long-term growth of Joint Venture.
Joint Venture and alliances can be useful for organisations who are working in ever-changing markets and it can also help the organisation to share the risk and cost of large capital investment. JV or merger can be ideal for organisation who have good leaders .The organisation who work closely with many other organisations and have a good relationship with them. For some organisations it might be a good strategy to acquire another organisation but there has to be a good understanding of the culture of the organisation it is going to acquire.Finally Businesses can always explore new ideas to expand and grow and Joint Venture or alliance with another organisation could be one of the options available.