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Profits Plateauing? Here Are 3 Reasons a Joint Venture Can Provide the Kickstart Your Company Needs

With a new year comes a fresh wave of inspiration to develop new ideas on how to best expand business operations and increase profits. Ideas such as new marketing initiatives, ways to reduce costs, and overall traditional business development tactics are usually the first to be considered. With 2021 right around the corner, it’s time to consider a joint venture which may offer the highest ROI of all. Companies large and small enter into joint ventures for a number of reasons including increasing the speed of innovation, adding new values to products and existing customers, the ability to access otherwise difficult markets, and reducing costs and risks.

This holiday season, there will likely be a record number of Zoom meetings and video calls resulting in less time spent traveling. Here are three reasons to take advantage of that extra time to plan and enter into a joint venture:

1. Increase Speed of Innovation and Add Value to Existing Products

A joint venture has the unique ability to quickly develop and add new capabilities to existing products at a lower cost as opposed to designing and implementing new features from scratch. A classic example is the merger between Microsoft and GE. This merger allowed Microsoft to combine their Azure cloud computing platform with GE’s industrial data gathering, which gave Microsoft an edge against other cloud based competitors and made GE’s products more attractive to customers with a new suite of capabilities. Combining the strengths of two companies saves, time, money, and energy which benefits companies and consumers alike.

2. Access Difficult Markets and Expand Around the Globe

The world now operates using a global market system. That doesn’t mean it’s easy to simply pick a new market, grow roots, and expand your company. Without being intimately involved in a market, it’s almost impossible to navigate hidden pitfalls, the political climate, cultural and religious factors, and business norms that may differ from the company’s headquarters location. A joint venture partner is an excellent way to gain the knowledge and strategies needed to compete successfully in a new market area. When Ascendant Group wanted to expand into the Middle East, there were too many risks to bring in the brand directly. Raoul Davis, CEO of Ascendant Group, formed a joint venture partnership with the CEO of an Egyptian business development agency and a new global division of Ascendant Group was born. Besides being able to navigate differences in culture and business etiquette, this partnership also allowed Ascendant Group to establish an Arabic-Speaking presence and avoid most of the challenges associated with language barriers.

3. Reduce Costs and Risks

Establishing a presence and marketing a product in a new location has significant costs and can take more time than you’d like to allow. Rather than fund the entire cost of a business initiative, such as expanding, consider entering a joint venture with an established company that already has a solid infrastructure, profitable relationships, and marketing capabilities. While the Chinese company, Yijian, which created a futuristic and low-cost treadmill, was successfully growing in China, it was always their goal to market their product in the United States. Yijian joined a joint venture and partnered with US based company, TOP JSEN Science & Technology to market their product to the United States as well as consumers around the world. Yijian’s partnership model is just one way to take advantage of joint ventures in order to reduce costs and risk that come with a new initiative.

Is a Joint Venture the Next Move For Your Company?

Joint ventures can lead to great opportunities that would normally be burdensome or outright inaccessible, however that does not mean they are the right option for every situation. A few questions to consider before moving forward with a new partnership are: How does your partner’s capabilities and their company’s capabilities compliment yours and your company’s? How can your strengths be combined to create something that is innovative to both companies and to the consumers? How do your definitions of success compare and differ with your partner’s? In what ways will this partnership be mutually beneficial? If you can answer these questions effectively and in depth, it may be time for you and your company to explore a joint venture.


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