An international joint venture (IJV) occurs when two businesses based in two or more countries form a partnership.
A company that wants to explore international trade without taking on the full responsibilities of cross-border business transactions has the option of forming a joint venture with a foreign partner.
International investors entering into a joint venture minimize the risk that comes with an outright acquisition of a business.
[citation needed] IJVs aid companies to form strategic alliances,[1] which allow them to gain competitive advantage through access to a partner's resources, including markets, technologies, capital and people.
Due diligence is the investigation of a country, business or person, for the purpose of obtaining useful information on the potential benefits, pitfalls and costs.
[1] Through international joint ventures, companies are given opportunities to increase profit margins, accelerate their revenue growth, produce new products, expand to new domestic markets, gain financial support, and share scientists or other professionals that have unique skills that will benefit the companies.
[2] Most of the time, the structure agreed on will be between different types of corporations, partnerships, or some form of a limited liability company.
Many ventures resolve this problem by forming a special purpose entity, usually a limited liability company or a corporation, which then acts as the general partner.
[2] The board of directors, which is made up of executives from each parent, also plays a key role in managing the venture by making all the operating and strategic decisions.
[2] When two or more partners get together and form an international joint venture agreement, they must decide early on in regards to what the financial structure will entail as this will aid in management and control.
[4] Some of the steps include establishing the capital required to start the IJV, the impact of securing a strong strategic alliance partner, and financial reporting.
[4] Once an arrangement is made, a tax-planned joint venture will be created which will aid in maximizing the after-tax returns.
For a successful joint venture, there has to be understanding and compromise between parties, respect and integration of the strengths of both sides to overcome the weaker points and make their alliance stronger.
The features a JV partnership should aim to acquire for an effective marketing campaign are both channeling the expertise and strengths of both parties to maximize value for the customers and stakeholders, while downplaying the weaknesses and presenting a united front.
[6] A popular dispute resolution technique used in IJVs is arbitration; however, many times a court process is given priority as this system has more authority.
[6] Entering into an international joint venture agreement begins with the selection of partners and then generally this process continues to a Memorandum of Understanding or a Letter of Intent is signed by both parties.
[8] Companies in an equity joint venture share both mutual rewards, risks and losses according to the ratio of investment.
[11] International joint ventures have played a significant role in the reform and liberalization of the laws governing foreign investors as part of Turkey's economic program adopted after 2001.
Turkey lies on the borders between Europe and Asia and is used as a way to achieve strategic goals to enter into the Asian or European market, which is important for those wanting to enter EU market since Turkey signed the European Customs Union (ECU).
The state's leading oil and gas producer (accounting for 30% of California's total production), Aera Energy's properties extend from the Los Angeles Basin in the south to Coalinga in the north.
[15] On January 1, 2000, the sales, design and development operations were transferred from the three joint venture partners to JNF, and JNF made a new start as a GE group company, later changing its name to GNF-J, by offering core management services as well as handling MOX fuel design and quality control.