Also known as a joint venture, JV (Joint Venture) is generally defined as the establishment of two companies with the same investment capital, each of which owns part of the shares and shares the profits, expenses, risks and control rights of the company.
Joint ventures are very common in oil companies, and are often established in the form of cooperation between a domestic company and a foreign company (3/4 of which are international companies). Through this form of cooperation, domestic companies can obtain the technical equipment it lacks, while foreign companies can also take advantage of their familiarity and political relations with the country.
Generally speaking, the reasons why two companies cooperate to establish a joint venture are as follows:
Government encouragement or legal policy: Based on the encouragement or legal restrictions of local governments, for example, the Indian government and foreign companies are restricted to hold up to 40% shares locally, and the tariff policy is also the reason why foreign companies set up joint ventures through cooperation with local companies.
Entering foreign markets: For example, in the newly established joint venture automobile manufacturing company between Toyota and General Motors, Toyota gained practical knowledge of entering the American market, while General Motors acquired Toyota's technology and management methods.
Complementary resources: each party of the joint venture provides different resources to the joint venture, and the enterprise makes full use of these resources to improve its competitiveness.