A joint venture, also known by its acronym JV, is the joining of two or more business entities comprised of individuals, corporations, or governmental entities. The purpose of joining is to synergistically combine wealth resources and expertise to operate one business entity with a joint proprietary interest, joint management, and profit and loss sharing. It is a prerequisite for a joint venture to have a contractual agreement, specific, time-bound objectives, a unique identity of the entity, to have an ownership interest, common objectives, profit/loss sharing, and common management. With the advent of globalization, expanding business horizons and generally receding economies in the atmosphere of extreme competitive markets, it is opportune for many entities to join hands in their own interest. A joint venture may be between two or more small entities or one or more of them being larger corporations, or all of them may be large entities. Joint ventures are not permanent, and they are time specific as well as terminable both in the case of fulfillment or failure of the achievement of the targeted objectives.
1. Siemens AG and Nokia Corp Joint Venture
In 2006, Siemens AG of Germany and Nokia Corp of Finland formed a joint venture called Nokia Siemens Networks U.S. It is headquartered in Espoo, Greater Helsinki, Finland. The formation of this joint venture was prompted by the mergers in the industry like that of Alcatel with Lucent. Its need also arose due to the rising tendency in the low-cost Chinese manufacturers like Huawei Technologies Co. Ltd. The joint venture was formally announced on June 19, 2006, and it was officially launched in February, 2007 in Barcelona at the 3GSM World Congress. The company started operating fully on April 1, 2007 and has continuously operated since then in 150 countries. In 2011, the company was rated by measure of revenues as the fourth largest manufacturer of telecom equipment. In this respect, it is next only to Ericsson, Huawei, and Alcatel Lucent.
2. Cadbury Schweppes PLC Carlyle Group Joint Venture
Behind only Mars, Cadbury Schweppes plc is the world’s second largest confectionery producer. From1969 until its demerger in 2008, the company was known as Cadbury Schweppes PLC. After the merger, the main confectionery business separated from its U.S. beverage unit, Dr. Pepper Snapple Group. The company is headquartered in Uxbridge, London and operates in 50 countries. With an aim to acquire 2 soft drink bottlers called Beverage America and Select Beverages for $724 million, the company formed a joint venture with an investment company, the Carlyle Group. It needed an alternate distribution network, and a joint venture arose due to the competition from Coca Cola Co. and Pepsi Co., Inc.
3. Microsoft and GE Joint Venture, Caradigm
In December, 2011, Microsoft Corporation and General Electric formed a joint venture which is a health IT company of its own kind. Their common objective was to improve patient experience and the economics of health and wellness through providing the health systems with required systemwide data and intelligence. The joint venture, known as Caradigm, aims at combining technology and clinical applications to transform it into intelligence which is usable by care providers. The name Caradigm evolved from ‘care’ and ‘paradigm,’ because Microsoft and GE intended a paradigm shift in the care delivery system.
4. The Hisun-Pfizer Joint Venture
The world’s largest drug company, Pfizer, and a Chinese pharmaceutical company, Zhejiang Hisun, formed a joint company in the Chinese city of Hang Zhou. The company, known as the Hisun-Pfizer joint venture, has a registered capital of U.S. $250 million. Hisun and Pfizer own 51% and 49% of the stake respectively. Factories of the joint venture are located in Fuyang, while its operations are based in Shanghai and Hang Zhou. The emergence of the joint venture has been prompted by the decline in sales of Pfizer due to the expiration of its many products, including the cholesterol lowering drug Lipitor. According to Pfizer’s forecast, China would be sharing around 70% of the market and would become the second largest drug market in the world by the year 2015.
5. The Dow Corning Joint Venture
The Dow Chemical Company is one of the top three chemical manufacturers in the world, while Corning, Incorporated is a famous American manufacturer of glass. In 1942, a problem faced by the airlines brought them closer in an effort to solve the problem. The presence of moisture and the Corona discharge was an obstacle for the aircraft to fly at higher altitudes. The corona discharge also caused the production of hazardous products like ozone. In 1943, both companies formed an equally owned joint venture named Dow Corning. The joint venture company is headquartered in Midland, Michigan, USA. The Dow Corning product line includes: sealants, adhesives, rubber for mold manufacturing, lubricants, release agents, liquid silicone, and many other products. The company has around 10,000 employees.
Sony-Ericsson is a joint venture between Sony and the Swedish company Ericsson. Ericsson is the Swedish manufacturing company of the telecommunications equipment while Sony is a mobile phone manufacturing company. Ericsson used to get chips from Philips, but in March, 2000, a fire destroyed the production facility of Philips. Facing an acute shortage of chips, Ericsson was prompted to form a joint venture with Sony. On February 16, 2012, Sony acquired Ericsson’s share in the venture and renamed the company as Sony Mobile Communications. Sony Mobile shifted its headquarters from Lund, Sweden to Tokyo, Japan on January 7, 2013.
7. AMEC Samsung Oil & Gas, LLC.
Korean shipbuilder Samsung Heavy Industries and Samsung Engineering announced in November, 2012, to form a joint venture with the U.K.-based AMEC. It intended to specialize in offshore engineering in Houston, Texas, U.S. AMEC is one of the top three engineering companies in the world, the other two being Mustang, U.S. and Aker Solutions, Norway. AMEC has 28,000 employees and has provided design and project management services to big oil companies including, Shell, BP, Petrobras, and Conoco Philips. The joint venture, under the name of AMEC Samsung Oil & Gas, LLC, shall be established in Houston, Texas which is the world hub of offshore engineering. Samsung’s share will be 51% while AMEC will hold 49% of the shares in the joint venture.
8.The Saudi Butanol Company
Three big companies; Sadara, Saudi Kayan, and SAAC signed a contract to form a joint venture, the Saudi Butanol Company. Saudi Kayan Petrochemical Company is affiliated with Saudi Basic Industries Corporation, better known as SABIC. Sadra Chemical Company is a joint venture of ARAMCO and Dow. Saudi Acrylic Acid Company is affiliated with Tasnee and Sahara Petrochemicals Company. The butanol plant is planned to be the first in the Middle East and the largest in the world. The plant is designed to go into production in the year 2015. Its designed capacity is to produce 330,000 metric tons per annum of n-Butanol and 11,000 metric tons per annum of iso-butanol.
The Sumitomo Corporation Group, comprising Sumitomo Corporation, Sumitomo Corporation of America, and Sumitomo Corporation of Brazil S.A., agreed upon forming a joint venture with Cosmotec Especialidades Quimicas Ltd. The Sumitomo Corporation Group is comprised of 800 companies and has more than 70,000 employees. The joint venture company, known as Cosmotec, was founded by Luciano Fagliari and Marly Yajima Fagliari in 1987. Brazil is considered to be the largest cosmetics market in 2016, and Cosmotec aims at catering its needs to the fullest extent.
10.Chery Jaguar Land Rover Automotive Company
The British luxury car manufacturers entered into a joint venture with the Chinese company Chery Automobiles. The joint venture company is known as Chery Jaguar Land Rover Automotive Company. The investment will include a new plant in Changshu near Shanghai. It will start operating in 2014. Cars shall be modeled while keeping in view the needs of Chinese consumers. In a joint statement, the chiefs of JRL and Chery proclaimed, ‘We will now begin working in close collaboration on our partnership plans to harness the capabilities of our respective companies to produce relevant, advanced models for Chinese consumers.’
Ever-increasing demands for innovative products with decreasing meeting times and at rock-bottom costs pose a great challenge particularly to the business entities with limited resources. A joint venture is an effective mode of handling things in this scenario. Joint ventures help reduce fixed costs, increase productivity, and allow innovation by virtue of the sharing of everyone’s expertise. A joint venture invariably strengthens a business alliance. According to Curtis E. Sahakian, ‘Joint ventures, alliances, and other corporate partnering are fueling the growth of the world’s most successful companies. ‘¦ They are the quickest way to grow your company, particularly in these times of change.’