Page 163 - Business Principles and Management

Unit 2

6.3 Specialized Types of Organizations

Goals Terms
• Describe organizations that are • joint venture • Subchapter S
specialized alliances between com- • virtual corporation corporations
panies or individuals. • cooperative • nonprofit
• Describe specialized forms of cor- • limited liability corporation
porations formed for tax or non- company (LLC) • quasi-public
profit reasons. corporation

Organizational Alliances

In addition to sole proprietorships, partnerships, and corporations, organizations
can be legally formed as joint ventures, virtual corporations, cooperatives, limited
liability companies, and nonprofit corporations. Joint ventures, virtual corpora-
tions, and cooperatives are specialized alliances between companies or individuals.

JOINT VENTURES
Sometimes businesses want to join forces in order to achieve an important objec-
tive. A joint venture is an agreement among two or more businesses to work
together to provide a good or service. The legal formation of the business is not
important. For example, a sole proprietorship and a corporation could agree to
work together. Each partner in the joint venture is expected to bring management
expertise and/or money to the venture. Many major corporations today have
learned that alone they may not have all the expertise or capital they need.
An example of a joint venture is an agreement between two major contractors
to connect two cities by building a tunnel for cars under a river. Neither company
on its own may have the capital to build the tunnel, and each may lack special
equipment or skills that the other firm has. By forming a joint venture, however,
facts they can acquire the needed capital and expertise. There are thousands of joint
& ventures between and among many companies. Many Web-based companies rely

figures extensively on joint ventures to build their businesses.

VIRTUAL CORPORATIONS
Joint ventures often include Because organizations must adapt quickly to compete effectively, a more fluid
business partners from foreign form of the joint venture, the virtual corporation, is evolving in the world of
countries. For example, Ford business. The virtual corporation is a network of companies that form alliances
Motor Company produces cars among themselves as needed to take advantage of fast-changing market condi-
in a joint venture with Mazda. tions. Nike, the world’s largest athletic shoe and sports apparel company, is a
Joint ventures help corporations virtual corporation. Nike manufactures and markets its products worldwide.
expand into new markets, and A large network of Asian companies purchase materials and manufacture shoes
companies in developing coun- and other apparel products in countries such as China, Taiwan, Indonesia, and
tries learn about doing business Korea. Then separate companies on all continents sell the shoes. In all, more
in a free-market economy. than 500 companies worldwide participate in making and selling Nike products.

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