Page 168 - GLOBAL STRATEGIC MARKETING

This is a partnership of two or more independent firms that share
resources when at least one partner’s headquarters is located outside the

venture’s country of operation or when the venture operates outside the
home countries of all the partners (McDonald and Burton, 2002, p. 224).
A joint venture is the sharing of assets, risks and profits, and participation

in the ownership (e.g. equity) of a particular enterprise or investment
project by more than one company. Joint ventures between two firms

share their equity either 50:50 or 51:49. The latter is the case between the
joint venture of Hong Kong Disneyland where the Hong Kong government
owns 51% of the company. The distribution of a joint venture may be

related to each partner’s financial, technological and management access
to world markets. The distribution can also be related to the host country’s

legislation. It is important to remember that there is a big difference
between a joint venture where there is a single country partner and one
where there is a wide range of distribution of local ownership. International

joint ventures have been through a lot of change since the 1980s, from
how value is added to existing activities (traditional joint venture) to how

value is created from new activities (new joint venture). Having said that,
the traditional joint venture is still used between Western companies and
partners from developing countries. McDonald and Burton (2002, p. 225)

explain that, from a Western perspective, these ventures are set up to
enable the Western partner to overcome entry barriers to national markets,

often government imposed, such as trade barriers and legislation against
foreign ownership. From a developing country perspective, a joint venture

provides the opportunity to acquire foreign marketing and management
skills and access to capital and technology.

6.5.5.1 Advantages

The main advantages of joint ventures include the following:

• In a situation of rapid technological change and large capital
requirement, joint ventures may be the best way for smaller
companies to improve their position in global industries.

• Joint ventures may be used to ensure access to distribution channels,
suppliers and technology, in effect as pre-emptive manoeuvres.