What are the Risks when Entering a Joint Venture?
The increasing complexity and challenges associated with the business environment makes it important for organizations to seek strategies for maintaining effectiveness. One of the ways through which organizations achieve this is by entering into joint ventures with other organizations with which they share common goals and missions but do not share markets. This enhances market performance for organizations but is also bound to result in various impacts as a result of the risks involved. As such, it is essential for companies intending to enter into joint ventures to consider the risks involved before delving into joint investments. One of the greatest risks is increased scrutiny on the business products and the business as a whole (Wallace 58). The failure of a joint venture brings out greater negative impacts for the business than expected.
The failure of a single joint venture makes it difficult for an individual to enter into other joint ventures. Failures at this point in business ventures have great negative effects on customer loyalty. The income of the firm is also affected by the failure of a joint venture. This is due to the increased running costs coupled with lack of clarity in goals and objectives which can make running the business difficult. The tendency to blame either partner for any mishaps also undermines the ability of the individuals to maintain mutually benefitting relations in the future. With different goals and objectives, the parties may prevent the two parties from together with each other together for the success of the business. Due to the lack of mutual goals and objectives, the invaluable resources can be wasted.
Wallace Robert. Strategic partnerships: An entrepreneur’s guide to joint ventures and alliances. USA: Kaplan Publishing, 2004. Print.
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