What is a joint venture? Give some reasons why joint ventures may be advantageous to the parties involved.

Explanation

Joint ventures are advantageous when two or more companies can receive benefit from a business venture without having to absorb all of the risks or costs by themselves. That means the venture either provides advantages of scale (where the companies receive more benefit than if they put up the same resources individually) or leverages assets of the companies that they may already have. These assets might include expertise, marketing channels, equipment, or other types. A company with excess warehouse space, for example, might engage in a joint venture for a new type of product with a company that can manufacture the product but has no warehouse in which to store it.

Sample Response

A joint venture is a project in which two or more companies participate and contribute resources.
Advantages to joint ventures include:

Lower resource commitment
Sharing the risks
Leveraging marketing or expertise
Leveraging hard assets (equipment)