Strategic Alliance Vs Joint Venture: What’s The Difference( With Examples)

Strategic Alliance Vs Joint Venture: What’s The Difference( With Examples)

Written by

Ilyas Omari

When running a business, one of your main goals is to maximise your profits. Your business can expand in many different ways depending on the methods that you use. A great way to expand your business is by entering into a joint venture or a strategic alliance. 

A joint venture is when two or more businesses enter into a temporary alliance for a particular project. This alliance is generally set in stone by a specific contract or product that is mutually beneficial for both entities.

The term strategic alliance effectively refers to joint ventures; the terms are used interchangeably although strategic alliance may be more common in some consulting contexts.

Read along!

Table of Contents

What is a Joint Venture?

A joint venture (JV) refers to a business arrangement that involves two or more parties that collaborate to carry out a specific project or task.

In joint ventures, the parties involved combine their resources. Joint ventures can be between the following:

Parties can enter into a joint venture agreement for either short- or long-term projects. Before you enter into a joint venture, you should be aware that everyone involved shares responsibility in regard to its costs, losses, and profits.  Nevertheless, joint ventures exist as a separate entity from the other business interests of their participants.

There are two types of joint ventures:

  • Incorporated Joint Venture: There is a separate legal personality. Therefore, it can enter into contracts and hold property under its own name.
  • Unincorporated Joint Venture: Parties hold specific shares in the joint venture depending on the agreement but do not hold a separate legal existence.

When parties enter into a joint venture, they usually sign a joint venture agreement. If you want to enter into a joint venture, you should use Lawpath’s joint venture agreement template to get started.

What are the advantages of a Joint Venture?

  • Joint ventures provide businesses with growth opportunities
  • Joint ventures are available to businesses of all sizes
  • Joint ventures are temporary agreements
  • Joint ventures provide businesses with the chance to work together and pool resources and expertise 
  • Joint ventures allow businesses to save money as funding and resources from several businesses will be utilized

What are the disadvantages of a Joint Venture?

  • There may be differences in the management styles of the parties involved, which could influence their expectations.
  • In order for a joint venture to succeed, due diligence must be performed beforehand, including feasibility studies, analysis, and research.
  • There could be unequal contributions that are made towards the joint venture that could lead to conflict between the parties involved
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