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Joint venture refers to a situation where an organization or company makes an investment in collaboration with another one so that they can take advantage of an opportunity. The companies that enter a joint venture will share equally the profits and losses that come through the venture. There are factors that determine the formation of a joint venture rather than an organization taking the business wholly as an independent venture. Some of these factors include government policies, sharing of resources and market share, to share costs and risks, and also to diversify product and service delivery to consumers and customers. This essay seeks to show processes that take place before a joint venture is formed, the advantages and disadvantages of the venture and also the evaluation of the venture.
Brookfield properties Corporation, a company that is based in the North America entered into a joint venture with another company in London, Bishopsgate. One of the reasons for the joint venture, as indicated in the introductory part is that it is a way of expanding the company and its market share. In forming a joint venture with a company in London, Brookfield now controls a certain percentage of market share abroad; something that is facilitated by the goodwill and relationship of Bishopsgate with its customers. It is important to keep in mind that there is always the threat of entry to a market that any chief executive of the company must look at and even avoid. By going into a joint venture with Bishopsgate, Brookfield is now rid of the threat of entry.
There are so many reasons why the two companies decided to come together and form a joint venture. One of these reasons is to allow the companies to access market share and take advantage of each company’s profile mutually. This means that before a decision transpired to the formation of the joint venture, the companies must first carry out research on the history and endeavors of each other and therefore make a conclusive decision that they can work together to make a certain objective.
As can be seen from Brookfield Corporation, the company is a giant in construction and management of properties. The portfolio indicates that the company has a wide financial base and stability and therefore is in a position to undertake a project without hustles. On the other hand, Bishopsgate holdings have a site that can be developed and managed to create many rentable spaces in the city and therefore great returns to the investors. The joint venture therefore becomes an important part of the deal and the two companies come to an agreement. It is worth mentioning that in the case of Brookfield and Bishopsgate, the two companies sealed a deal of 50:50 joint ventures. Sometimes the percentage will depend on what each individual company is putting into the business and it is therefore important to keep in mind the fact that it is not by default that companies coming to a joint venture will give a 50: 50 % profit and loss sharing.
Decisions for entering into a joint venture are sometimes a hard one to make. However, it is at times necessary as a strategic planning and management practice to put companies into competitive advantage. By entering into a joint venture with Bishopsgate, Brookfield blocks the possibility of Bishopsgate entering in the property management practice as much as it blocks its competitors into brokering a deal with Bishopsgate. It can thus be said that the move to form a joint venture is a brilliant and strategic move towards maintaining competitive advantage over other companies.