Joint Venture Failures

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A joint venture is a contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking (InvestorWords, 2008). Some of the most significant benefits gained from joint venturing include, a reduced risk of both companies resulting from capital and resource sharing, the opportunity to increase sales, and enhance technological capabilities through research and development underwritten by one party (INC, 2009). Joint ventures also provide a mode for entering foreign markets because the partnering companies join complementary skills and knowhow with local firms (Qiu, 1984). Companies often jump into joint venture agreements blinded by these benefits and often fail to research the risks…show more content…
The total investment in joint operation would equal ten million dollars. Although the common goal between the partnering firms was to successfully extract high quality stone, each firm had its own individual goal of how to benefit from the project. The difference in goals was a result in the difference in the financial risk, operating risks, and contributions from each company (Chalos, 2002). Prosperity Ltd’s goal was to secure a payback term of five years and continue operations with high profit, they would have a high operating risk and a high financial risk. Tomiyama construction Machinery Ltd’s goal was to secure initial inroads for the sale of heavy machinery to the Peoples Republic of China market, they would have a low operating and a low financial risk in the joint venture. Tagawa Crush Stone International Ltd’s goal was to secure source of supply of stone for the Japanese market, they would have a low operating risk and a low financial risk in the joint venture. Finally, Tien Shan Ltd’s goal in the joint venture was to share a stable return from the quarry operations, and to ensure employment of local Chinese citizens, they would have a minimal operating risk and no financial risk in the joint venture (Chalos, 2002). From the combined resources of each partnering company, the joint venture was able to begin construction in March of 1995, and was able to output the quarry stone
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