What are the advantages and disadvantages of a joint venture with a foreign firm?

Question

What are the advantages and disadvantages of a joint venture with a foreign firm?

Answer 1

Advantages depend on what your role in the JV is. Typically, one partner has a product, the other has a distribution network. So if you are the distributor, you don't need to develop the product; if you are the producer, you don't need to invest in distribution.

Disadvantages... Decision making can be difficult, if partners have opinion differences. Marketing decisions, in particular, often become a constant battle, with producer thinking it knows better how to market the product and distributor thinking it knows better how to market to the customer base.

Answer 2

I suppose you refer to establishing the JV in USA?
In that case, the international partner may bring:
1- Technical expertise and know how specific to the product to be manufactured.
2- Managerial know how, or methods he has proven and demonstrated in his own facilities abroad.
3- A brand
4- The potential to offer a market abroad for the product
5- R&D capabilities to support product enhancement and development.

You as the local partner may bring:
1- Local knowledge on dealing with Unions, regulatory bodies and regulations
2- Knowledge on managing Taxes and fees.
3- Knowledge of the local market
4- Your local brand
5- A team of people
6- Your business knowledge

In addition to the profit you could obtain from the revenues of the JV, your company would be very wise, in trying to learn from your partner ALL the knowledge and know how possible.
This would enable you to:
1- Retrofit or upgrade/optimize any other facilities you may own in USA.
2- Have a fall back plan if after sometime the JV does not work as expected.

PRECAUTIONS:
1- Have a clear strategy of what do you want to get from the JV, and what are your profit goals and the time for attain them.
2- Try to understand as much as possible the motivations and circumstances of your foreign partner.
3- Put in charge from the USA side someone that has tangible experience in working abroad, and understands the language of the international partner.
4- Have a clear EXIT strategy from the JV ("a divorce plan")