The joint venture is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Typically, companies pursue a joint venture for four reasons:
To access a new market
To gain scale efficiencies by combining assets and operations.
To share risk for major investment or projects</i>
To access skills or capabilities
A Strategic Alliance is an agreement between two or more parties to pursue a set of agreed-upon objectives needed while remaining an independent organization. Strategic alliances can develop in outsourcing relationships based on mutually desired outcomes.
To be competitive in the global market, a business looks for an international edge by forming strategic alliances or joint venture.
Now the arises that what is the difference between the joint venture and strategic alliance.
The term “joint venture” and “strategic alliance” are often used interchangeably. But they are quite a different thing. The main difference between the joint venture and strategic alliance is that joint venture requires a legal creation of a third -party entity, while strategic alliance does not. Another major difference between the joint venture and strategic alliances is that joint venture’s objective is to represent the legal ownership of the partnership and ensure the profitability of the entity, while strategic alliance’s objective is to focus on the success of project-related tasks of the alliance, such as technology development or marketing initiatives. In joint venture partners focus on the equity stake the partners will share, while in strategic alliance partners are independent and operate by a contractual agreement for a task or project.
Hence, last, we can conclude that joint venture is not a form of strategic alliance.