For some, a joint venture or strategic alliance may sound like the territory of a Fortune 500 company. In truth, your venture or alliance might be as straightforward as collaborating with a colleague on a software application, teaming up with another company on a marketing campaign, or licensing a product you've developed.
A joint venture is an association of two or more individuals or business entities who combine and pool their respective expertise, financial resources, skills, experience, and knowledge in the furtherance of a particular project or undertaking.
A strategic alliance is an arrangement in which two or more separate organizations combine resources to advance their respective businesses.
Both normally last for a specific project or for a finite period of time. One factor in which joint ventures and strategic partnerships differ is that traditionally partners in a joint venture form a new business entity while strategic partners preserve their separate identities.
Joint ventures traditionally require large amounts of capital. Sample uses for joint ventures include real estate development, film production, and the exploitation of a patent. For example, suppose you have a limited liability company (LLC) that produces building materials and I offer architectural services as a sole proprietor. We get together to design and construct a new museum downtown. Instead of doing the construction under the umbrella of your LLC or my sole proprietorship, we establish a new company – maybe another LLC or corporation. The owners of the company are your LLC and me as an individual. The sole purpose of our new company is building a museum.
Strategic alliances are traditionally less capital intensive than joint ventures. Sample uses of a strategic alliance include gaining access to a larger client base, expanding a product line, or reducing a project’s risks and costs. For example, suppose you sell fine wines and I sell corkscrews and wine cabinets. We might enter into an alliance where we package our products together and cross market the products.
But don’t get too bogged down by the jargon because both “joint venture” and “strategic alliance” refer to people or companies coming together for the purpose of working together.
Comments