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Difference Between Joint Venture vs Strategic Alliance

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In a joint venture, both parties come together for a specific purpose or for, a new project or any other new business. In joint, each party is responsible for profit & losses and its associated cost. The strategic alliance allows two organizations, individuals, and other entities to work toward a common or correlating goal. A strategic alliance is for the benefit of all parties involved, and it can be for both the short term and the long term. The agreement in a strategic alliance can be formal or informal, but each party’s responsibilities must be clear. So both joint venture vs strategic alliance term has their own importance in business and big corporations. Joint ventures and strategic alliances have a vital role in the perspective of a business.

Head To Head Comparison Between Joint Venture vs Strategic Alliance (Infographics)

Key Differences Between Joint Venture vs Strategic Alliance

Both Joint Venture vs Strategic Alliance are popular choices in the market; let us discuss some of the major differences :

A joint venture is basically contracting between two or more parties who agree to pool their resource to accomplish a specific task. This task can be a new project or any other business activity. On the other hand, a strategic alliance is an arrangement between two parties that have decided to share their resources to undertake a specific, mutually beneficial activity.

In a joint venture, each participant is responsible for the profit, loss, and cost associated with the particular project for which they come together. A strategic alliance is less involved and less binding than a joint venture.

A joint venture needs a contract agreement between two or more parties with all the descriptions about a share of profit and loss etc. On the other hand, there May or may not be needed for a contract agreement between two or more parties. There is a risk of a trust relationship.

Although they have a partnership agreement which can be in the colloquial sense of the word, the joint venture can take any legal structure. Corporations, partnerships, and limited liability are some of the functions of a joint venture. Let’s discuss the strategic alliance in which two parties come together to achieve a common goal or objective. The strategic alliance allows the involved organizations to pursue the opportunity faster than if an organization functions alone.

The joint venture allows both parties to share resources to accomplish the goal faster and move on to another contract, so in a joint venture, people come together for specific work. After completion of work, they share the profit and finish the contract.

A strategic alliance provides access to additional information, knowledge, and resources the other party owns.

In a joint venture contract, all thing is taken care of, like how much each party contributes and the structure of the JV. On the other hand, there is no existence for such a contract, but they use either party’s resources to achieve a common goal.

Joint Venture vs Strategic Alliance Comparison Table

The Basic comparison

Joint Venture

Strategic Alliance

Meaning A Joint venture is a business organization set up by two or more business organizations to carry out a particular task or business activity. A strategic alliance implies an agreement between two or more entities to work jointly to increase the performance of both parties.

Independent organization The independent entities come together in a joint venture. Do not operate as independent companies. The two companies come together in a strategic alliance and continue to operate as separate and independent companies.

Contract In a joint venture, there is a need for a contract, so a contract exists in a joint venture. In a strategic alliance, there may or may not be a contract.

From of Strategic alliance Collaboration or corporate partnering

Separate legal entity A joint venture is a separate legal entity A strategic alliance is not a separate legal entity

Objective In a joint venture, the risk is limited. In a strategic alliance, the reward is maximized.

Management In joint venture management is bilateral. In a strategic alliance, management is delegated.

Resources In joint ventures, resources include massive leverage, lower risk, and optimum utilization of resources. Strategic alliance resources include products, knowledge, expertise, goodwill, capital, etc.

Part The joint venture is a complicated part of a strategic alliance. A strategic alliance is itself an alliance of two different businesses.

Duration Joint venture duration is short-term only, maybe 1 year to 5 years. Strategic alliance duration can be long-term or short-term depends upon the need of time.

Risk In a joint venture, there is limited risk to the parties involved in the agreement. In a strategic alliance, there are chances for higher risk due to the trust relationship between two parties because there may or may not be a contract.

Conclusion

Joint venture vs strategic allegiance both terms has a vital role in business. The company that wants to properly use available resources can go for either. A strategic alliance needs a proper understanding between the parties involved. A joint venture has a legal contract, so there is no misunderstanding. But both the term has importance in the field of business.

To complete work in less time, one can go for a joint venture because, with the help of two parties, the work can be completed even faster. One can go for strategic allegiance as per the need to accomplish a common goal of a company or business. So joint venture vs strategic alliance has its own importance per the business need. If a company working on infrastructure, then they may go for a joint venture.