Definition of joint venturing

formal or informal agreement between two companies to join together to take advantage of a marketing situation, sometimes called a strategic alliance. In a joint venture companies share marketing or marketing expertise, costs, knowledge of important connections, and other resources, resulting in reduced marketing and distribution costs and favorable trade terms. In recent years, joint venturing has become very popular in the international marketplace and is often considered crucial for dealing with global markets. There are four general types of joint ventures: (1) licensing, wherein one firm gives the other the rights to a manufacturing process, trademark, or patent in exchange for a fee or royalty. Licensing allows a company entry into a foreign market with very little risk; (2) contract manufacturing, wherein an international company establishes a contract with a local company to have its products made locally. Contract manufacturing offers the advantage of being able to start up quickly in the new market, but affords the international company less control over the manufacturing process; (3) management contracting, wherein an international company supplies management knowledge to a local company and the local company supplies management knowledge to a local company and the local company supplies the capital; (4) joint ownership, wherein an international company joins with local investors to create a local business in which all share joint ownership and control.