Joint Venture Examples
The following Joint Venture example
In the present complex corporate world, we can see various types of arrangements that entity structure in order to maintain their efficiency and try to achieve their intended purposes.
Top Examples of Joint Venture
The following are the examples of Joint Venture
Joint Venture Example #1
A limited is having spare land, B limited is having expertise in the construction of the flats, C limited is having expertise in the supply of manpower and in marketing.
All three entities come together to jointly contribute in the operation of utilising the spare land of A limited by using the expertise of B limited related to the construction of the house, and expertise of C limited of supplying the manpower and marketing abilities.
This arrangement is only for the development project of the land. Once that land is being developed and sold to the customer, this jointly controlled operation will get over.
Characteristics of Jointly Controlled Operations
- Entities will continue their own set of business and no new entity will be set up.
- There will be written agreement by which all the operations will be abiding by.
- Each entity will record own set of transactions and no separate books of accounts will be maintained
Under this arrangement, only specific operations will be handled by two or more entity and they will enjoy the mutual benefit of the same in the proportion prescribed in the agreement.
Joint Venture Example #2
A limited and B limited are major players in the market for extraction of oil, refine the same and then to distribute it. For this, they are in need to have a pipeline with a specified nature, which requires a huge amount of investment.
In order to save the cost, they both come together for jointly constructing Pipeline with the specific requirement from the place of extraction until the place of refinery and then to the place of distribution.
They both will agree to share the amount of investment and will utilize the pipeline for the distribution. This is the classic example of a jointly owned asset under the common ownership and the benefit of the same will be mutually utilized by both the entity.
Such type of joint arrangement will remain valid until commonly owned asset remains in existence.
Characteristics of Jointly Controlled Assets
- No new entity will be set up and there will be joint control over the assets
- All the expenses of the jointly controlled assets will be bared by all the ventures, and expenses not related to jointly controlled assets will be bared by the entity by their own
Joint Venture Example #3
A limited is the US-based company, a pioneer in the Insurance Segment. B limited is India based company, which is interested in entering the insurance business in Indian Market. Hence, B limited will form a joint venture with A limited and will utilize the brand name and expertise of the A limited. They both formed new entity together in India named A & B General insurance limited, which will serve the customers to fulfill their insurance needs
A new entity A & B General Insurance limited will last long until it is getting liquidated through the procedure provided as per the law of the land.
Characteristics of Jointly Controlled Entity
- The new entity will be set up.
- All the assets and liabilities will be kept under the banner of a new entity.
- Venturers will get their own share of profits based on the conditions defined in the contract.
- Joint control over the asset and liability will be determined based on the ratio defined in the contractual arrangement.
Joint Venture Example #4
The best example of Joint venture is in between Starbucks Corporation and Tata Global Beverages. Starbucks Corporation, a chain store of the USA serving coffee and such other drinks, pre-packaged foods and evening drinks. It is famous for its coffee throughout the globe. Tata Global Beverages is the world’s second largest producer of tea throughout the world and one of the largest producer of coffee in the world.
Tata Global Beverages leveraged the goodwill that Starbucks holds, for the coffee serving retail chains and captured the market of India by forming Joint venture with Starbucks. Both firms come together and created a private limited company named as Tata Starbucks limited in 2012. It is 50:50 owned by both the firms and presently they are having around 140-retail outlet throughout Indian Territory.
Here, the basic model is that one is having expertise in tea manufacturing and tea production, while other is having a brand image in the market of serving the coffee at the retail level in the market. And this combination is presently a good success in the market.
With the increase in risk, innovation and market complexities, in order to safeguard own image and not to get disturbed with a new set of activities, firms come together to set up new firm in joint control with agreed conditions of sharing profits.
The models and structure of the joint venture keep on changing with the passage of time. Daily new innovations are coming in joint ventures, which not only gives better functionality but also flexibility in obtain fundings and to operate in the required field of work. Joint ventures are much more preferable as compared to partnership firms as there exists minimal risk only until the capital brought into the venture. Moreover, at the global level, this is considered to be the safest mode of entry in any market.
This has been a guide to Joint Venture Examples. Here we discuss its definition and the examples of joint venture along with its characteristics and detailed explanation. You may learn more about accounting from the following articles –