What are the 5 most successful joint ventures in America? With the advancement of technology, which facilitates communication, interconnection and globalization, allowing for enterprises from different corners of the world to collaborate easier and more efficiently, joint ventures have become something rather common. However, since joint ventures represent a collaboration between two companies, which often have different visions and approaches, there are many pitfalls, which are often overlooked and may result in the break-up of the joint enterprise.
A joint venture is a business entity that is created by at least two parties, which share ownership, returns and risks. A joint venture can be a business, or it can work on a single project that all parties have interest in. In the last couple of years, several joint ventures entered the spotlight in the automotive industry. With technology making self-driving cars possible, Fiat Chrysler Automobiles NV (NYSE:FCAU) has recently partnered with Alphabet Inc (NASDAQ:GOOGL)’s Google division to develop self-driving cars. Google has been working on self-driving technology for a while and its partnership with Fiat should allow it to integrate its technology and bring it to the masses sooner. A joint venture with a similar objective was recently launched by Swedish carmaker Volvo and Uber, which agreed to pool together an investment of $300 million to bring the autonomous driving capabilities to China’s Geely-owned Volvo’s XC90 flagship SUV.
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However, both Google/Fiat and Volvo/Uber’s partnerships are at early stages and its unclear whether or not they’ll succeed. As stated earlier, joint ventures are not immune to challenges and sometimes can even be more prone to conflicts than other deals, like mergers, which usually come with the adoption of a single company’s business culture. In contrast, joint ventures involve several parties coming together. These parties may have different strategic interests and decision-making processes. Joint ventures also often mean that employees of the parent companies have to work side by side, so there might be conflicts on the grounds of cultural differences. This is why parties involved in forming a joint venture have to establish the details of the new entity’s operations from the start, clearing any hurdles and allowing for compromise on all aspects of day-to-day operations. The parent companies should also settle on the degree of each party’s involvement in the oversight and financing of the joint venture and the returns that each party gets based on this involvement.
Because many companies fail to set the ground rules before launching their joint ventures, many partnerships fail. In 2001, Harvard Business Review conducted an analysis of over 2,000 joint venture announcements and found out that only 53% of them resulted in a positive return on investment for all involved parties. HBR did a similar analysis of 49 joint ventures in 1991 and found that only 51% succeeded. So the success rate for joint ventures has remained pretty low, even though companies had more information about them in 2001 than a decade earlier, and should have been more aware of potential reasons for failures.
Nevertheless, amid the many joint ventures that were failures right from the start, or were shut down for other reasons, a number of them stand out and are still operational. With this in mind, let’s take a look at the 5 most successful joint ventures in America, beginning on the next page.
