Joint Venture: Is it the ideal business model?

There is an old adage that if you can’t beat them then you had better joined them. True to the saying, a man who has been injured by his enemy in a battle not only finds refuge from further attack by stooping but a possible lifeline on his ultimate submission. The business arena has and will never be different. Just like that man in a battle with his enemy, many entrepreneurs find themselves entangled in a dilemma due to the ever increasing competition. Increasing competition implies that survival and ultimately business leadership can only be availed by achieving a semblance of competitive edge no matter how obscure. One of the many ways of achieving a competitive edge is by forging strategic alliances or what is popularly referred to as joint venturing. Unlike partnerships, joint ventures do not result in a transfer of ownership among the members. The beauty, however, is that they result into what we all love most which is none other than ‘win – win’ business relationships.  

The case of XYZ Bank
Last year, a friend narrated to me his ordeal in search of a reputable bank in Uganda that could offer him online visa transaction services. As it turned out, most banks claimed to offer the service but on the contrary a good number of them literally confused the service with internet banking. His last resort was bank XYZ, not real name, which is one of the leading local banks. He subscribed for the service and commenced its enjoyment until he experienced some technical difficulties that required the attention of the bank. A few phone calls to the bank did not solve his misery and his rather complex technical problem was referred to another bank in Nairobi.  Whatever happened next in his ordeal is not quite worth mentioning here but at the very least we should commend XYZ Bank for outside the box thinking. But for the alliance with the bank in Nairobi, XYZ Bank could not be in a position to offer credible visa services probably due to the high initial costs of setting up the system. To the best of my knowledge, the bank has capitalized on this service to grow its customer base to date. Such strategic alliances have attributed the success of many business ventures. The big questions however are, ‘what benefits will you accrue from such a business model?’ And, ‘What are its downsides?’

The Golden benefits
Most business persons attest to the fact that the hardest part of starting up is to build customer confidence. Quite simply, a business owner facing such an impediment should look into sourcing an alliance with a larger known branded company, say, the likes of MTN Uganda. In addition, given the fact that every member of the alliance is bound to take something home we should expect low costs of set up, not to mention the relatively few legal requirements.
Well, nothing is said to throw a business owner off balance than the successful attempts of the competitor in slicing his share of the market. Unfortunately, such a vivid threat can ultimately be the source of business failure. Salvation from such a mishap is however available through joint venturing. Precisely, a joint venture with several key players in the market will successfully alienate competitors leaving the business owner to enjoy high profit margins akin to those of a monopoly. What could be better?    

The downsides
On the other side of the coin, joint ventures are business relationships and like any other relationship, say, a marriage, it takes time to build the right one. The relationship is bound to end up in shambles where there is a mix of different cultures and management styles resulting into poor integration of the resources available. To counter such a mishap, it’s advisable that adequate time is allocated in locating a partner with an honest interest and similar corporate culture. It’s also worth mentioning that though formation of joint ventures is quite inexpensive, failure to plan from the get go makes them quite expensive in the end.

In my view, this business model cuts across businesses of all forms and hence the ultimate model. Well, Sun Tzu would not have said it better in the ‘Art of War’ when he was quoted to have said, ‘If you do not seek out allies and helpers, then you will be isolated and weak’.