Joint Venture vs. Strategic Alliance

Difference between Joint Venture and Strategic Alliance

Joint ventures and strategic alliances, although both involving the merging of two parties, differ financially, legally, and in their definitions.

What is a Joint Venture?

A joint venture is a contract between two or more companies in order to perform a business task. When companies enter this agreement, they lose their independence until the contract is over. A joint venture is legally binding and therefore harder to break than a strategic alliance. It is more advantageous with regards to tax purposes but a lot of hard work must be put into it before it becomes successful.

What is a Strategic Alliance?

A strategic alliance is a formal partnership between two or more companies in order to achieve a common goal. Unlike in a joint venture, companies who enter a strategic alliance retain their independence. A strategic alliance is also more flexible than a joint venture and it can be broken with the help of a few lawyers. One advantage of this partnership is that they have various combinations of resources and information, thus, allowing them to be successful faster.

In summary:

  • Companies that enter a joint venture lose their independence until the contract is over while those that enter a strategic alliance retain their independence
  • A joint venture is legally binding and hard to break while a strategic alliance can be broken by the help of a few lawyers
  • A joint venture is more advantageous when it comes to tax purposes but a lot of hard work must be put into it before it becomes successful
  • A strategic alliance is more flexible and they achieve success faster because of the various combinations or resources and information that they have