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.
- 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