Manufacturing joint venture partnerships are unique deals that typically lead to greater distribution of some products. An impetus for such an arrangement may be to expand one company's reach into a new region. The products may be developed to meet a certain need for a period of time, or production could lead to a long-term commitment to a market. In any industry, including manufacturing, the joint venture operates as a separate entity to the businesses forming the partnership.
A manufacturing joint venture between international partners can grant one company access to a new market. Regulatory approvals will likely have to be met in order for any product manufacturing to begin. Production often occurs in the nation where the product will be distributed.
Companies that become involved in a manufacturing joint venture have some role to play in the production of some product. Partners may be involved in the same part of the production process or may complement one another with different business lines. In a manufacturing venture, the participants may agree to lease or otherwise gain access to some facility where production for the item at the core of the partnership can begin. If partners are anxious to begin manufacturing in the short term but the life of the joint venture is expected to last for many years, a temporary facility may be used until some other more permanent location can be secured.
Obtaining a facility is key in a manufacturing joint venture. The new business is not replacing production at the core businesses of the partners in the endeavor but instead is in addition to those practices. Subsequently, it is also possible that, following a joint venture announcement, production at the newly combined business will not begin for months or even into the next year.
Once the terms of a manufacturing joint venture are set, it is possible for those parameters to change. Even the financial conditions can be amended. Manufacturers of technology products, for instance, may experience unexpected declines in demand for items during times of an economic pullback or because of demand toward other technology trends, for instance. In the event that a company commits to a manufacturing joint venture with a partner and subsequently is impacted by declining sales elsewhere, the financial commitment to a partnership may no longer be prudent. The responsibilities, profit distribution, and investment of the partnership may be changed even after the venture has begun if the terms are agreeable for all members.
By Gerelyn Terzo