Joint Venture Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Somewhere between the competitiveness or indifference of autonomy and the border erasure of a merger is a joint venture, a business entity created by two or more parties (generally other businesses) that contribute an economic stake. Joint ventures are more than just agreements between cooperating companies; the venture takes the form of a new business. Often this is because, for instance, one company markets chocolate and the other has a stake in confection-quality peanut butter; while continuing to pursue their own concerns, they create a peanut-butter cup company. Or one company may be experienced in the field of magazine publishing, while the other has developed an improved technology for printing high-quality photographs on thin paper; they could benefit from a joint venture in the form of a photo-intensive magazine.

Though those two examples describe synergistic relationships, there are many reasons a joint venture is desirable, and depending on the industry and the purpose for which it is formed, it may be a corporation, an LLC, a partnership—essentially anything but a sole proprietorship, by its nature. A joint venture may be designed to take advantage of economies of scale. It may be the only way one of the participating companies is willing to share access to certain markets, customers, technologies, processes, or other resources. It spreads out the costs and risks of the venture more than if either company engaged in it on its own—in Hollywood, there have been a small number of movies produced as joint ventures between studios unwilling to take on the full financial risk by themselves, and willing to share the potential rewards. Even when the risk is not perceived to be high, the manner in which a joint venture reduces a company’s economic stake relative to pursuing the activity on its own keeps the company more liquid and does not require the interest payments of a loan or other funding.

Recent Examples

Joint ventures may be the quickest way to bring a product or service to market, before other competitors in the industry are able to do so. A joint venture may be an alternative to competition, especially in cases where competition offers no obvious benefits. Hulu is a good example of this, one that demonstrates that the avoidance of competition in no way harmed the consumer or resulted in a product of lesser quality. A Web site that allows viewers to watch ad-supported television shows and movies online—primarily new and classic shows from broadcast television, not the “produced for the Web” shows that had been plentiful elsewhere and in low demand when the site launched—Hulu is a joint venture between NBC Universal and News Corporation (the Australian media conglomerate that owns the Fox television network). In addition to shows from those networks and their cable affiliates (Bravo, the SciFi Channel, USA, FX, et cetera), shows from the Sundance Channel, the Disney Channel, PBS, Comedy Central, and others are available. There is no apparent reason why networks, studios, or viewers would benefit from each network or studio having its own online presence—though in fact NBC continues to show streaming television shows on their own Web site rather than redirecting to Hulu. But the joint venture clearly benefits viewers by aggregating content in one place and providing an experience as uniform as television itself. (Though formed as a joint venture in part to avoid competition between NBC and Fox, Hulu is not immune to competitive impulses, and has pulled content from both Boxee and CBS-owned TV.com.)

Another well-known joint venture is Verizon Wireless, 45 percent of which is owned by Vodafone, a British cell phone operator and the operator of the largest cellular telecommunications network in the world. Vodafone’s infrastructure and wireless assets were a perfect match for Bell Atlantic, which was looking to launch a large national cellular network. Announced in September 1999 and launched the following April, the joint venture was known as Verizon Wireless, adopting the Verizon brand name two months before Bell Atlantic renamed itself Verizon Communications. The venture combined the best assets of both companies and allowed for a much more rapid launch than would have been possible otherwise.

There is also the CW Television Network, a result of the struggles of the WB and UPN networks, which had failed to find the same long-term success enjoyed by Fox—their spiritual predecessor in breaking the broadcast dominance of the Big Three networks that had persisted since the days of radio. At the time of its dissolution, UPN—founded by Viacom (owners of MTV, Paramount, and other media concerns)—was owned by CBS, which had been bought by Viacom before the company split in 2006. The WB was owned by media company and content provider Warner Brothers. Both networks had had successful shows, but had been unable to sustain their ratings once those shows reached the end of their runs.

Reflecting the conventional wisdom that neither network had offered enough successful content to justify its continued existence, equal partners CBS and the WB formed the CW Television Network to combine the resources of the defunct networks and focus on programming for the WB’s ages 18–34 demographic. Despite rumors that the CW name was just a working title to give executives convenient shorthand by which to refer to the joint venture, the network stuck with it, citing polls showing that the name was highly recognizable even before launch, thanks to press coverage of the plans. The CW continued the WB and UPN’s plans to compete with the Big Three (plus Fox) by gearing its content for younger audiences, essentially treating their ratings on a “quality, not quantity” basis by targeting the desirable demographic, one that was brand-conscious, loyal to its favorite series, and had ample disposable income. Popular shows like WWE Smackdown, Gilmore Girls, Supernatural, and Veronica Mars continued their existence from the old networks to the new one, and the network hoped for a “the whole is greater than the sum of its parts” synergy. The ratings, unfortunately, have not reflected this, but the network has produced several shows— Gossip Girl and the remake of 90210—with headline generating buzz.

Bibliography:

Kate Barclay, A Japanese Joint Venture in the Pacific: Foreign Bodies in Tinned Tuna (Routledge, 2008);
John D. Carter, C. Scott Hartz, and Robert F. Cushman, The Handbook of Joint Venturing (McGraw-Hill, 1988);
John Child, David Faulkner, and Stephen Strategies of Cooperation: Managing Alliances, Networks, and Joint Ventures (Oxford University Press USA, 2005);
Marcello Hallake, Structuring & Negotiating Cross-Border Mergers, Acquisitions, & Joint Venture Transactions (Reedlogic, 2007);
Harvard Business Review on Strategic Alliances (Harvard Business School Press, 2002);
Robert Wallace, Strategic Partnerships: An Entrepreneur’s Guide to Joint Ventures and Alliances (Kaplan Business, 2004).

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