Difference Between Joint Venture and Strategic Alliance

Strategic Alliance can be termed as an arrangement wherein two or more entities come together to undertake common interest. Such an arrangement is in vogue in the contemporary business environment. Indeed, it is a response to the vigorous forces of globalisation, change in technology, deregulation and so forth, due to which the environment is now more complex and competitive in nature.

One of the forms of strategic alliance is a joint venture, which can be understood as the temporary partnership, in which two or more entities conjoin to undertake a specific venture. The basic difference between the joint venture and strategic alliance lies in their nature and relationship between the two entities.

In the given article, we’ve presented you all the substantial points of distinction amidst these two, so take a read.

Content: Joint Venture Vs Strategic Alliance

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

Basis for Comparison	Joint Venture	Strategic Alliance
Meaning	Joint Venture refers to a form of business organization, set up by two or more companies, to carry out financial activity.	Strategic Alliance implies an agreement amidst two or more entities to work jointly with one another, to increase performance of both the entities.
Independent Organization	The entities which come together in a joint venture, do not continue to operate as independent companies.	The entities which come together in a strategic alliance, continue to operate as independent companies.
Contract	Exist	May or may not exist
Form of	Strategic Alliance	Collaboration or corporate partnering
Separate legal entity	Yes	No
Objective	Risk limitation	Reward maximization
Management	Bilateral	Delegated

Definition of Joint Venture

Joint Venture may be defined as a combination of two or more firms, which set up a separate legal entity, which indicates the capital and interests of the two parties. In finer terms, when two or more firms, invest funds for forming a jointly owned new company is known as a joint venture.

The parties to the joint venture, contribute their resources, competencies, skills, technology, in a definite proportion and share the revenues, expenses and company’s control. The four basic reasons for entering into such a strategic alliance is:

• Learning partner’s skills.
• Upgrading and improving skills
• Seeking vertical integration
• Shaping future industry evolution

A joint venture may result in pooling of resources, massive leverage, lower risk, optimum utilisation of resources, high profits, etc.

Definition of Strategic Alliance

Strategic Alliance is an arrangement between two or more firms to carry out a number of objectives agreed upon by the entities or to fulfil a critical business requirement while operating as separate organisations. In finer terms, a strategic alliance is a relation that exists amidst two firms, to do business together, which is more than a regular firm to firm dealing, but less than a merger or complete partnership.

The entities involving in the alliance may pool their resources such as products, knowledge, expertise, goodwill, capital, distribution channels and so forth. The entities may maintain their autonomy, while they achieve new opportunity.

The alliance aims at gaining synergy, wherein each party expects that the strength of the alliance will surpass individual efforts. It encompasses transfer of technical know-how, economic specialisation, divide rewards, risk and expense sharing.

Conclusion

Nowadays, most of the companies are turning towards the strategic alliance, with the aim of coping with uncertainty and risk, as well as to approach a gamut of competencies, market and technology. On the other hand, joint ventures can access the knowledge, assets and funds from all the firms to venture, so it is a blend of best features of those entities, without altering the parent enterprise.