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International Journal of Engineering Research and Technology.

ISSN 0974-3154 Volume 10, Number 1 (2017)


© International Research Publication House http://www.irphouse.com

Development of Smart Cities and role of Joint venture


as a Public-Private Partnership (PPP) : a major vehicle
of resource mobilisation
Ar. Shobhan S. Kelkar
M.Arch (Arch. & Const. Project Management)
Associate Professor,
SKN College of Architecture, Ambegaon, Pune -41
Email:[email protected]
Abstract India is drawing on the development of smart cities at
the global level. Prime Minister Narendra Modi‟s vision
Infrastructure is a key enabler and empowers the „Digital India‟ has a plan to build 100 smart cities across
economy to grow. The Government, both at the Centre & the country. Smart Cities would be developed as satellite
State level, has realized this and there is a conscious towns of larger cities and by modernizing the existing
thrust by them to build the infrastructure of the Nation in mid-sized cities. Government of India (GoI) has recently
a big way. Government has put a step forward by pledged to create 100 new Smart Cities in the country. It
announcing the concept of smart cities. Instead of being has a sense of urgency , the first 20 cities will be selected
“intelligent”, a Smart City simply tried to create a more for funding with development beginning in 2015-16.
pleasant city innovative technologies that aim to build the
city of tomorrow with one major objective: to simplify, The smart city project in India is part of a $1.5tn
optimize and streamline cities and the services they offer, global market opportunity. The business opportunities
for the benefit of all citizens. that come along the smart cities mission in India can be
seen as a source of great potential for Flemish businesses
Infrastructure development has limitations due to who are involved in products and solutions within the
scarcity of funds and scare budgetary resources. Hence, smart technology, sustainable solutions and hi-tech space.
government has allowed the participation of private firms, A smart city can contribute towards improved governance
in public beneficial programme. Government is trying to and efficient management of infrastructure such as water,
attract private sector investments to this sector by taking energy, transportation and housing and to a higher quality
appropriate steps to issue the clearances and by of life.
simplifying the procedure in this regard.
The Government of India released the list of the first
Joint ventures (JVs) facilitate the combination of 20 smart cities first week of February 2016. Tenders for
economic resources, skills and knowledge required for the shortlisted 20 cities will be floated over a span of next
projects. The use of the JV set-up in the construction few months. 1. Bhubaneswar 2. Pune (Maharashtra) 3.
industry has become necessary in order to secure a large Jaipur 4. Surat 5. Kochi 6. Ahmedabad 7. Jabalpur 8.
scale project or one that is beyond an individual firm‟s Visakhapatnam 9. Solapur (Maharashtra) 10. Davangere
capability. This paper deals with the concept of Joint 11. Indore 12. New Delhi (NDMC) 13. Coimbatore 14.
Venture. Much of the discussion in this paper relates to Kakinada 15. Belgaum 16. Udaipur 17. Guwahati 18.
the smart city development and role of PPP along with Chennai 19. Ludhiana 20. Bhopal
advantages, disadvantages and risks related to JV .
Smart City is not a destination but a series of steps in
Keywords:-Infrastructure, Smart Cities, Joint Venture, that direction. Given that the urbanisation level in India is
Risk, SWOT analysis still at just around 31 per cent, far lower than China‟s 54
per cent, Brazil‟s 90 per cent and well over 80 per cent in
most developed economies. The short list of 20 cities is a
1 Introduction decisive step in this direction, considering that these cities
have already furnished plans to cumulatively mobilise
The idea of smart city came into formulation owing resources over the next five years .These include an
to the need to accommodate rapid urbanization. Interest in integrated urban planning effort with a sharper focus on
smart cities continues to grow, driven by a range of infrastructure, land use planning, transport, design and
socioeconomic and technological developments across the architecture. The core infrastructure elements in a Smart
globe. It is due to the increasing number of smart cities City would include:
that established suppliers from energy, transport,
buildings, and government sectors are moving into the  Adequate water supply
smart city market, while start-ups are addressing a range  Assured electricity supply
of emerging opportunities in the same field.  solid waste management

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International Journal of Engineering Research and Technology. ISSN 0974-3154 Volume 10, Number 1 (2017)
© International Research Publication House http://www.irphouse.com

 Efficient urban mobility and public 2 Joint Venture


transport
 Affordable housing, especially for the poor A joint venture takes place when two parties come
 Robust IT connectivity and digitalization together to take on one project. In a joint venture, both
 Good governance, especially e-Governance parties are equally invested in the project in terms of
and citizen participation money, time, and effort to build on the original concept.
 Sustainable environment While joint ventures are generally small projects, major
 Safety and security of citizens, particularly corporations also use this method in order to diversify. A
women, children and the elderly joint venture can ensure the success of smaller projects
 Health and education for those that are just starting in the business world or for
As far as Smart Solutions are concerned, an established corporations. Since the cost of starting new
illustrative list is given. This is not, however, an projects is generally high, a joint venture allows both
exhaustive list, and cities are free to add more parties to share the burden of the project, as well as the
applications. resulting profits.

These 20 cities will be the first to receive funds, 2.1 Joint Venture
hence kick starting the process of developing them into
'smart cities'. The 20 selected cities will now set up A joint venture is a business agreement in which
special purpose vehicles (SPV‟s) and start implementation parties agree to develop, for a finite time, a new entity and
of their proposals, prepare detailed project reports, float new assets by contributing equity. They exercise control
tenders etc. All the cities have proposed public-private over the enterprise and consequently share revenues,
partnership (PPP) as a major vehicle of resource expenses and assets. There are other types of companies
mobilisation, said the minister. 10 of the 20 cities have such as JV limited by guarantee, joint ventures limited by
proposed to mobilise Rs 8,521 crore (Euro 1.12 Billion) guarantee with partners holding shares.
under public-private partnership (PPP) model, while
others have also indicated this option. A total investment On the other hand, when two or more persons
of Rs 50,802 crore (Euro 6.7 Billion) has been proposed come together to form a temporary partnership for the
in the selected smart cities. Public Private Partnerships purpose of carrying out a particular project, such
(PPP) approach is best suited for finding the resources. partnership can also be called a joint venture where the
Better construction management is required for parties are "co-ventures".
optimizing resources and maximizing productivity and
efficiency.
The venture can be for one specific project only -
when the JV is referred to more correctly as a consortium
There is a massive investment flow into the
(as the building of the Channel Tunnel) - or a continuing
infrastructural development in India and other Asian
business relationship. The consortium JV (also known as
countries. New business entities are venturing into the
a cooperative agreement) is formed where one party seeks
sector with the advent of BOOT, BOLT concepts in India.
technological expertise or technical service arrangements,
Mega fast track projects which are not even thought
franchise and brand use agreements, management
earlier are into the pipeline. Large volume, complexities
contracts, rental agreements, for „„one-time‟‟ contracts.
in design and execution and excessive risks call for
The JV is dissolved when that goal is reached.
multidisciplinary expertise and specialized construction
technology. They can only be met by strategic alliances
and joint ventures. A joint venture is not to be taken lightly. For a
businessperson to embark on a joint venture, he or she
Joint ventures, may be in the form of PPP (public needs to be committed and willing to work cooperatively
private partnership) or FDI (Foreign Direct Investment) or with the other party involved. A person involved in a joint
JV between two domestic partners, help a contractor in venture can no longer make all of the decisions for the
increasing his credibility in prequalifying for the projects. business alone. For it to be truly a “joint venture,” there
Even though it apparently look lucrative there are lot has to be 100% commitment from both sides.
more risk involved in joint ventures. For the success of
joint venture it is very much necessary to understand the When determining whether or not to embark on a
role of joint venture, types of JV, Necessity of SWOT joint venture, it is important to ensure both parties are a
analysis and risk associated with joint venture. match with the projected client base. In a joint venture,
each party must complement the other in business.
Sometimes, a misunderstanding or a lack of
communication can destroy a joint venture. Therefore, it
is necessary for both parties to be capable of
communicating what they are able to offer to the project
and what their expectations are.

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International Journal of Engineering Research and Technology. ISSN 0974-3154 Volume 10, Number 1 (2017)
© International Research Publication House http://www.irphouse.com

Since money is involved in a joint venture, it is


necessary to have a strategic plan in place. In short, both
parties must be committed to focusing on the future of the
partnership, rather than just the immediate returns.
Ultimately, short term and long term successes are both
important. In order to achieve this success, honesty,
integrity, and communication within the joint venture are
necessary.

A joint venture can defined as “An enterprise,


co-operation or partnership, formed by two or more
companies, individuals, or organizations, at least one
of whom is an operating entity that wishes to broaden
its activities for the purpose of conducting a new,
profit motivated business of permanent duration. In Fig .No. 1
general the ownership is shared by the participants 3 Partner selection
with more or less equal equity distribution and
without absolute dominance by one party.” The ideal partner in a joint venture is one that has
resources, skills and assets that complement your own.
2.2 Motivation for Joint Venture The joint venture has to work contractually, but there
should also be a good fit between the cultures of the two
A joint venture is a business entity owned and organizations. Creating a joint venture could mean a
operated by two or more organisations. Pooling resources major shift in direction, or, at the level of a strategic
may allow you to: alliance, it may be just another profit center. Either way,
you must first decide how much of yourself and your
 Take on projects that are larger than you would business you will devote to partnering with another
normally bid on, with a view toward spreading organization. The more you contribute, the more you can
the risk. expect to gain.
 Tap another company's unique skills. Next, calculate what you want to achieve by
 Combining two contractors to generate bonding collaborating. One of the root causes of joint venture
capacity that each contractor would not possess failure is lack of clarity, failing to decide what you want
individually. the end result to be.
 Teaming up two contractors with special You must know what your objectives are in order to
expertise (a civil and mechanical contractor plan for their accomplishment. You cannot hit a target,
teaming up to construct a power plant). you cannot see and the more you plan, the more you can
 Teaming up a contractor that has an established expect to achieve.
organization in a country with a contractor with This is an excellent time to carry out a S.W.O.T.
little or no experience in the country but with analysis of your company - strengths, weaknesses,
specialized engineering knowledge or skill. opportunities and threats. While an overall examination
 Teaming up a foreign contractor with a local can be informative, a SWOT analysis can be the most
contractor that may have political or other effective if the partner is already decided and the desired
valuable relationships in the country where the end result is already known. Very often one of those
factors is awaiting decision. You might have a person or
project is.
company in mind with whom you want to joint venture
 Enter new markets.
but must decide on what the joint venture will do, or you
 Increase your ability to raise capital.
know what you want to do and are looking for someone
 Take advantage of local knowledge. with whom you can joint venture. SWOT analyses can
 Increase bidding power and bonding capacity. help you focus on the attributes you are looking for.
While most joint ventures are limited in scope
to a single project, they can be left open
indefinitely.

Fig. No. 2 A balanced Perspective

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International Journal of Engineering Research and Technology. ISSN 0974-3154 Volume 10, Number 1 (2017)
© International Research Publication House http://www.irphouse.com

By identifying the strengths, weaknesses, Each member is taken for specific scope of work and is
opportunities and threats of partners and projects, you will responsible for the profit or losses associated with that
know to look for a partner whose strengths balance your scope of work. Each member is solely responsible for the
weaknesses and vice versa; and projects that exploit your resources necessary to perform its specified scope of
opportunities and minimize any threats. SWOT analysis work. The advantage of this type of joint venture is that
of external opportunities and threats as well as the internal for the contractor entering in to the joint venture, each can
strengths and weaknesses of the enterprises is important complement the others skills. But the disadvantage is that
for strategy formulation and development. some contractors have put more efforts than others, thus
The purpose of the analysis of external opportunities leading to internal conflicts.
and threats is to evaluate whether an enterprise can seize
opportunities and avoid threats when facing an This type of joint venture is used in projects
uncontrollable external environment, such as fluctuating where total work can be divided in to different sections.
prices, political destabilization, social transition, change These sections can be subcontracted out to separate
in the rule of law, etc. The purpose of the analysis of partners, who are responsible for technical and
internal strengths and weaknesses is to evaluate how an administrative element of those sections.
enterprise carries out its internal work, such as
management, work efficiency, research and development, 4.3 Combination joint venture:
etc. They present a combination of an integrated and
Before starting a joint venture, the parties involved non-integrated joint venture. Each member takes on
need to understand what they each want from the specified scope of work and responsible for the profit or
relationship. Smaller businesses often want to access a losses associated with that scope of work 19. But the
larger partner's resources, such as a strong distribution member also agree to act as partners with respect to a
network, specialist employees and financial resources. portion of the necessary work, which may include sharing
The larger business might benefit from working with a the preliminaries and general condition necessary for each
more flexible, innovative partner or simply from access to member‟s separate scope of work, as well as the actual
new products or intellectual property. Similarly, you performance of portion of the work of the project.
might decide to build a stronger relationship with a
supplier. You might benefit from their knowledge of new This type of joint venture is used in larger and
technologies and get a better quality of service. complex projects.
You can benefit from examining your own business.
be realistic about your strengths and weaknesses - 4.4 Other types of joint ventures used can be
consider performing a SWOT (strengths, weaknesses, classified and described as follows:
opportunities and threats) analysis to discover whether the a. Equity joint ventures
two businesses are a good fit. You will almost certainly b. Contractual joint venture
want to find a joint venture partner that complements your
own business' strengths and weaknesses. The objectives 4.4.1 Equity joint ventures
both parties agree should be turned into a working
relationship that encourages teamwork and trust. Equity joint ventures involves the participation of
two or more partners in the creation of a new corporate
4 Types of joint venture entity in which each partner owns a given share of the
equity capital, or in the redistribution between the parties
4.1 Integrated joint venture: of the shares of an existing company.
Primary characteristic is that it can represent a Equity in existing company is shared with and transferred
true partnership, in that the parties share profit and losses. to the other party in the joint venture.
The interest may be 50:50% or some other division and
there may be two or more members. The members share In equity based type, the inputs can be of capital,
the profit and losses in proportion to their interest in joint staff, plant and other resources and need not be on equal
venture. The parties combine resources and personnel in basis. The furnishing of bonds and sharing of profit has to
an agreed upon manner. be agreed upon.

This type of joint venture is used in projects 4.4.2 Contractual joint ventures
which are of immense size and task of splitting the work
There is no equity participation between the partners
is very difficult. As a result planning and programming
and their relations, rights and liabilities, as among
can become complicated and required highly structured
themselves and in respect of third parties, are principally
and authoritative central management.
governed by contract or agreement. Contractual JVs have
their drawbacks. First, since all contractual JV contract
4.2 Non-integrated joint venture: details need to be negotiated, establishing a contractual
Primary characteristic is that it is not a JV can be time consuming and expensive. Indeed,
partnership in that there is no sharing of profit and losses. contractual JV negotiations can deal potential ventures as

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International Journal of Engineering Research and Technology. ISSN 0974-3154 Volume 10, Number 1 (2017)
© International Research Publication House http://www.irphouse.com

parties discover that they cannot reach agreement on works, default of sub contractors and productivity of
every detail. Second, contractual JVs are sometimes not workforce.
the most appropriate business structure for the project.  Commercial aspects such as material or manpower
shortages, price controls, different interpretation of
5 Risks in joint venture project: legal requirements or regulation between the parties
A number of risks related to joint ventures can result
in loss of control, lower profits, conflict with partners and It is observed that most of the projects of joint
transferability of key assets. As per the studies, failure venture nature where involving parties are from different
rates varying from 2% to 90%, depending on the partners countries fail because of their respective cultural
involved in JV. JV risks stem from many sources, differences, inefficient management system, local labour
including the following: problems etc. That is, they either (a) never make any
 Communication: The firms may not communicate money, (b) break down and have to be terminated, or (c)
their objectives clearly, resulting in both of the above. The reasons behind such failure are as
misunderstanding. These communication issues can follows;
be exacerbated by geographic and cultural distance
among partner firms and by the use of language such 5.1 Lack of trust:
as “us versus them”. The most common reason of JV failure is lack of
 Strategy: The firms may have divergent strategies for trust. For two partners to work together under any
the joint venture, and fail to reach a set of mutually circumstance it is necessary that mutual trust and respect
agreeable objectives regarding business and exit be developed. It is for this reason that the negotiations
strategies. Risks can also emerge from a lack of leading up to the establishment of a joint venture are often
agreed processes regarding governance, so long-winded; the terms of the agreement may be fairly
accountability, decision-making, HR, and conflict easy to agree, but both parties have to be sure that they
resolution. can trust the other to live up to their part of the bargain.
 Imbalanced resources: The firms may bring Western, especially US, companies usually try to sign
imbalanced resources to the table, a source of great terms quickly, confident that they can resort to law if the
conflict. Another source of conflict may be that the other party breaks the agreement. Asian companies are
JV disproportionately allocates resources among the more reluctant to go to court and will try to make sure that
firms. For example, one firm may find that its the grounds for trust are established in the first place.
technology is being appropriated by another firm. Much of the problem of lack of trust can be got over
 Culture: The JV partner firms may have distinct by agreeing precise terms at the outset and ensuring each
corporate (and in the case of cross-border JVs, party understands those terms and their own
national) cultures and management styles, resulting in commitments. As well as lack of trust, lack of goal
poor integration and cooperation alignment can be a serious problem. Too many partners,
with the best will in the world, pick a partner company
Because of the complex nature of construction that does not want the same thing as them. This does not
business activity, process, environment, and organization, mean that ideal partners are always of the same type or
the participants are widely exposed to a high degree of size; very often, opposites attract. Some of the most
risk. Risk management is an important component to successful east-west joint ventures have been between
make sure the success of the construction project or to relatively small, technologically advanced western
make sure the profitability for the contractors. companies with a narrow market focus and larger, more
traditional Asian companies with a broad market focus.
The risks of failure of construction joint ventures Before searching for potential partners, it is first
(JVs) are high and the financial consequences are important to decide what kind of partner they need. The
expensive. They are managed, through the study of the potential partners can be categorized into three classes as
critical factors that contribute to successful JVs and the follows:
risk factors associated with JV operations. The risk 1. The nuts and bolts partner, whose primary function is
factors that may prompt JV partners to share their risks to provide access to resources, distribution systems
are said to include one or more of the following aspects: and so on;
 Financial risks relating to inflation, foreign 2. The well-endowed godfather, who can help kick-start
exchange, cost of financing due to late payment by new ventures by providing capital and other
client and interest rates fluctuation. resources or help deal with local regulations and
 Country related risks such as difficulty in fund licenses and cut through red tape;
repatriation, change in statutory requirements, host 3. The four hands on the wheel partner, who comes in
government expropriation, reversal in policy toward- as an equal and works actively to develop its own
foreign investment, imposition of unfavorable strategic position through the partnership.
conditions, complexity of legal and tax systems.
 Construction risks such as cost over-run, cost
estimate‟s deficiency, disruption to construction

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International Journal of Engineering Research and Technology. ISSN 0974-3154 Volume 10, Number 1 (2017)
© International Research Publication House http://www.irphouse.com

5.2 Lack of shared goals:  Environment risks: The main environmental risks
To form a successful joint venture it is necessary to associated with hydro power projects are
first be absolutely clear about one's own goals; second, be Loss of flora and fauna, Loss of fertile lands
clear about the attributes one is seeking in a partner; and Rehabilitation and resettlement problems
third, when negotiating with potential partners, be open  Force Majeure: The defining of force majeure
and prepared to give as well as take. It is possible that events, these include:
potential partners will not reciprocate; at which point it is Natural force majeure events, Direct political force
time to politely break off negotiations and start over majeure events, Indirect political force majeure
somewhere else. Having got the right deal, stick to the events
terms. Good joint ventures are highly profitable and offer
the promise of future, even more lucrative deals. Bad joint
ventures are worse than no deal at all.

6 Risks at various stages of project


Understanding and addressing the risks of a
construction projects early on are important to protecting
our financial exposure as well as that of our clients
assignments. Various risks include:
 Design risks: This risk relates to any defect in the
design of the infrastructure facility or the design
requirements stipulated for the project
 Construction risks : The construction risks relate to
the factors adversely affecting the very ability to Fig. No. 3, Risks associated with construction project
undertake construction activities such as availability
of resources, industrial relations, safety during 7 Advantages & Disadvantage of a Joint Venture
construction, quality of raw materials, workmanship,
delay in supplies and construction activities, 7.1 Joint venture advantages:
construction techniques, failure to comply with Businesses of any size can use joint ventures to
construction milestones, cost of construction, strengthen long-term relationships or to collaborate on
insolvency etc. short-term projects. There are many good business and
 Operating risks : this risk includes Performance accounting reasons to participate in a Joint Venture.
risk( The completed facility cannot be effectively Partnering with a business that has complementary
operated or maintained to produce the expected abilities and resources, such as finance, distribution
capacity, output or efficiency), Operation cost channels, or technology, makes good sense.
overrun, Operating Contractor Default, Force
Majeure or Environmental Damage, Default ( The Parties enter Joint Ventures to gain individual
default may be caused by the actions of a third party) benefits, usually a share of the project objective. This may
 Financial risks: This risk is the totality of all risks be to develop a product or intellectual property rather than
that relate to financial developments external to the joint or collective profits, as is the case with a general or
project that are not in the control of the project limited partnership.
developer. This results from consequences that may
have adverse economic effects. Financial risks fall
into these categories: Exchange rate risk, Interest A successful joint venture gives rise to following
rate risk, Cost Overruns and Time and Quality. benefits:
Increased Financing Costs.
 Political risks : The project company and the lenders  Combining complementary R&D or technology:
face the risk that the project execution may be  Provide companies with the opportunity to
negatively affected by acts of the contracting obtain new capacity and expertise
authority (Government), another agency of the  Efficient commercialization of a technology or
Government or the host country‟s legislature. business concept
 Legal risks: Some of the legal risks that a  Developing or acquiring marketing or
construction projects can face are related to: distribution expertise
Title/lease of property, Ownership of assets,  Sharing of scientists or professionals with unique
Ownership of assets, Corporate and security skills- The complexity of the knowledge to be
structure, Financial failure or insolvency of transferred is a key factor in determining the
concession company, Breach of financing documents, contractual relationship between the partners.
Enforceability of security. One or more participants may seek to learn more
about a relatively new product market activity.
This might concern all aspects of the activity or a

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International Journal of Engineering Research and Technology. ISSN 0974-3154 Volume 10, Number 1 (2017)
© International Research Publication House http://www.irphouse.com

limited segment like R&D, production, thus limiting the commitment for both
marketing or product servicing. parties and the business' exposure.
 Allow companies to enter into related businesses  Allow companies to enter related businesses or
or new geographic markets or obtain new new geographic markets or gain new
technological knowledge technological knowledge
 Have a relatively short life span (5-7 years) and  access to greater resources, including specialised
therefore do not represent a long-term staff and technology
commitment  Joint ventures can be flexible. For example, a
 Improving access to financial resources for both joint venture can have a limited life span and
partners: - financial resources increases because only cover part of what you do, thus limiting
when to parties undertake economic activity both your commitment and the business'
together then they share expenses this leads to exposure.
more access to each others financial sources  In the era of divestiture and consolidation, JV‟s
.Financial support, or sharing of economic risk- offer a creative way for companies to exit from
It reduces the risks in a number of ways as the non-core businesses.
activities can be expanded with smaller  Companies can gradually separate a business
investment outlays than if financed from the rest of the organisation, and eventually,
independently. A small firm with a new product sell it to the other parent company. Roughly 80%
idea that involves high risk and requires of all joint ventures end in a sale by one partner
relatively large amounts of investment capital to the other.
may form a joint venture with a large firm. The
larger firm might be able to carry the financial 7.2 The disadvantages of joint venture
risks and be interested in becoming involved in a
new business activity that promises growth and
profitability. In addition, the larger firm might Partnering with another business can be complex. It
thereby gain experience in the new area of takes time and effort to build the right relationship.
activity that may represent the opportunity for a Problems are likely to arise if:
major new business thrust in the future.
 Proper utilization of resources- Resources are  The objectives of the venture are not 100 per
inputs into a firm's production process, such as cent clear and communicated to everyone
capital, equipment, the skills of individual involved
employees, patents, finance, and talented  The partners have different objectives for the
managers. Resources are either tangible or joint venture
intangible in nature. With increasing  Varied organizational structures may lead to less
effectiveness, the set of resources available to the efficient decision-making
firm tends to become larger. Individual resources  There is an imbalance in levels of expertise,
may not yield to a competitive advantage. It is investment or assets brought into the venture by
through the synergistic combination and the different partners
integration of sets of resources that competitive  Cultural difference: Different cultures and
advantages are formed. management styles result in poor integration and
 Acceleration of revenue growth co-operation
 Ability to increase profit margins  The partners don't provide sufficient leadership
 Expansion to new domestic markets and and support in the early stages
international markets- It also helps in expanding  High level of commitment of staff and
the firm's operations into foreign countries. The management
local partners contribute in the form of  Time consuming (especially where a new
specialized knowledge about local conditions, venture is involved)
which are essential to the success of the venture.  Political risks in the country where the joint
 New product development venture is based
 Higher rate of profit and more control over the  Working in a different legal and commercial
operations. system
 Sharing of risk and ability to combine the local  It takes time and effort to build the right
in-depth knowledge with a foreign partner with relationship and partnering with another business
know-how in technology or process. can be challenging. Problems are likely to arise
 Tax advantages are a significant factor in many if: Different cultures and management styles
joint ventures. result in poor integration and co-operation.
 A joint venture can also be very flexible. For
example, a joint venture can have a limited life A joint venture may be subjected to several
span and only cover part of what company needs, difficulties. As circumstances change, the contract might

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International Journal of Engineering Research and Technology. ISSN 0974-3154 Volume 10, Number 1 (2017)
© International Research Publication House http://www.irphouse.com

be too inflexible to permit the required adjustments to be  Joint Ventures in construction, third edition, Richard
made. While most of joint ventures have been seen to be W. Miller, By National Ass. Of Surety Bond
very successful & fruitful for the parties involved, there Producers, Washington DC
have been few comes where JVs have failed to give the  Joint Ventures in India by Nishith Desai Ass., April
desired results for the parties involved & ended in long, 2010
painful litigations.  Joint Ventures in India- Majmumdar & Co.,
International Lawers
8 Conclusion  Managing Joint Ventures, by Paul W. Beamish and
There is a massive investment flow into the Nathaniel C. Lupton, in Beamish & Lupton, 2009
infrastructural development in India and other Asian  Hsu-Hsi Chang_, Wen-Chih Huang,” Application of
countries. New business entities are venturing into the a quantification SWOT analytical method”, Abstract
sector with the advent of BOOT, BOLT concept in India. Mathematical and Computer Modelling 43, 158–169
Mega fast track projects which are not even thought , 2006
earlier are into the pipeline. Large volume, complexities  Jiaqin Yang, Huei Lee, “Identifying Key Factors for
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 Opportunities For Flemish Companies In Indian
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