Introduction to International Joint Ventures (IJVs)

In this post, we introduce and open discussion to one typical approach to international expansion: International Joint Ventures (IJVs). IJVs – which typically involve partnerships between a foreign investor and an incumbent player in the market – provide one of the most logical ways for businesses to enter and grow in a market.

By joining forces to address an international market, partners can combine high potential business models and/or brands with the local know-how, experience, and other tools that are required to build a successful business in a particular market. Partners in an IJV willingly forego complete control over an international investment (at least for a period of time) in order to secure access to needed assets and skills from their collaborators. In this sense, an IJV provides a blended approach to international expansion that captures some of potential from owning an international business venture and some of the benefits of delegating business activity to a knowledgeable third party.

IJVs vary widely by the extent to which partners decide to combine forces, the number of areas in which they will cooperate, and the length of time that the partnership is intended to last.

On one end of the spectrum are very light alliances where, for example, one IJV partner dominates business decisions and the other plays a passive role. Sometimes, a minimal approach to an IJV responds to formalistic legal requirements that companies have more than one shareholder, such as is the case in Mexico, or provide some level of local resident management or administration, such as in certain types of companies in Brazil.

On the other end of the spectrum are more tightly knit alliances involving true sharing of assets, workforces, technology, etc. These strategic alliances often but not always share significant equity stakes in a new venture and have a highly developed alliance or partnership agreement. These more strategic IJVs have historically shown the most potential for success as well as failure. We will dedicate future posts to case studies and examples of actual IJV experiences in the Americas.

Whether IJVs are right for a company depend on many factors that we will delve into in other posts. Determining whether IJVs or other modes of market entry make sense for a particular company requires significant pre-study and deployment of a focused and experience expansion team.

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Andres Snaider is a founding partner of Nextant, a consulting firm specializing in assisting companies expand their businesses in international markets, with a strong focus on Latin America. With a degree in law and experience working as an international attorney and businessman, Mr. Snaider has advised clients on a range of commercial matters and investments across the Americas. He is a graduate of the Harvard Law School and currently lives and works in Boulder, Colorado.

Email Andres at : asnaider@nextant.com

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Nextant has extensive experience in assisting leading clients through its Market Expansion and Business Optimization services. For more information on how Nextant can assist your company in socializing a market entry and initiating sales, please visit our website at http://www.nextant.com