ADVANTAGES OF NONEQUITY JOINT VENTURES       

ADVANTAGES OF NONEQUITY JOINT VENTURES

A nonequity joint venture is a type of corporation where one partner enjoys more shares and control of the business than the other. Several companies, including Ford Motors, have been seen to follow this type of trend. The partnership or collaboration has its benefits and risks. The various advantages that Ford motor company is enjoying from its joint ventures are the elimination of hazards, management of competition, and increase in knowledge. Some of the dangers that Ford motors might face and have already met through the nonequity joint ventures are Fall of sale and diversification due to culture and background.

Elimination of risks.

Nonequity joint venture help to eliminate any risk that would otherwise pose a threat to a company. Venturing into an international business can be high risk. Ford has been able to reduce risks by its various collaborations. An example is the Ford and Koc group of Turkey joint ventures, where Turkey is the sole distributor of Ford motors in Turkey (Otosan, 2020). The collaboration has allowed Ford to sell and significantly eliminate risks that it could have faced in the Turkish market if not for the partnership. Thus, nonequity joint venture helps to reduce risks significantly.

Increase in Knowledge.

Nonequity joint ventures allow companies to gain technical skills, thereby increasing their expertise. For instance, Ford has managed to come in line with environmental regulation, which is a significant factor that motor companies face. Ford significantly improved its emission through its nonequity joint venture with Mazda (Treece, 2020). Therefore, the joint venture has allowed Ford motors to learn new skills hence improving the quality of its products.

Management of competition.

Ford has been able to manage competition through its various collaboration.  Competition is a threat that most producers and manufacturers face. The partnership between Ford and Mazda has offered great help to Ford motors in the management of competition (Treece, 2020). The joint venture between the two has helped Ford to be able to access the Japanese market as well as its manufacturing processes. Thus, Ford motor company has been able to deal with competition through the nonequity joint ventures.

Different goals and aims.

Partners having different goals and aims can pose a risk to the partnership. The unequal shares, distribution of resources, and control of the business can be a significant threat to the joint venture (“ADVANTAGES AND RISKS FOR FORD MOTOR COMP – writing master – Contentmart”, 2020). Different goals and aims can easily lead to loss and Fall of the partnership. Ford is an international motor company that collaborates with partners all over the world. Therefore, Ford is at high risk of partnering with companies with different goals and objectives.

Fall in sales.

A fall in the sale is a risk that Ford motors have faced. Fall in a deal can significantly affect one side of the partnership. For instance, Ford China joint venture did not do well in 2018.  Ford suffered a 54% fall in sales from its collaboration with China (Hancock, 2020). Fall in sales leads to loss of finances and confidence from the other side of the partnership. Hence, Fall in the sale is a significant threat that Ford motors faced.

Different backgrounds and culture among partners.

Due to diversity in culture, religion, and background, partners may fail to communicate effectively, hence posing a threat to the joint partnership. Diversity may lead to poor relations and performance. (“ADVANTAGES AND RISKS FOR FORD MOTOR COMP – writing master – Contentmart”, 2020)The different behaviours may lead to policies and goals of the partnership not being described adequately. Diverse background and culture among partners can be a setback that Ford might face in its collaboration with various companies all over the world.

In conclusion, Ford motor nonequity joint ventures has its benefits and risks. Through its collaboration with other companies, it has been able to reduce risks, manage competition, and has gained more knowledge in the production of quality motors. However, Ford is at high risk of collaborating with companies that may have different goals and is also at the risk of losing capital due to a fall in sales.