Joint Venture is establishment of firm that jointly owned by two or more independent firms. The most general joint venture is 50/50 venture in which there are two parties, each of them holds 50percent ownership stake and contributes a team of managers for sharing operating control.
The advantages are access to local partner’s knowledge and can be shared the development costs and risks, the political considerations will not be a problem for a firm. The disadvantages of this mode are the firm will not have a tight control on the subsidiary; the shared ownership may cause conflicts and battles for control.
Wholly Owned Subsidiaries
“Wholly owned subsidiary, the firm owns 100 percent of the stock. Establishing a wholly owned subsidiary in a foreign market can be done two ways. The firm either can set up a new operation in that country or acquire an established firm in that host nation and use that firm to promote its products”. The advantages are the location and experience curve economies can be realized; the subsidiary can be shared 100 percent and the control on the operation also will not lose its technologies to others. The disadvantages is that it the most costly and risky method.