Explain joint ownership with an example. What are its advantages and disadvantages?

Question

What will be an ideal response?

Answer 1

Joint ownership is a type of joint venture. Joint ownership ventures consist of one company joining forces with foreign investors to create a local business in which they share possession and control. A company may buy an interest in a local firm, or the two parties may form a new business venture. Joint ownership may be needed for economic or political reasons. For example, the firm may lack the financial, physical, or managerial resources to undertake the venture alone. Alternatively, a foreign government may require joint ownership as a condition for entry. Often, companies form joint ownership ventures to merge their complementary strengths in developing a global marketing opportunity. For example, to increase its presence and local influence in China's mobile phone and tablets markets, chipmaker Intel recently paid $1.5 billion for 20 percent ownership in China's state-run Tsinghua Unigroup, which controls two domestic mobile chipmakers. The joint ownership investment will help Intel to better understand Chinese consumers. It may also help to earn more favorable treatment from Chinese regulators. So far, Intel has gone untouched by China's recent crackdown on foreign technology companies such as competitor Qualcomm and software makers Microsoft and Symantec. Joint ownership has certain drawbacks. The partners may disagree over investment, marketing, or other policies. Whereas many U.S. firms like to reinvest earnings for growth, local firms often prefer to take out these earnings; whereas U.S. firms emphasize the role of marketing, local investors may rely on selling.