Joint ventures can provide both partners with tremendous success, but even the best intentions can go awry. One example of an off track joint venture involves online marketing giants eBay and Craigslist.
In 2004, eBay and Craigslist entered into an agreement whereby the two companies would try to expand more into global markets. However, the joint venture soon stagnated to the point where eBay was trying to market the 28.5% share in Craigslist to other companies, and Craigslist was fighting to get it back.
The biggest problem with this joint venture is that the two companies obviously had completely different intentions and goals. Craigslist wanted to retain authority and management of its own operations, but learn from eBay about larger online classified operations. eBay wanted to use their share in Craigslist to better compete against Google in the online classified industry and maximize profit potential in Craigslist operations. Although both companies had a shared intention of expanding into bigger global markets, their alternative intentions soiled the relationship, and they are now in litigation to end the JV.
Looking at the original intention of the JV, it was a good one. However, there are things you can learn to prevent such a tragedy from occurring in your own JV. Here are some things to consider:
Write Out the Intention of the JV as a Mission Statement
Before your JV goes “live”, you and your JV partner need to know exactly what is expected from one another. Are you looking to have access to technology while your JV partner needs help in reducing expenses? Or perhaps you both are looking to enter into bigger national markets by combining forces?
The mission is critical to ensuring that you and your JV partner will not have disputes over the overarching goals.
Explicitly Write Out the Partner Responsibilities
What will you be contributing to the JV? What will your JV partner contribute? Who will manage the accounting books? Who will handle distribution?
All of the facets need to be clearly outlined in the beginning. You don’t want to have a finished product ready, but find your JV partner reluctant to distribute it appropriately. Know who is responsible for every step of the joint venture.
Shelter Your Proprietary Information
eBay used confidential Craigslist information and techniques to form its own “free” online classifieds, called Kijiji. Craigslist did not want another competitor, especially one that was using its own technology and industry secrets.
Although you may agree to share certain proprietary information to develop a new product, be careful what information you do share. Keep your proprietary information private. Remember, you are still in business for yourself.
Define the Exit Strategy
eBay and Craigslist are still in a lengthy and expensive dispute on how to dissolve the joint venture partnership. You can avoid legal litigation by defining exactly how your JV will dissolve if things go wrong, as well as if things go right.
Joint ventures don’t have to end badly. Knowing all expectations and responsibilities will help you and your JV partner get the most benefit and profit from your JV efforts.
Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.
To discover more Joint Venture Marketing Strategies join his free Joint Venture Marketing Wealth Report.