JOINT VENTURES OR ENTERPRISES
ECONOMICS

JOINT VENTURES OR ENTERPRISES

Joint ventures or enterprises can be defined as those businesses in which private investors and governments are in partnership. In other words, these are ventures which are set up by government in collaboration with private firms.

One of the major purposes of setting up a joint venture is to combine some of the advantages of government and private ownership and reduce the problems of complete government or private ownership. It also eliminates the inefficiency associated with public corporations.

Government can participate in joint venture with private firms in various ways. Some of the ways include:

  • Acquisition of part of the ownership of an already existing company.
  • Government may provide a larger portion of the capital required to set up such a venture.
  • Government may provide the basic infrastructure e.g. electricity, water and telephone services.
  • Government may purchase a larger portion of the shares of the joint ventures.

Joint ventures are common in car assemblies, cement manufacturing, mineral exploration and production, etc.

 

GENERAL SOURCES OF FINANCE FOR BUSINESS ENTERPRISES

  1. Savings: Business enterprises, especially sole proprietorship and partnership, can raise capital from their personal or owner’s savings.
  2. Borrowing: Business enterprises, especially the small ones, can borrow money from friends and relatives.
  3. Loans and overdraft from banks: Loans and overdraft can be obtained from commercial or development banks, especially by co-operatives and limited liability companies.
  4. Equipment leasing: Equipment can be leased out by companies in order to raise capital.
  5. Retained profits: The profits made by the company can be set aside or ploughed back as working capital.
  6. Trade credit: Raw materials can be purchased by the company on credit.
  7. Hire purchase: Facilities can be granted to a company to buy and pay by instalments.
  8. Sale of shares: Business enterprises can raise capital by issuing shares for public subscription.
  9. By debentures: These are long term loans obtained from the general public at a fixed interest.
  10. Bill of exchange: This is a document duly signed by the debtor’s bank to the creditor and the creditor cashes the money with some discounts.
  11. Grants: Business enterprises, especially public corporations, can obtain capital by special financial grants from government, international financial institutions like African Development Bank (ADB), International Monetary Fund (IMF) and from other foreign countries.

 

GENERAL AND SPECIFIC PROBLEMS OF BUSINESS ENTERPRISES

  1. Inadequate capital: Business enterprises, be it private or public enterprises are usually faced with inadequate capital which makes it difficult for them to expand their operations.
  2. Inadequate infrastructural facilities: Infrastructural facilities like good roads, electricity, pipe borne water and telephones services are usually grossly inadequate and this make business operation very tough and difficult.
  3. Inadequate skilled personnel: Most of the skilled personnel required to operate or manage business enterprises are also inadequate. This results in low output and poor quality of products.
  4. Shortage of raw materials: Most of the raw materials needed by business enterprises to operate are in short supply. This has either forced some of the enterprises to operate at low capacity utilisation or even fold up completely.
  5. Low patronage: Goods and services provided by some business enterprises do encounter low patronage partly because of low standard of goods and services provided and partly because of consumer’s preference for foreign goods.
  6. Political instability: Most business enterprises find it difficult to grow due to political instability such as coups, strikes, civil war and communal crisis.
  7. Low technological development: As a result of our low level of technology, most of the business enterprises have to rely on crude mode of production . which lead to low output of goods and services.
  8. High level of corruption: Business enterprises, be it private or public, are characterised by high level of corruption. Directors embezzle company’s money and this usually leads to the closure or liquidation of most companies.
  9. Inefficient management: Most of the business enterprises are managed by unqualified and incompetent personnel and this leads to the failure of many enterprises.
  10. Government policies: Certain government policies that are in place do not encourage the growth of business enterprises. Government policies like high taxes, ban on importation of essential raw materials and high import duties discourage the growth and survival of enterprises.
  11. Problem of smuggling: The activities of smugglers whose duties are to bring in banned goods through illegal means have forced most business enterprises to fold up.
  12. High operating cost: In many developing countries like Nigeria, business enterprises are to provide their raw material, water and generate their source of power. With these, there will be high cost of operation which will lead to high cost of their products.
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