International Business Transactions

It is important to note that in some countries like China it is a regulatory requirement that the international firms need to partner with the local players in order to make an entry into the market. Due to this regulatory requirement, international firms, therefore, have to adopt joint venture arrangements (JVA) or franchising as the most feasible methods for making an entry into the international market.The overall development of joint ventures especially was done under the English Common Law and each of the party to the joint venture maintains its individual legal entity and character because of the temporary nature of the relationship. The case with the franchising, however, is different.Over the period of time, firms traditionally adapted two methods of expanding i.e. build or buy, however, joint venture presents a third and interesting alternative to the firms to expand and grow at domestic as well as international level. Before discussing the legal issues involved in the joint ventures, it is important to understand the business reasons behind the rise of the joint ventures and how international comes into this overall scenario.There are different commercial or business reasons as to why there is a general increase in international joint ventures. One critical reason is the increase in the competitive pressures due to globalization which has forced the firms to actually look into new markets and better ways to reduce their costs. It is because of this reason that the international firms have been able to enter into the emerging and developing countries to take advantage of cheaper resources.