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To be competitive in a global market, a business looks for an international edge by forming strategic alliances or joint ventures with international partners to pool resources. The terms "joint venture" and "strategic alliance" are often used interchangeably. While both partnerships are instrumental in establishing foreign ground, the main difference is that joint ventures require a legal creation of a third-party entity and strategic alliances do not.
Difference in Partners
In an international joint venture, foreign companies seek partners with business and political relationships in a local territory in exchange for technology or other area of expertise. Partners in a joint venture focus on the equity stake the partners will share, which can be anywhere from 10 to 90 percent from developing strategic alliances. International strategic alliance partners are independent and operate by contractual agreement for a task or project.
Difference in Objectives
While both joint ventures and strategic alliances are similar in their purpose of building strengths in a international territory, a strategic alliance can be considered a subsidiary of a joint venture. The joint venture's objective is to represent the legal ownership of the partnership and ensure profitability of the entity. The strategic alliance's objective is to focus on the success of project-related tasks of the alliance, such as technology development or marketing initiatives.
Difference in Function
When at least two international companies work together to implement a strategy, they may have ideas, resources or technology to share. By forming an alliance they can, for example, share a marketing strategy and establish a referral program. A strategic alliance can be as simple as running a booth together at a trade show. A joint venture is a legal entity concerned with its ownership stake in the company and, therefore, carries management functions of objectives, partnership investments, assets and exit strategies.
Difference on the Internet
As a result of the e-commerce boom, an Internet marketing joint venture internationally is used by businesses online. It may be referred to as a joint venture, but it is no different from a strategic alliance since no legal third party is formed. The partners promote each other's products and services and benefit through an affiliate payment program either ongoing or for a marketing blitz.