Certified Supply Chain Professional (CSCP) Practice Exam

What is a joint venture?

1. An informal collaboration

2. An agreement between two or more firms to achieve a specific business objective

3. A partnership requiring no shared risk

4. A business acquisition

The correct answer is: An agreement between two or more firms to achieve a specific business objective

A joint venture is defined as an agreement between two or more firms to achieve a specific business objective. This arrangement allows companies to pool their resources and expertise while pursuing a common goal, such as entering a new market, developing new products, or sharing operational costs. Each party in the joint venture retains its distinct independence while contributing to a shared project, which can enhance their competitive advantage without the complexities of a merger or acquisition. The environment of collaboration in a joint venture typically entails shared decision-making and mutual investment in resources, risks, and profits associated with the venture. This strategic alliance can take various forms, such as forming a new company or a contractual agreement that outlines the roles, contributions, and expectations of each firm involved. In contrast, the other choices describe different concepts: informal collaborations may lack the structure and mutual commitments required for a joint venture, partnerships usually imply shared risk rather than an absence of it, and a business acquisition involves one company taking over another rather than collaborating towards a common goal.