4.2.4 Reasons for global mergers or joint ventures

Question 1

organic growth

Answer 1

using own resources 
e.g.s 
new stores/factories/employ more staff 
offshoring/outsourcing 
outlets 
franchise

Question 2

2 ways for business to expand growth/operations

Answer 2

1. organic

2. inorganic (merger, takeover, acquisitions)

Question 3

joint venture

Answer 3

separate business entity created by 2 or more parties (agreeing to work together) = sometimes
combines resources/expertise
ST or LT
involving shared ownerships, returns (profit), and risks (both invested liability)
risk= operate larger scale, larger costs, local taste/trends

2 independent businesses collaborating on specific project

Question 4

example of global joint ventures

Answer 4

Google and GSK (pool resource/ expertise = innovation/leadership in emerging global market opportunity and spread risk

Jaguar Land Rover (overcome protectionism) in China

Question 5

reasons and rationale for joint ventures

Answer 5

overcome barriers to entry and gain expertise (save money on JV and marketing EOS)

1. risks and returns are shared (expertise/resources shared = knowledge/customers/distribution/R&D) option to acquire JV in future
2. strategy for market development (reduce risk of growth strategy, in some markets it is necessary)

Question 6

challenges with joint venture

Answer 6

conflict of interest
imbalance of power/expertise
language barrier
objective of partner may evolve and conflict
imbalance of investment and asset purchase between partners
culture clash risk (management level)
infrastructure/networks