4.2.4 Reasons For Global Mergers Or Joint Ventures Flashcards
What is a joint venture?
A joint venture is a commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities, this is only a temporary arrangement.
What is a merger?
A merger is where two businesses come together to become one, on a permanent basis.
How can joint ventures spread risk?
Often a business might decide to enter into a joint venture to share the risk, perhaps with a business already trading in that country – which can help them navigate the paperwork and cultural differences.
How can mergers spread risk? (Example Tata)
-In 2008 Tata the Indian company bought the two companies from Ford.
-The purchase gave Tata the opportunity to expand its presence in the passenger car market beyond India and gave it the clout necessary to compete with international players.
What are the 3 main advantages of joint ventures?
1.) Access to knowledge and resources.
2.) Access to new opportunities such as new markets or greater distribution reach.
3.) Shared exposure to risks, financial responsibility and workload.
What are some disadvantages of joint ventures?
1.) A large number of joint ventures fail because of the many risks involved and the complexity of integrating operations and work culture of two different companies.
2.) Coping with differing cultures, management styles, and working relationships that are in each company.
3.) 50% of all joint ventures fail.
What is the use of brand name acquisition?
A business may look to merge with another business in order to acquire a lucrative brand name.
What is the use of patent acquisition?
A joint venture allows inventors to move their products to market quickly with much less financial risk.
How can joint ventures help secure resources?
A business in one country may need resources that are only found in another country and so they may enter into a joint venture to secure access to these resources.
How can joint ventures maintain global competitiveness?
The local partner may be able to provide critical market data, local knowledge on the domestic market and information on customers, tastes and trends which will help the parent business to maintain competitive advantage.
