4.2.4 - REASONS FOR GLOBAL MERGERS or JOINT VENTURES

Question 1

What is a JOINT VENTURE?

Answer 1

when 2 BUSINESSES come together to COLLABORATE on one PROJECT, But still REMAIN SEPERATE BUSINESSES
( TEMPORARY Arrangement )

Question 2

What is a MERGER?

Answer 2

where 2 BUSINESSES come together to BECOME ONE on a PERMANENT Basis

e.g. Orange and T MOBILE became EE

Question 3

What are 5 REASONS for GLOBAL MERGERS OR JOINT VENTURES?

Answer 3

• SPREADING RISK OVER DIFFERENT COUNTRIES/REGIONS
• ENTERING NEW MARKETS / TRADE BLOCS
• ACQUIRING NATIONAL / INTERNATIONAL BRAND NAME/PATENTS
• SECURING RESOURCES / SUPPLIES
• MAINTAINING / INCREASING GLOBAL COMPETITIVENESS

Question 4

Explain the Reason for Global Mergers or Joint Ventures - SPREADING RISK OVER DIFFERENT COUNTRIES / REGIONS

Answer 4

• MOVING PRODUCTION or SALES into ANOTHER COUNTRY -> very COMPLEX and RISKY for a business to do BY THEMSELVES
• JOINT VENTURE to SHARE the RISK , HELP them NAVIGATE the PAPERWORK and CULTURAL DIFFERENCES
• RISK REDUCED LONG TERM with a MERGER
• SPREAD RISK –> REDUCED COSTS –> If SUCCESSFUL –> INCREASE PROFITS

Question 5

Explain the Reason for Global Mergers or Joint Ventures - ENTERING NEW MARKETS / TRADE BLOCS

Answer 5

• Renault - Nissan alliance - signed JOINT VENTURE to Produce electric vehicle with Partner Based in Wuhan –> GOOD WAY for Nissan to GET INTO the Chinese car MARKET and to BYPASS the EXPENSIVE IMPORT TARIFFS -> way to EXPAND

Question 6

What are 3 ADVANTAGES of JOINT VENTURES

Answer 6

• ACCESS to KNOWLEDGE and RESOURCES e.g. capital, staff and technology
• ACCESS to NEW OPPORTUNITIES such as new markets or greater distribution reach
• SHARED EXPOSURE to RISKS, FINANCIAL RESPONSIBILITY and WORKLOAD

Question 7

What are 3 DISADVANTAGES of JOINT VENTURES

Answer 7

• a LARGE Number of JV FAIL because of the Many RISKS involved and the COMPLEXITY of INTEGRATING OPERATIONS and WORK CULTURE of 2 DIFFERENT COMPANIES
• Coping with DIFFERENT CULTURES, MANAGEMENT STYLES ( clashes - those in power ) , and working relationships that are in each company
• PROFITS SHARED

Question 8

Explain the Reason for Global Mergers or Joint Ventures - ACQUIRING NATIONAL / INTERNATIONAL BRAND NAMES / PATENTS

Answer 8

BRAND NAME ACQUISITION - acquiring a LUCRATIVE BRAND NAME -> attract MORE CUSTOMERS –> Growth -> Market Share
PATENT ACQUISITION - allows INVESTORS to MOVE their PRODUCTS to MARKET QUICKLY -> Less Financial Risk
- INVESTORS can TEAM UP with MANUFACTURING COMPANIES who help them -> REDUCED PRICES in EXCHANGE For OVERSEAS MARKETING RIGHTS

Question 9

Explain the Reason for Global Mergers or Joint Ventures - SECURING RESOURCES SUPPLIES

Answer 9

a BUSINESS in One Country may need RESOURCES that are ONLY FOUND in ANOTHER COUNTRY - may Enter a JV to SECURE ACCESS to these RESOURCES

Question 10

Explain the Reason for Global Mergers or Joint Ventures - MAINTAINING / INCREASING GLOBAL COMPETITIVENESS

Answer 10

a JV or MERGER may be ESSENTIAL to ENSURE REMAIN COMPETITIVE in DYNAMIC GLOBAL MARKET
- partner may be ABLE to PROVIDE CRITICAL MARKET DATA, LOCAL KNOWLEDGE on the DOMESTIC MARKET & INFORMATION on CUSTOMERS, TRENDS - help MAINTAIN COMPETITVE ADVANATAGE