4.2.4 Reasons For Global Mergers Or Joint Ventures

Question 1

what is a joint venture

Answer 1

a legal agreement between two or more firms to work together on a joint project

Question 2

what is a global merger

Answer 2

• when two or more firms from different countries agree to become a single business
• this process forms MNC’s

Question 3

list reasons for a joint-venture or global merger

Answer 3

• spreading risk
• access to different markets
• securing resources and supplies
• obtaining intellectual property (patents and copyright)
• maintaining or increasing global competitiveness

Question 4

benefits of a global merger or joint venture

Answer 4

+ economies of scale, costs spread over larger outputs
+ diversifying risk, having products in several markets means that the business can still generate revenue if sales fall for some products
+ opportunities to enter new markets

Question 5

drawbacks to global mergers or joint ventures

Answer 5

• initial costs of merging are high
• culture clashes can affect communications
• when businesses merge, redundancies can occur which may affect the morale of the workers
• diseconomies of scale, when the issues and a lack of control result in a higher cost per unit