4.2.4 Reasons For Global Merges And Joint Ventures

Question 1

Define joint venture

Answer 1

A commercial enterprise undertaken jointly by 2 businesses, whilst still retaining their separate identities, only a temporary arrangement.

Question 2

Define merger

Answer 2

Where 2 businesses come together to become one on a permanent basis.

Question 3

What are the benefits of global mergers and joint ventures?

Answer 3

- spreading risk
- access to new markets
- securing resources and supplies
- increased global competitiveness

Question 4

How is spreading risk an advantage?

Answer 4

Joining with a foreign firm brings good knowledge of the local market and legal requirements which reduces risk

Question 5

How is access to new markets an advantage?

Answer 5

Means the market will be less saturated and there’s more opportunity for growth and sales

Question 6

How is securing resources and supplies an advantage?

Answer 6

Global mergers and joint ventures can give businesses access to supplies of raw materials. On of the parties may have a good relationship with a supplier which will benefit both parties.

Question 7

What benefits come with global competitiveness?

Answer 7

- able to achieve economies of scale so the business can lower their prices to make them more cost competitive.
- firms may enter a merger with a competitor to remove them from the market.