4.2.4. Reasons For Global Methers Or Joint Ventures

Question 1

Spreading risk over different regions

Answer 1

-Selling across a range of national markets to ensure business remains buoyant even if some fail.
-Getting into different markets would help spread risk
-Harnessing expertise of another business via inorganic growth not joint ventures rather than doing it alone.

Question 2

Entering new markets/trade blocs

Answer 2

-Helps boost sales as growth objective
-Avoiding trade barriers

Ansoff stressed importance of understanding and having knowledge of the market to avoid failure. This can be done via mergers and takeovers by buying businesses with local expertise,

Question 3

Acquiring international brand and patents

Answer 3

-Gives the business brand recognition and builds brand image.
-Low risk way to penetrate new international markets.
-Multinational businesses can help bring new ideas to market more successfully than smaller national businesses.

Question 4

Securing resources and supplies

Answer 4

-Using natural resources may be difficult to source. Merge with company that extracts the resources.

-If partner doesn’t maintain standards of quality or ethical treatment= bad publicity for both

-Full takeover may better option to gain more control

Question 5

Maintaining/ increasing global competitiveness

Answer 5

-Most merge or takeover to drive down unit costs which boosts competitiveness.
-Economies of scale usually makes businesses want to merge to drive down costs to undercut any rivals
-Porters low cost strategy: only remove for 1 cost leader in any market. Can be done by ensuring competitiveness.