Edexcel-Reasons for global mergers and joint ventures 4.2

Question 1

Global merger

Answer 1

Permanent agreement between two businesses from different countries.

Question 2

Joint venture

Answer 2

Two businesses join together to share knowledge, resources and skills to form a separate business entity for a limited amount of time.

Question 3

Spreading risk

Answer 3

Businesses operating in different markets spread risks with fluctuating economic conditions.

Question 4

Entering new markets

Answer 4

Governments insist foreign businesses only enter as joint ventures to benefit domestic businesses.

Question 5

How does forming a joint venture with a local business help?

Answer 5

Allows the business joining to gain knowledge of the local market.

Question 6

Acquiring nation international brand names and patent

Answer 6

Businesses can get access to intellectual property or a business with strong reputation.

Question 7

Patent

Answer 7

Legal right given by the government to a business to make, use or sell an invention and exclude others from doing so.

Question 8

Securing resources or supplies

Answer 8

Speed up production processes through merging with businesses with access to resources.

Question 9

What do businesses have to be aware of when securing resources or supplies?

Answer 9

Ethical issues concerning resources as it can damage the businesses reputation.

Question 10

Maintaining and increasing global competitiveness

Answer 10

Increase global presence by merging or joining another business.

Question 11

Benefits

Answer 11

Economies of scale lead to increased profit margins.
Diversifying risk generates revenue.
Opportunity to enter new market.

Question 12

Disadvantages

Answer 12

Initial costs of merging might be high
No guarantee business will gain a return
Culture clash between businesses.