4.3.2.4 REASONS FOR GLOBAL MERGERS, TAKEOVERS OR JOINT VENTURES

What is a merger?

When two businesses combine to form a single new entity.

What is a takeover?

When one business buys 51% or more shares of another, gaining full control of its operations

What is a joint venture?

Temporary partnership between two businesses to collaborate on a specific project while remaining separate entities.

Why might businesses merge, do takeovers or joint ventures?

• spreading risk over different countries/regions

• entering new markets/trade blocs

• acquiring national/int’l brand names/patents

• securing resources/supplies

• maintaining/increasing global competitiveness

Why would businesses wanna spread risk over different countries/regions?

• reduces risk associated w operating in one country

• Because all countries are at different states if business cycle (recession or economic growth)

• profits in one country can sustain the business in another country to overcome recessions etc

How can mergers/takeovers/jv’s help secure resources/suppliers?

• The need for a middle man/intermediate to access suppliers is eliminated therefore costs are reduced

How can acquiring brand names/patents help a business?

• Brand name means suppliers more likely to offer EoS

• Branding is expensive - global brand means that there’s a reduced need to have local variations of brand

• Global advertising and marketing (e..g Coca Cola) business getting more advertising at lower costs

• Can charge high prices due to brand name

How can takeovers/mergers/jv’s help w competitiveness

• increased global presence :. Easier to enter markets

• Better customer service

• Products can be adapted for local needs (glocalisation)

• Supply management easy and cheap