4.2.4 - reaosns for global mergers or joint ventures

joint venture

• A joint venture is a temporary business collaboration between two or more parties.

• Each party keeps its own identity while working together on a specific project.

• They remain separate businesses despite the partnership.

merger

a merger is where two businesses come otgether to become one , on a permanent basis

spreading risks via joint ventures

• Expanding into another country alone can be complex and risky.

• Businesses often form joint ventures with local firms to share risk and navigate legal and cultural challenges.

• Example: Boots partnered with a Chinese drug wholesaler to enter the China market.

• can bypass expensive import tarrifs

benefits of joint venutures

• Gain access to capital, staff, and technology.

• Enter new markets and expand distribution.

• Share financial risk and workload.

• Collaborate with experts who have unique skills.

drawbacks of joint ventures

• About 50% fail due to difficulties integrating operations and work cultures.

• Power imbalances between partners can lead to conflict.

• Risk of losing intellectual property (e.g. patents).

patent

• A government licence granting exclusive rights to make, use, or sell an invention for a set period (e.g. Honda VTEC engine).

joint ventures for securing resources

• Businesses may form joint ventures to access resources (e.g. tech or finance) found in other countries.

• Example: eBay and PayPal merged to combine financial and tech capabilities, then later separated.

• This strategy helps firms overcome resource limitations and expand internationally.

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verticle merger

A vertical merger is when two companies at different stages of the same supply chain combine into one entity. Instead of merging with a competitor (like in a horizontal merger), a business merges with a supplier or distributor to gain more control over production, reduce costs, and improve efficiency.