4.2.4 - reasons for global merges / joint ventures

what are the factore involved

a) Spreading risk over different countries/regions

b) Entering new markets/trade blocs

c) Acquiring national/international brand

names/patents

d) Securing resources/supplies

e) Maintaining/increasing global competitiveness

What is a joint venture

is a commercial enterprise undertaken jointly by 2 or more parties which otherwise retain thier distinct identities ( temporary )

• do this to share KN , resources , skills

what is a merger and a global merger

is where 2 business come together to become 1 on a permanent basis

• is a pediment agreement between 2 b from 2 diffrent countires join together

1- spreading risk

• Spreading risk associated with fluctuating economics conditions as if economic downturn in 1 market gain sales in another less affected market

What does it mean by spreading the risk + joint ventures

moving productions / sales can be complex + risky for small b

• often b decide enter into joint venture to share the risk ( b trading In country ) → help navigate paperwork + cultural differences

What does it mean by spreading the risk + merges

• risk reduced by ensuring a into LT arrangement with mergers

Joint ventures in Japan

• a joint venture with another country may be an excellent opportunity to grow without complexities of making outright purchase of another company

What are the benefits of joint ventures

• Gain capital , technology , skilled staff + profession KN not availible internally

• Enter new / restricted market → expand distribution + benefit EOS

• Spread finical responsibility , workload + risk across partners while diversifying across markets

what are the drawbacks of joint ventures

• Culture clashes , redundancies + diffuclt integrating system → Lowe morals +effeicncy

• High initial cost , no guarantee of returns + dis EOS if coordination Is poor

• around half of joint ventures collapse due to compelxility + disagreements

2- entering a new market / trading blocs

• entering new market using mangers / joint ventures is quick method than organic growth

• in emerging economy gov insist foreign b only operating as joint ventures as benefits domestic b → gaining KN of local market

what is a patent

Is the legal right given by the gov to an b to make , use , sell an invention and exluse others from doing so

• The process of developing intellectual property can be long + expensive - using merges / acquisitions allows access this with strong reputation

Why might a a business decide on doing acquisitions

• to aquire a lucrative brand may

• joint venture allows inventors to move their p to market quickly with less finial risk . as inventors can team up with manufacturing companies who will help them make prototype . could be with overseas manufacture who will make the p for a reduced price for overseas marketing rights

Mergers and joint ventures to secure resources or supplies:

a b in 1 country may need resources ( being technological / financial ) that are only found in another country so may enter into joint venture to secure access which speeds up production process

• B has to aware of ethical issues as cant mange reputation of b

Maintaining global competitiveness

A joint venture . Merger may be essential to ensure that b remains comeptitive in dynamic global market

• The foreign partner may be bale provide critical market data / local KN o domestic markets

• By expanding a b can even fit from EOS