joint venture definition
separate business entity created by two or move parties, involving shared ownership, returns and risks
what is a global merger
permanent agreement between 2 firms from 2 different countries
Reasons for undergoing a global merger/ joint venture
- spreading risk - diversification
- entering new markets/ trading blocs
- acquiring national brand names/ patents
- securing resources/ supplies
- Increase global competitiveness
potential benefits of a joint venture
- benefit from each other’s expertise and resources
- diversifying product/ market = reduce risk
- overcome protectionism, trade bloc access
potential drawbacks of a joint venture
- unequal investment and expertise
- objectives are different
- poor communication due to cultural issues
- high initial costs
- redundancies can occur
definition of push factors
factors in the existing market that encourage a firm to expand outside of their domestic country
push factors include:
- saturated markets
- competition
features of saturated markets
demand for goods has reached its peak, so challenging for firms to grow and expand within local market.
features of competition as a push factor
A rise in competition or a high level of competition in the domestic market may force a business to sell abroad.
definition of pull factors
Pull factors entice firms into new markets. They are the opportunities that businesses can take advantage of when selling in overseas markets.
pull factors include:
- new or bigger markets
- economies of scale
- spreading risk
- lower costs of transportation
spreading the risk
spreading risk can limit the reliance and dominance on one market and encourage investment in another. if one market decreases or stops growing then the business is still invested in another market
what is offshoring
offshoring involves moving manufacturing or service industries to a location with lower costs (abroad)
benefits of offshoring
- reduced costs - including the workers
- hire workers with particular skills
- economies of scale
drawbacks of offshoring
- can damage a business’s reputation
- cultural differences
- poor customer service due to language barriers
definition of outsourcing
this involves moving an entire business function or project to a specialist external provider (doesn’t have to be abroad)
benefits of outsourcing
- reduced costs - including workers
- take advantage of specialist skills
- comes with specialist rules and regulations
drawbacks of outsourcing
- damage to brand image - if pay is worse and working conditions
- poor communication
Assessing a country as a market
infrastrucutre
- roads, transport, communication
- This improves production processes, delivery of goods
- reducing costs
Assessing a country as a market
political stability
more stable = less risky
some countries may not gain. return on investment due to corruption + high crime rate
other factors when assessing a country as a market
- levels of growth and disposable income
- ease of doing business - laws
- exchange rates
assessment of a country as a product location
- costs of production
- skills + availability of workforce
- infrastructure
- location in the trading bloc
- return on investments
- natural resources
- political stability
- ease of doing business
- govnement incentives
what is reshoring
moving business activities from overseas back to the home country
reasons for reshoring
- greater certainty around delivery times
- Minimise risk of supply chain disruptions
- cost advantage of producing or sourcing overseas is not as significant as it used to be
