Theme 4 Topic 5
Global Mergers and Joint Ventures
Merger – where two firms agree to combine resources and form one company
Joint Venture – where two firms agree to work together on a large project
Reasons for Global Mergers or Joint Ventures
Reason Example
If there was an economic downturn in one country, there
are other countries to fall back on. Tesco has a joint
Spreading Risk Over Different Countries
venture in China with state run China Resources Enterprise
(CRE) which is now the biggest food retail chain in China
The Chinese government does not allow foreign car
Entering New Markets and Trade Blocs companies to manufacture within China unless they are
part of a joint venture with a Chinese car maker
A strong brand or patent can be exploited in various
countries as there is likely to be strong recognition among
consumers and loyalty. This can help the firm move into
Acquiring National and International Brand
new market segments quickly. E.g. L’Oréal transformed
Names or Patents
itself from being a company narrowly focused on white
women to focusing on new markets such as the African
American ethnic market
Operating globally means supply chains can be long and
uncertain. By merging with suppliers, it avoids the
Securing Resources and Supplies
problems of high costs and shortages at certain times. E.g.
Starbucks now own their own coffee farm in Costa Rica
Economies of scale are possible which can enable more
Maintaining or Increasing Global competitive prices e.g. the merger between SAB Miller and
Competitiveness AB Inbev will create the worlds largest brewing companies
with potential for cost saving synergies
Global Mergers and Joint Ventures
Merger – where two firms agree to combine resources and form one company
Joint Venture – where two firms agree to work together on a large project
Reasons for Global Mergers or Joint Ventures
Reason Example
If there was an economic downturn in one country, there
are other countries to fall back on. Tesco has a joint
Spreading Risk Over Different Countries
venture in China with state run China Resources Enterprise
(CRE) which is now the biggest food retail chain in China
The Chinese government does not allow foreign car
Entering New Markets and Trade Blocs companies to manufacture within China unless they are
part of a joint venture with a Chinese car maker
A strong brand or patent can be exploited in various
countries as there is likely to be strong recognition among
consumers and loyalty. This can help the firm move into
Acquiring National and International Brand
new market segments quickly. E.g. L’Oréal transformed
Names or Patents
itself from being a company narrowly focused on white
women to focusing on new markets such as the African
American ethnic market
Operating globally means supply chains can be long and
uncertain. By merging with suppliers, it avoids the
Securing Resources and Supplies
problems of high costs and shortages at certain times. E.g.
Starbucks now own their own coffee farm in Costa Rica
Economies of scale are possible which can enable more
Maintaining or Increasing Global competitive prices e.g. the merger between SAB Miller and
Competitiveness AB Inbev will create the worlds largest brewing companies
with potential for cost saving synergies
