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Speed: It provides ability to speedily acquire resources and competencies not held in
house. It allows entry into new products and new markets. Risks and costs of new
product development decrease.
Market power: It builds market presence. Market share increases. Competition decrease.
Excessive competition can be avoided by shut down of capacity.
Diversification is aggrieved. Synergistic benefits are gained.
Financial gain: Organization with low share value or low price earning ratio can
be acquired to take short term gains through assets stripping.
Integration problems: The activities of new and old organizations may be difficult
to integrate. Cultural fit can be problematic.
High cost: The acquirer may pay high cost, especially in cases of hostile takeover bids.
Value may not be added for the acquirer.
Too much focus: Too much managerial focus on acquisitions can be detrimental to
internal development.
Joint venture:
a joint venture is a common business strategy used among companies seeking to achieve a
common goal or reach a specific consumer market. Entering into a joint venture involves two or
more businesses coming together under a contractual agreement to work together on a specific
project for a certain period of time. When a joint venture is successful, participating companies
share in the profit as agreed upon in the initial contract.
The most common form of equity alliance is
the joint venture, where two organizations
remain independent but set up a new
organization jointly owned by the parents
Provide companies with the opportunity to gain new capacity and expertise
In the era of divestiture and consolidation, JVs offer a creative way for
companies to exit from non-core businesses.
The objectives of the venture are not 100 per cent clear and communicated
to everyone involved.
Different cultures and management styles result in poor integration and co-
operation.
The partners don't provide enough leadership and support in the early
stages.
Transferring resources and creating a new business unit in a new industry to innovate
new kinds of products
Pitfalls/drawbacks