Business organisation and environment

Table of Contents

1. Topic pack - introduction
2. 1.1 Nature of business activity - notes
3. 1.1 Nature of business activity - questions
4. 1.2 Types of organisation - notes
5. 1.2 Types of organisation - questions
6. 1.3 Organisational objectives - notes
7. 1.3 Organisational objectives - questions
8. 1.4 Stakeholders - notes
9. 1.4 Stakeholders - questions
10. 1.5 External environment - notes
11. 1.5 External environment - questions
12. 1.5 External environment - simulations and activities
13. 1.6 Organisational planning tools - notes
14. 1.6 Growth and evolution - notes
    1. Economies and diseconomies of scale
    2. Types of economy of scale
    3. Internal and external economies and diseconomies of scale
    4. Economies and diseconomies of scale - examples
    5. Small versus Large Organisations
    6. Internal and external growth
    7. Internal growth
    8. External growth
    9. Joint Venture and Strategic Alliance
    10. Mergers and takeovers
    11. Porter's generic strategies
    12. Franchises
    13. Ansoff matrix
15. 1.7 Growth and evolution - questions
16. 1.7 Growth and evolution - simulations and activities
17. 1.6 Change (HL only) - notes
18. 1.9 Globalisation - notes
19. 1.9 Globalisation - questions
20. Print View

Joint Venture and Strategic Alliance

External growth can be achieved by entering into a joint venture or strategic alliance. Although the methods are different, they do represent a similar method of external growth.

A joint venture means setting up a separate organisation in which all the 'partners' have a stake. This arrangement allows the participating companies to grow, while maintaining their own identity and brands.

A joint venture and strategic alliance offer the following advantages and disadvantages:

Advantages:

• Competition may be reduced - by working in cooperation with another firm.
• A synergy is created where the joint skills, resources and experience of the businesses collaborating far exceed those of the two businesses acting independently.
• By partnering with a local firm, there may be fewer logistical problems entering a new and/or overseas market and it may be possible to take advantage of the local knowledge and distribution channels of the partner firm. This may lower distribution costs and may also reduce any problems due to language or cultural issues.
• Allows firms to work together without being burdened by these costs or the permanency of the arrangement. Mergers or takeovers are expensive and difficult to reverse.
• Enable a firm to move into a new product or market much faster.
• Avoidance of taxation, or at least rates on tax in the country of production.

Disadvantages

• Profits are shared - this may be regretted by the firm if subsequently they feel they could have carried out the activity quite easily themselves.
• Communication and control issues - there may be some issues with control in a joint venture - who has the final say? There may also be communication problems caused by cultural and language differences if the firms are very different in their organisational structure and management style.
• Conflict - there may be disagreements between the partner organisations especially if there are inadequate conflict resolution procedures. The joint arrangement requires goodwill to be maintained throughout the term of the agreement.