Question

Choose a company of your choice, either domestic or foreign, that operates internationally. Discuss the potential types of "collaborative arrangements" (mergers & acquisitions; joint ventures, franchising/licensing etc) you feel would be appropriate for this firm. Are there are particular industries that seem to lend themselves to particular types of collaborative arrangements more readily than others? Be sure to discuss why this might be so.

Answer 1

The company that I have chosen for the analysis of collaborative avenues is Ford Motor company. It is a pioneer automobile manufacturer continuing its operations for more than a century.

The possibilities for collaborations for this company are as follows-

1. Mergers and acquisitions- A merger takes place when two or more firms of the same business area come to join hands to enjoin greater benefits of economies of scale. An acquisition, on the other hand is purchasing the assets of business and integrating it within the acquiring company.

Ford is well positioned to undertake merger and acquisition activities in many of the Asian markets which are seeing growth in demand for automobiles. In fact a decade back, it was approached by Tata Motors from India for an acquisition. Therefore, Ford can consider mergers and acquisitions in Asian markets rather than setting up a new manufacturing facilities altogether.

2. Joint Venture- A joint venture is an attempt by two or more firms to colloborate either in building a technology or developing a market with shared expertise and financial resources.While the two entities remain in seperate existence, other than the specific joint venture purpose in a specified market.

Ford is already at an advanced stage to enter into joint ventures globally. For instance, to tap the upcoming market demand for autonomous cars, it has partnered with Volkswagen to fulfill demands in European markets.

3. Franchising/Licensing- these collaboration arrangements are not suited for ford as they require sharing of technology, which is a key component in automobile industry.

B. Particular industries tend to undertake particular type of collaborative activities for their specific purposes, for example-

1. Automobile industry players prefer joint ventures as technology development and facility creation in international markets involves risk, sharing risk is more closely covered under joint venture.

2. Fastfood chains such as McDonald's and KFC prefer franchising and licensing, as they can not risk putting in huge costs of opening restaurants in international markets, as the gestation period for initial investment recovery would be long with associated risks.