MODULE 2

The mode of entry is the path or channel set by a company to enter into the international
market. Many alternative modes of entry are available for an organization to choose from and
expand its business.
FACTORS INFLUENCING THE SELECTION OF THE MODE OF ENTRY

1) External Factors:
i) Market Size:
Market size of the market is one of the key factors an international marketer has to keep in
mind when selecting an entry mode. Countries with a large market size justify the modes of
entry with long-term commitment requiring higher level of investment, such as wholly owned
subsidiaries or equity participation.

ii) Market Growth:

Most of the large, established markets, such as the US, Europe, and Japan, has more or less
reached a point of saturation for consumer goods such as automobiles, consumer electronics.
Therefore, the growth of markets in these countries is showing a declining trend. Therefore,
from the perspective of long-term growth, firms invest more resources in markets with high
growth potential.

iii) Government Regulations:

The selection of a market entry mode is to a great extent affected by the legislative
framework of the overseas market. The governments of most of the Gulf countries have made
it mandatory for foreign firms to have a local partner. For example, the UAE is a lucrative
market for Indian firms but most firms operate there with a local partner.

iv) Level of Competition:

Presence of competitors and their level of involvement in an overseas market is another
crucial factor in deciding on an entry mode so as to effectively respond to competitive market
forces. This is one of the major reasons behind auto companies setting up their operations in
India and other emerging markets so as to effectively respond to global competition.

v) Physical Infrastructure:
The level of development of physical infrastructure such as roads, railways,
telecommunications, financial institutions, and marketing channels is a pre-condition for a
company to commit more resources to an overseas market. The level of infrastructure
development (both physical and institutional) has been responsible for major investments in
Singapore, Dubai, and Hong Kong. As a result, these places have developed as international
marketing hubs in the Asian region.

vi) Level of Risk:

From the point of view of entry mode selection, a firm should evaluate the following
risks:
a) Political Risk:
Political instability and turmoil dissuades firms from committing more resources to a market.
b) Economic Risk:
Economic risk may arise due to volatility of exchange rates of the target market’s currency,
upheavals in balance of payments situations that may affect the cost of other inputs for
production, and marketing activities in foreign markets. International companies find it
difficult to manage their operations in markets wherein the inflation rate is extremely high.
c) Operational Risk:
In case the marketing system in an overseas country is similar to that of the firm’s home
country, the firm has a better understanding of operational problems in the foreign market in
question.

vii) Production and Shipping Costs:

Markets with substantial cost of shipping as in the case of low-value high-volume goods may
increase the logistics cost. This has a major influence on choosing the right mode of entry.

viii) Lower Cost of Production:

Firms prefer to choose countries with a lower cost of production as it reduces the overall cost
burden on the business. It may also be one of the key factors in firms deciding to establish
manufacturing operations in foreign countries.

2) Internal Factors:
i) Company Objectives:
Companies operating in domestic markets with limited aspirations generally enter foreign
markets as a result of a reactive approach to international marketing opportunities. In such
cases, companies receive unsolicited orders from acquaintances, firms, and relatives based
abroad, and they attempt to fulfill these export orders.

ii) Availability of Company Resources:

Venturing into international markets needs substantial commitment of financial and human
resources and therefore choice of an entry mode depends upon the financial strength of a
firm. It may be observed that Indian firms with good financial strength have entered
international markets by way of wholly owned subsidiaries or equity participation.

iii) Level of Commitment:

In view of the market potential, the willingness of the company to commit resources in a
particular market also determines the entry mode choice. Companies need to evaluate various
investment alternatives for allocating scarce resources. However, the commitment of
resources in a particular market also depends upon the way the company is willing to
perceive and respond to competitive forces.

iv) International Experience:

A company well exposed to the dynamics of the international marketing environment would
be at ease when making a decision regarding entering into international markets with a highly
intensive mode of entry such as Joint ventures and wholly owned subsidiaries.

v) Flexibility:
Companies should also keep in mind exit barriers when entering international markets. A
market which presently appears attractive may not necessarily continue to be so, say over the
next 10 years. It could be due to changes in the political and legal structure, changes in the
customer preferences, emergence of new market segments, or changes in the competitive
intensity of the market.

EXPORTING

Exporting is the process of sending or carrying of the goods abroad, especially for trade and
sales. Exporting is the simplest and most widely used mode of entering foreign markets.
With Export entry modes, a firm’s products are manufactured in the domestic market or a
third country, and then transferred to the host market via two broad options: indirect, and
direct exporting.

TYPES OF EXPORTING
• Indirect Exporting
• Direct Exporting

Indirect Exporting
Indirect exporting is exporting the products either in their original form or in the modified
form to a foreign country through another domestic company. For Example, various
publishers in India including Himalaya Publishing House sell their products, i.e. books to
various exporters in India, which in turn export these books to various foreign countries.

Direct Exporting
Direct exporting is selling the products in a foreign country directly through its distribution
arrangements or through a host country’s company. Although a direct exporting operation
requires a larger degree of expertise, this method of market entry does provide the company
with a greater degree of control over its distribution channels than would indirect exporting.

ADVANTAGES OF EXPORTING
The reason for a company to consider exporting is quite compelling; the following are few of
the major advantages of exporting:

• Selling goods and services to a market the company never had before boost sales and
increases revenues. Additional foreign sales over the long term, once export
development costs have been covered, increase overall profitability.
• Most companies become competitive in the domestic market before they venture in
the international arena. Being competitive in the domestic market helps companies to
acquire some strategies that can help them in the international arena.
 • By going international companies will participate in the global market and gain a
piece of their share from the huge international marketplace.
• Selling to multiple markets allows companies to diversify their business and spread
their risk. Companies will not be tied to the changes of the business cycle of domestic
market or of one specific country.
• Capturing an additional foreign market will usually expand production to meet
foreign demand. Increased production can often lower per unit costs and lead to
greater use of existing capacities.
• Companies who venture into the exporting business usually have to have a presence
or representation in the foreign market. This might require additional personnel and
thus lead to expansion. This will help the company gain a global presence.

DISADVANTAGES OF EXPORTING
While the advantages of exporting by far outweigh the disadvantages, small and medium size
enterprises especially face some challenges when venturing in the international marketplace.

• It takes more time to develop extra markets, and the pay back periods are longer, the
up-front costs for developing new promotional materials, allocating personnel to
travel and other administrative costs associated to market the product can strain the
meagre financial resources of small size companies.
• When exporting, companies may need to modify their products to meet foreign
country safety and security codes, and other import restrictions. At a minimum,
modification is often necessary to satisfy the importing country’s labeling or
packaging requirements.
• Collections of payments using the methods that are available (open-account,
prepayment, consignment, documentary collection and letter of credit) are not only
more time-consuming than for domestic sales, but also more complicated.
• Though the trend is towards less export licensing requirements, the fact that some
companies have to obtain an export license to export their goods makes them less
competitive. In many instances, the documentation required to export is more
involved than for domestic sales.
• Finding information on foreign markets is unquestionably more difficult and time-
consuming than finding information and analyzing domestic markets.
In less developed countries, for example, reliable information on business practices,
market characteristics, and cultural barriers may be unavailable.

LICENSING

Licensing is a legal agreement made between a licensor and a licensee. The licensor is the
owner of a product, idea or service. The licensee is the organization that will manufacture,
market, and sell a product, service, or idea. In exchange for the rights to the product or idea,
the licensor will receive a royalty.
FRANCHISING
A franchise is a joint venture between a franchisor and a franchisee. The franchisor is the
original business. It sells the right to use its name and idea. The franchisee buys this right to
sell the franchisor's goods or services under an existing business model and trademark.
ADVANTAGES OF FRANCHISING
1. Gain Brand Recognition
Starting a business from scratch will take ample time to receive brand recognition as you
have to build your customer base from the beginning. However, this is different for a
franchise model since they are already well-known brands having a set customer base.
Therefore, whenever you invest in a franchise, people are already aware of your product and
services, thus helping your business to grow.
2. Receive Business Assistance
One of the major advantages of a franchise business is that you receive extensive business
assistance and support from the franchisor. However, it depends upon the following:
• Terms of a franchise agreement
• The business model and structure
The assistance is in regards to equipment, brand, supplies, proper advertisement and
marketing plan, apart from the knowledge and wisdom of a franchisor. Therefore, even if the
business has just started, it runs successfully.
3. Lower Failure Rate
Generally, franchise businesses have a lower failure rate than independent businesses. This is
because:
• Entrepreneurs who invest in such a business model become part of a successful brand.
• In addition, they are also gaining a network that ensures support and knowledge.
 • With such a business concept, you are assured that customers already like the
products and services you offer. Also, they will be in demand.
4. Reduced Operation Cost
If you are part of an independent business, you must purchase and order materials or supplies
to make your product. In that case, there can be more investment in an item, even if the order
is relatively small.
However, a franchise network buys goods in bulk and gets them at a much-discounted rate.
Due to this reduction in the cost of goods and materials used, the operation costs of the
franchise decrease.
5. Higher Profits
Another advantage of franchising is that the franchise business model witnesses higher profits
than solo-run businesses. This is because one can utilise the opportunity attached to renowned
brands, like having large customer bases. Several other reasons allow profits, but this
popularity and demand for products initiate maximum profits. Additionally, franchises
requiring large amounts of initial investments also witness high returns on investments due to
this strategy.
6. Loyal Customer Base
A franchise business model comes with a built-in reliable customer base, loyal to the brand
and the products. This results in instant brand recognition, even if you invest in the first
franchise branch in a remote destination.
Since your potential customers are already aware of your brand from exposure to media and
commercials, you know your products will sell.

DISADVANTAGES OF FRANCHISING FOR A FRANCHISEE

While there are several advantages of the model, you must also be prepared for its
disadvantages:
1. Strict Regulations
Though you will be your boss as a franchisee, you can only partially control the business.
This includes:
• Before making any decisions, you are required to follow the restrictions laid out by
the franchise agreement.
• Additionally, the franchisor can apply control over most of the business, which can
hinder your decision-making.
These decisions allow uniformity in different franchises in different locations but can be
burdensome for the franchisee.
2. Initial Investment
An initial investment of the ‘franchise fee’ can carry several benefits for the business but can
be costly if you join a renowned and profitable setup. Although it can regulate large profits,
this huge initial investment can stress out a small entrepreneur.
If this is the case, look for several financing options to help you begin the business.
3. Several Ongoing Costs
Besides the initial investment, there are several ongoing costs incurred while you plan to start
your franchise business. These are already mentioned in the agreement and include the
following:
• Royalty fees
• Charges for the training and development of workers
• Advertising costs
Keeping these factors in mind, one should decide when and how to start a franchise business.
4. Lack of Privacy
Lack of privacy is one of the biggest disadvantages of a franchise business. In addition, the
agreement will mention that the franchisor will oversee the financial ecosystem of the setup.
However, this reduction in financial privacy can be a burden on the franchisee.
Nevertheless, welcoming knowledge and financial guidance will only build the brand and
contribute to the company's growth which is the only motto.
5. Reason for Conflict
Although the agreement describes both the franchisee and franchisor’s involvement, a
franchisee has minimal power to exert. This results in a lack of support and a rife for conflict.
However, one can avoid these conflicts if a franchisor screens all the potential entrepreneurs
before entering into business with them. Additionally, a franchisee can use this opportunity to
understand the franchisor's reputation and personality, which will help in the long run.

DIFFERENCES BETWEEN FRANCHISING AND LICENSING

BASIS FOR
LICENSING FRANCHISING
COMPARISON
Meaning Licensing is an arrangement in Franchising is an arrangement in which the
which a company (licensor) sells franchisor permits franchisee to use
the right to use intellectual business model or brand name for a fee, to
property or produce a company's conduct business, as an independent branch
product to the licensee, for royalty. of the parent company (franchisor).
Governed by Contract Law Franchising regulations or Company Law as
the case may be.
Registration Not necessary Mandatory
Training and Not provided Provided
support
Degree of control The licensor has control on the use Franchisor exerts considerable control
of intellectual property by the over franchisee's business and process.
licensee, but has no control on the
licensee's business.
Process Involves one time transfer of Needs ongoing assistance of franchiser.
property or rights.
Fee structure Negotiable Standard
CONTRACT MANUFACTURING
Contract manufacturing is the production of goods by a third party (the contract manufacturer)
for a company that cannot produce its own goods in-house. Ultimately, contract manufacturing
is a form of outsourcing that helps businesses manufacture their products and goods.

ADVANTAGES OF CONTRACT MANUFACTURING

Economies Of Scale
Contract manufacturing helps in minimizing the cost of production for the company. Under
this, the company does not manufacture its products itself. Rather the production activities
are outsourced to other manufacturers.

These manufacturers produce large amount of products for different customers. This helps
them in acquiring cheap materials in bulk and takes advantage of economies of scale. The
more they produce the less the cost would be.

More Focus On Selling Activities

Contract manufacturing helps companies in paying attention to functional areas. Selling of
products is important task for the businesses. It needs to face tough competition in the market
to survive. Companies, through outsourcing of its production activities, get more time to
focus on these activities.

Quality Products
Under contract manufacturing, products are not manufactured by the company itself.
Companies basically outsource their production activities to contract manufacturers. These
manufacturers are highly skilled and expert in production activities.

They produce high-quality products at lower costs. This helps companies to provide good
quality products to its customers.

Saving Cost
Contract manufacturing helps the companies in saving huge capital required for setting up the
production process. Companies are not required to invest large amount in production plants
and several other types of equipment.

It saves the company cost of labour involved in paying wages and training. Thus the
companies outsource their production activities to low-cost countries.

Easy Entry In Markets

There are various trade barriers in many countries to perform business there. Companies
cannot enter and sell their products there. Under contract manufacturing, it becomes easy for
companies to enter into different countries.

They give the contract to the manufacturers in different countries producing their products. It
helps in entering different markets.

DISADVANTAGES OF CONTRACT MANUFACTURING

Quality Issues
This is one of the risks involved in contract manufacturing. It is essential for companies to
inspect the products manufactured by contract manufacturers. They need to develop certain
standards for testing of their products. Contract manufacturers may not produce products
meeting the required standards.

Lacks Control
Under contract manufacturing, companies lose control over production activities. Contract
manufacturers produce products as per their skills. Companies may not be able to control or
directs manufacturers for the production of their products. It is also possible that contract
manufacturers are not able to deliver the required product.

Lack Of Flexibility
Companies under contract manufacturing lose the ability to respond to market conditions.
There are always great fluctuations in the market regarding the demand for its products.
Companies do not have direct control over production activities. They cannot affect its supply
chain. It becomes difficult for them to fulfil their customer’s demands.

Delay In Delivery
Contract manufacturers are those who are expert in production activities. These
manufacturers produce products not of one company but of different companies. They carry
production activities on a large scale. Sometimes, due to workload, they may not be able to
produce the company’s products on time.

Outsourcing Problems
Under outsourcing, companies contact manufacturers of different countries. These
manufacturers are basically of low-cost countries. Different countries have different cultures,
traditions, language and lead times. This difference among countries makes it difficult for
companies to manage its contract manufacturers.

TURNKEY PROJECT
A turnkey project is one which is designed, developed and equipped with all facilities by
a company under a contract. It is handed over to a buyer when it becomes ready to
operate business. The company responsible for building a turnkey project does it for the cost
as agreed in the contract. The work of the company includes design, fabrication, installation,
aftermarket support and technical service for the turnkey project.
Turnkey operations are a type of collaborative arrangement in which one company contracts
with another to build complete, ready-to-operate facilities.

Turnkey operations are generally done in the areas of industrial equipment manufacturing and
construction. The customer for a turnkey operation is often a government agency.

ADVANTAGES OF TURNKEY
1. One-Stop Shop: One of the most significant advantages of turnkey projects is the
convenience they offer to clients. Instead of coordinating with multiple parties and
managing multiple contracts, clients can work with a single company to get their
project done from start to finish. This saves time, reduces confusion, and streamlines
the project process.
2. Reduced Costs: Turnkey projects often result in lower costs for clients as compared
to traditional project delivery methods. This is beca use the company responsible for
 delivering the turnkey project can negotiate better prices with suppliers, utilize
economies of scale, and reduce the need for multiple contracts.
3. Reduced Time: Turnkey projects are often faster to complete than traditional project
delivery methods. This is because the company responsible for delivering the turnkey
project can work on design and construction at the same time, reducing the time
required for design, procurement, and construction.
4. Improved Quality: Turnkey projects often result in improved quality as compared to
delivering the turnkey project has control over both design and construction, reducing
the potential for misunderstandings and mistakes.
5. Single Point of Responsibility: With a turnkey project, there is only one company
responsible for delivering the finished product. This reduces the risk of finger-
pointing and blame-shifting, and makes it easier for clients to hold the company
accountable for any issues that arise during the project.
DISADVANTAGES OF TURNKEY

1. Limited Control: One of the significant disadvantages of turnkey projects is the

limited control clients have over the design and construction process. Clients may
have specific requirements or preferences, but they must rely on the turnkey company
to make decisions about design and construction.
2. Reduced Flexibility: Another disadvantage of turnkey projects is the reduced
flexibility clients have to make changes to the project once it is underway. In a
traditional project delivery method, clients can make changes to the design and
construction as needed. However, in a turnkey project, changes can be difficult and
time-consuming, as they must be approved by the turnkey company.
3. Dependence on Turnkey Company: Clients are dependent on the turnkey company
to deliver a high-quality product. If the turnkey company fails to deliver, clients may
be stuck with a subpar product or must start the project over from scratch with a new
company.
4. Limited Competition: Turnkey projects often result in limited competition as
compared to traditional project delivery methods. This is because clients are working
with a single company, rather than multiple parties, reducing the potential for
competitive bidding.
5. Lack of Transparency: Turnkey projects can sometimes lack transparency, making it
difficult for clients to understand what is happening during the design and
construction process.

FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) is an investment made by a company or an individual in one
country into business interests located in another country. FDI is an important driver of
economic growth.
Any investment from an individual or firm that is located in a foreign country into a country is
called Foreign Direct Investment.
Foreign direct investments may involve mergers, acquisitions, or partnerships in retail,
services, logistics, or manufacturing. They indicate a multinational strategy for company
growth.
Types of FDI
Foreign direct investments are commonly categorized as horizontal, vertical, or
conglomerate.

• With a horizontal FDI, a company establishes the same type of business operation
in a foreign country as it operates in its home country. A U.S.-based cell phone
provider buying a chain of phone stores in China is an example.
• In a vertical FDI, a business acquires a complementary business in another country.
For example, a U.S. manufacturer might acquire an interest in a foreign company
that supplies it with the raw materials it needs.
• In a conglomerate FDI, a company invests in a foreign business that is unrelated to
its core business. Because the investing company has no prior experience in the
foreign company’s area of expertise, this often takes the form of a joint venture.
• Platform FDI is the last type falling under foreign direct investment is called
platform FDI. In the instance of a platform FDI, a business extends into a particular
foreign country, but the commodities manufactured are exported to another different,
third country

Greenfield FDI

In a greenfield investment, parent company opens a subsidiary in another country. Instead of

buying an existing facility in that country, the company begins a new venture by
constructing new facilities in that country

Brownfield FDI
Brownfield investments, on the other hand, occur when an entity purchases or leases an
existing facility to begin new production. Companies may consider this approach a great time
and money saver since there is no need to go through the process of starting from level zero.
ADVANTAGES OF FDI

1. Boost in Economy: One of the major significant reasons a country (especially a

developing nation) attracts foreign direct investment is due to the creation of
jobs. FDI increases the production and services sector, which creates jobs and
helps to decrease unemployment rates in the said country. Elevated
employment explicates higher incomes and awards the population with added
buying powers, advancing the overall economy.
2. Human capital expansion: Human capital is concerned with the knowledge
and subsistence of any workforce. Employees’ various skills gained through
different training and practices can advance a particular country’s education
system and human capital. Through a prolonged impact, it helps to train
individual resources in other areas, trades and companies.
3. Increased exports: Many assets produced by the FDI have global markets, and
they are not solely based on domestic consumption. The production of 100%
export-oriented segments helps to serve FDI investors in supporting exports
from other foreign countries.
 4. Advanced Flow of Capital: The capital inflow is especially beneficial for
countries with limited domestic resources and limited chances to raise stocks in
the global capital market.
5. Competitive Market: By promoting the entrance of foreign organizations into
domestic markets, FDI advocates the creation of a competitive environment and
breaks domestic trusts.

DISADVANTAGES OF FDI

1. Hindrance of domestic investment

FDI creates a good level of competition between domestic and foreign organisations.
Due to this, small domestic organisations find it hard to survive or either try to
compete with foreign organisation. Most of the time, the small-scale or cottage
industries fail to compete and survive due to a lack of skills, technology and quality
which being provided by foreign organizations. As people have a wide range of
products with varied prices, the demand for domestic goods reduces. This leads to the
closure of domestic businesses.
Thus, FDI negatively affects domestic investments and companies start to lose interest
in domestic organisations
2. The risk from political changes
With the change of political parties in power, the rules and regulations change. This
creates a direct impact on foreign direct investments and affects the interest of
investors.
3. Economic non-viability
Foreign direct investments are of a capital nature. It involves huge capital investment
which is risky. Thus, not every investment made leads to a successful company.
4. Poor performance
Many multinational companies have established poor working environment to save
costs involved. It leads to resignation by workers and employees which in turn
reduces the growth of the company.
5. Trade Deficit
A trade deficit occurs when the value of a country’s imports is more than the value of
its exports. The enactment of international trade-related policies has established
policies and restrictions over the production of certain products. Only a few countries
have been provided with the authority to produce. The countries which don’t have the
permission to need such product to have to import the product from another country
or bring it into their nation in the form of FDI causes them to pay huge costs. This
affects the trade system and leads to the trade deficit.
6. Increase in Pollution
Many of the developed nations have established their manufacturing and production
units in less developed nations, which leads to higher pollution levels. The production
 un its emit harmful gases and chemicals which pollute the environment in the country
where investment has been made.

JOINT VENTURE
A joint venture abbreviated as JV is a type of business arrangement in which more than two or
two parties agree to pool their resources for the purpose of fulfilling a specific task which can
be a new project or any business activity. All the participants in this venture are responsible for
the profits and losses.

Advantages
• Stronger together – Properly set up, the best joint ventures effectively leverage both
parties’ assets and strengths, while diluting weaknesses. The result is a joint venture
that brings the best of both worlds.

• Time limited – Joint ventures usually have a defined timeframe. Their temporary
nature means it doesn’t tie businesses together for eternity, and exit clauses mean it
can be simple to dissolve a joint venture if it isn’t working out.

• Diversification and scale – Joint ventures allow each partner to operate at a larger
scale than possible individually. This can mean access to a larger market, more
diverse product and service offerings, or more effective supply chains opens in new
window. It allows a business to move quickly into a new market without having to
develop new products and services from scratch, reducing costs and time to market.

• Pooled risk – All businesses involved in the joint venture share a proportion of the
risk, with all parties working to a shared goal. This can dilute the risk that an
individual business would face by going it alone, and if the venture fails, means that
sunk costs are shared between invested parties.

Disadvantages
• Culture clash – Many joint ventures flounder due to a clash of cultures, processes
and approaches when two companies work together. Differing management skills
and abilitiesopens in new window, conflicting HR processes and workplace
culturesopens in new window can make it hard for joint ventures to successfully
mesh.

• Decision making – Trust is vital in any joint venture – which can make decision-
making more difficult if both parties need to sign off decisions when there is a lack of
trust. Poor decision-making and second-guessing the other party can lead to failure.
 • Privacy and sharing information – A joint venture inevitably involves a degree of
knowledge sharing that can mean a lack of control over your intellectual property. To
ensure that trade secrets or other sensitive corporate information isn’t made public,
and that any data issues are properly documented and handled, ensure non-disclosure
agreements and data sharing agreements are in place from the outset.

• Unequal commitment – Ideally a joint venture should be an all-for-one and one-for-

all proposition. A lack of commitment from one of the partners can create an
unbalanced joint venture.

MERGERS & ACQUISITIONS

The term mergers and acquisitions (M&A) refers to the consolidation of companies or their
major business assets through financial transactions between companies. A company may
purchase and absorb another company outright, merge with it to create a new company,
acquire some or all of its major assets,

The terms "mergers" and "acquisitions" are often used interchangeably, but they differ in
meaning.

• In an acquisition, one company purchases another outright.

• A merger is the combination of two firms, which subsequently form a new legal
entity under the banner of one corporate name.

Advantages of Mergers and Acquisitions

The following are a few of the advantages of mergers and acquisitions;

1. Improved Economic Scale

A new large business or a business that has acquired another company generally has
increased needs in terms of materials and supplies. And when a business has high demands, it
means it has a high purchasing power. A high purchasing power enables a company to
negotiate bulk orders, and when a business is able to negotiate bulk orders, it results in cost
efficiency. In other words, by purchasing supplies and materials at higher volumes, a
company is able to improve its scale.

2. Enhanced Distribution Capacities

A merger or an acquisition may result in a business expanding geographically, which would,
in turn, increase the business's ability to distribute goods or services to more people.

3. Increased Market Share

When two businesses operating in the same industry become one, or when a company
acquires another company operating in the same industry, the new or larger company gets to
enjoy a greater market share.
 4. More Financial Resources
When two companies merge or when a company acquires another company, it results in two
companies pooling their financial resources, and that can result in, among other things, a
business being able to reach more customers because of a larger marketing budget.

Disadvantages of Mergers and Acquisitions

The following are some of the disadvantages of mergers and acquisitions;

1. Job Losses
When two companies doing the same activities come together and become one company, it
might mean duplication and over capability within the company, which might lead to
retrenchments.

2. Diseconomies of Scale
Sometimes mergers and acquisitions can result in diseconomies of scale. For example, this
can happen if the owner of the new larger company lacks the control required to run a bigger
company.

3. Higher Prices
Although not something that affects the business, it is worth mentioning. A great market
share is good for a business, but it can be bad for consumers. When a company has less
competition and greater market share, consumers tend to pay more for products or services.

4. Lost Opportunities
Lastly, the process of merging two companies or acquiring a company takes time and
requires energy and money. The energy, time, and funds that go into the merger or
acquisition process could mean that the businesses involved give up other potential
opportunities.

DIFFERENCES BETWEEN MERGER ACQUSITION & JOINT VE NTURE

BRICS ECONOMY
BRICS is an acronym for Brazil, Russia, India, China, and South Africa. Goldman Sachs
economist Jim O'Neill coined the term BRIC (without South Africa) in 2001, claiming that by
2050 the four BRIC economies would come to dominate the global economy. South Africa
was added to the list in 2010.

The notion behind the coinage was that the nations' economies would come to collectively
dominate global growth by 2050. The BRICS nations offered a source of foreign expansion
for firms and strong returns for institutional investors