A Joint Venture Is an Attractive Way for a Company

question 153

Multiple Choice

A joint venture is an attractive way for a company to enter a new industry when:

• A) the pool of attractive acquisition candidates in the target industry is relatively small.
• B) it needs better access to economies of scope in order to be cost-competitive.
• C) the industry is growing slowly and adding too much capacity too soon could create oversupply conditions.
• D) the firm has no prior experience with diversification and the industry is on the verge of explosive growth.
• E) the opportunity is too risky or complex for a company to pursue alone,a company lacks some important resources or competencies and needs a partner to supply them,and/or a company needs a local partner in order to enter a desirable business in a foreign country.

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Definitions:

Canadian Dollars

The currency of Canada, represented by the symbol CAD, and used throughout the country for financial transactions.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

Appreciate

The increase in value of an asset over time.

Canadian Dollar

The official currency of Canada, symbolized as CAD and often referred to as the "loonie."