2. Video Links of the Topics
• Joint venture/Partnership
• https://www.youtube.com/watch?v=drK_S95gCJU
• Merger and acquisitions
https://www.youtube.com/watch?v=DVRPe897nnA
First movers Advantage
https://www.youtube.com/watch?v=VL4jBchBYsU
• Outsourcing
• https://www.youtube.com/watch?v=DcQraUl1Zjg
3. Joint Venture
• A joint venture occurs when two or more businesses join together to
pursue a common project
• Basics on joint ventures
• With a joint venture, businesses remain separate in legal terms
• Joint ventures are common, as firms want to benefit
from collaborative work in reaching a mutually agreed strategic
target.
• Many joint ventures seek to share the fixed costs of major business
research / infrastructure projects
4. Examples of joint ventures include:
• Vodafone & Telefónica agreed to share their mobile network
• BMW and Toyota co-operate on research into hydrogen fuel cells,
vehicle electrification and ultra- lightweight materials
• Google and NASA developing Google Earth
5. Joint venture and partnership
• http://www.infoentrepreneurs.org/en/guides/joint-ventures-and-
partnering/
6. Merger and acquisitions
• WHAT IT IS:
• Mergers & acquisitions (M&A) refer to the management, financing,
and strategy involved with buying, selling, and combining companies.
7. HOW IT WORKS (EXAMPLE):
• A merger is the combination of two similarly sized companies combined to form a new company.
• An acquisition occurs when one company clearly purchases another and becomes the new owner.
• A merger or an acquisition usually starts out with a series of informal discussions between the
boards of the companies, followed by formal negotiation, a letter of intent, due diligence, a
purchase or merger agreement, and finally, the execution of the deal and the transfer of payment.
• Quite often, these transactions can take six to nine months (smaller deals often take less time and
larger deals often take more time), and they can be complex, particularly from legal
and accounting perspectives.
• companies often hire investment bankers or other intermediaries to facilitate M&A transactions.
• These intermediaries can help sellers find buyers (or vice versa), conduct the negotiations for a
client, handle paperwork, and perform the due diligence on the other party. For this, the
intermediary receives a fee, which is usually a percentage of the transaction amount
8. • Mergers & Acquisitions can take place:
• • by purchasing assets
• • by purchasing common shares
• • by exchange of shares for assets
• • by exchanging shares for share
9. First Movers Advantage
• The first mover advantage refers to an advantage gained by a
company that first introduces a product or service to the market. The
first mover advantage allows a company to establish strong brand
recognition and product/service loyalty before other entrants.
10. • first mover advantage only refers to a large company that moves into a market. For example,
Amazon was not the first company to sell books online. However, it was the first company to
achieve significant scale in that line of business.
• Advantages of Being a First Mover
• There are several advantages to being the first business to execute a strategy.
• Companies that are first movers can often:
• Establish their product as the industry standard
• Be able to tap into consumers first and make a strong impression, which can lead to brand
recognition and brand loyalty.
• May be able to control resources, such as basing themselves in a strategic location, establishing a
premium contract with key suppliers, or hiring talented employees.
• Can gain an advantage when there is a high switching cost for consumers to switch to later
entrants
11. Benefits of FMA
• 1. Technology leadership
• First movers can make their technology/product/services harder for
later entrants to replicate. For example, if the first mover can reduce
the costs of producing a product (an “experience” curve effect), the
first mover can establish an absolute cost advantage. In addition,
applying for patents can protect and establish a first-mover
advantage.
12. • 2. Control of resources
• The second benefit is the ability to control strategic and/or scarce
resources. For example, Wal-Mart was able to locate their stores in
small towns and prevent others from entering the market
13. • 3. Buyer-switching costs
• The third benefit that first movers may enjoy is buyer-switching costs.
If the first business is able to establish itself first, it may seem
inconvenient consumers to switch to a new brand
14. Disadvantages of Being a First Mover
• Being the first business in an industry may not always guarantee an
advantage.
• The first mover may invest heavily in persuading consumers to try a new
product. Later entrants would benefit from these informed buyers and
would not need to spend that much on educating consumers.
• Later entrants can avoid mistakes made by the first mover.
• If the first mover is unable to capture consumers with their products, later
entrants can take advantage of it.
• Later entrants can reverse-engineer new products and make them better
or cheaper.
• Later entrants can identify areas of improvement by the first mover and
take advantage of it.
15. Examples of Successful Companies That Were Not
First Movers
Listed below are 3 companies that were not first
movers in their respective markets, but have now
grown to become some of the biggest companies
in the world:
16. • 1. Google
• Before Google, there were search engines such as Yahoo and
Infoseek. However, Google was able to customize their search engine
to perform more effectively and efficiently. They now control over
65% of the search activity.
17. • 2. Southwest Airlines
• Southwest Airlines entered the airline industry as a late entrant but
was able to expand and become the second largest airline in the
world in terms of the total number of passengers. The company
focused on an area that other airlines were not looking at – short haul
flights.
18. • 3. Starbucks
• There were a lot of places to buy coffee before the establishment of
Starbucks. However, Starbucks was able to establish a strong brand
equity by placing an emphasis on making Starbucks the go-to place
when you’re not home or at the office.
19. Out sourcing
• Outsourcing is a term used to describe almost any corporate activity
that is managed by an outside vendor, from the running of the
company's cafeteria to the provision of courier services.
20. Difference between outsourcing and joint
venture
• Outsourcing is the contracting of services via monetary means in
order to minimize or limit the resources that would normally be
required to perform business functions internally, thus reducing
costs.
A partnership, on the other hand, does not necessarily involve
monetary payment from one firm to another, or a binding contractual
agreement between two companies.
