In the case of Kraft Foods Group and Cadbury, Joint venture may become feasible alternative. A joint venture (JV) is a business agreement in which parties agrees to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets.
The advantages of using joint venture:
In the case, Kraft paid $19 million to acquisition Cadbury. It showed that the acquisition is expensive and used a lot of cash. If using joint venture, it can save a lot of money to make a partnership. Also, Kraft has opportunity to gain new capacity and expertise to development their business.
Access Larger Markets
A strategic JV partnership can provide access to larger customer bases and geographical markets. If Kraft Foods Group and Cadbury make a JV partnership, that can increase larger customer bases and geographical markets base on they products and retail outlets.
Longer Marketing Reach
If Kraft Foods Group and Cadbury make a JV partnership, not only can gain access to larger and new markets, but also can extend their marketing reach. That may save the budget for advertisements in national magazines, using a strategic joint venture can provide new marketing channels and geographic scopes.
Access to Technology & Resources
By using the technology and resources already utilized by a joint venture partner, Kraft Foods Group and Cadbury could build their business and raise revenues faster by sharing the profits.
Sharing of risks with a venture partner
Kraft Foods Group and Cadbury can using joint venture to sharing risks and reduce their risks through capital and resource sharing.
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