This week’s Scenario examines a merger strategy for Katrina’s Candies. Please respond to the following questions: What is a merger and how is it different from a joint venture as an expansion business strategy? In a merger, two companies become one, and one of the companies often survives while the other disappears. In a joint venture, two companies conspire to achieve a specific goal, such as building a third company, working on an outside project or marketing synergistic services. In a joint venture, both companies remain separate and intact. Mergers happen when two companies agree to legally combine into one company, melding their management. This can take the form of an amalgamation in which a new company is created, or it can be an absorption in which one of the companies survives. Mergers and acquisitions are often confused. An acquisition involves one company buying a controlling interest in the stock of another company and managing both companies under one management team, which might consist of a mix of managers from both companies or only the managers from the surviving company. A joint venture is a legal partnership between two or more companies. It can be for strategic purposes or as a way of servicing a large project that requires capabilities beyond the scope of each individual company. b) What are the main economic ramifications from entering into a merger? Discuss this from the standpoints
of business firms involved as well as the impacts on consumers. Mergers often require downsizing of one or both companies, but the theory behind mergers is that the best parts of each company survive. A major problem arises in combining the two business cultures, and many mergers don't achieve optimal performance for this reason. Joint ventures can suffer from problems involving allocation of effort, authority and profits. When these problems are contained, a joint venture operates smoothly, combining the specialties of all companies involved toward a...
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