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ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

A European retailer wants to enter a country where foreign ownership of retail businesses is restricted and where it lacks local market knowledge. It wants to limit capital outlay and share risk, but is willing to share control. Which growth strategy best fits?

A joint venture with a local partner fits best. It provides local market knowledge, shares capital cost and risk, and can satisfy foreign ownership restrictions. Full acquisition and greenfield wholly owned entry need full ownership and larger investment, which conflicts with the restrictions and the firm's wish to limit outlay.

  1. AFull acquisition of a local retailer
  2. BGreenfield wholly owned subsidiary
  3. CJoint venture with a local partnerCorrect
  4. DOrganic growth through exports only

Explanation

A joint venture with a local partner gives local knowledge, shares cost and risk, and complies with ownership limits. Full acquisition and a wholly owned greenfield subsidiary require full ownership and heavy capital, which the restriction rules out or the firm wants to avoid.

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