ACCA Strategic Professional · Strategic Business Leader · Strategic choices
Orlix, a software company, is considering a joint venture with a local firm to enter a new country. The local partner will contribute distribution networks. A director warns the main strategic risk specific to this mode. Which risk is most characteristic of a joint venture rather than of exporting?
The characteristic joint venture risk is conflict with the partner over objectives and control, together with leakage of know-how. Because control and decisions are shared, partners may pursue different aims or exploit shared knowledge, unlike exporting, where tariffs and currency exposure dominate.
- AExposure to exchange rate movements on sales
- BLoss of economies of scale from small production runs
- CConflict over objectives and control with the partner, and leakage of know-howCorrect
- DHigher tariff costs on imported goods
Explanation
Joint ventures share control, so differing goals and the risk of partner opportunism or know-how leakage are typical. Currency exposure, tariffs and scale issues arise in exporting and are not distinctive to a joint venture.
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