CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Two Indian firms, an automobile maker and a battery technology company, set up a separate jointly owned company to produce EV batteries, sharing investment, risk and control while each continues its own business. Which strategic option is this?
This is a joint venture. Two independent firms form a new, jointly owned company to make EV batteries, sharing investment, risk and control while continuing their own businesses. A hostile takeover or demerger involves one firm acquiring or splitting, not co-owning a new entity.
- AJoint ventureCorrect
- BHostile takeover
- CDemerger
- DLiquidation
Explanation
Two independent firms creating a new jointly owned entity to pursue a common objective, with shared equity, risk and control, is a joint venture, a form of strategic alliance. A takeover would give one firm control of another, and a demerger splits one firm.
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