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CA Intermediate · Financial Management and Strategic Management · Strategic Choices

Two Indian firms, an e-commerce platform and a logistics company, form a separate jointly owned company in which each holds 50%, to build warehouses. They stay independent in all their other businesses. This arrangement is best classified as a:

This is a joint venture. Two independent firms create a separate jointly owned company, each holding 50%, for a specific purpose while remaining independent elsewhere. A merger would combine the firms, a takeover would transfer control, and a demerger would split one firm.

  1. AMerger
  2. BTakeover
  3. CJoint ventureCorrect
  4. DDemerger

Explanation

Two independent firms creating a separately incorporated entity with shared ownership for a specific purpose is a joint venture, a type of strategic alliance. A merger would combine the firms and a takeover would give one firm control of the other. A demerger splits a single firm.

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