CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Two Indian firms, Raman Steels and Gupta Alloys, form a new jointly owned company to develop special alloy plants, each holding 50% and sharing control while remaining independent otherwise. Which strategic option best describes this?
This is a joint venture. Two independent firms create a new jointly owned company and share ownership and control in it, while continuing to exist separately. A merger would combine the firms into one entity, which is not what is described.
- AJoint ventureCorrect
- BMerger
- CHostile takeover
- DFranchising
Explanation
Two independent firms creating a separate jointly owned entity with shared control is a joint venture. A merger would combine the firms completely, a hostile takeover is acquisition against management wishes, and franchising grants rights to operate under a brand.
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