Exam Questionsa and Answers on Business Ownership

Running head: EXAM QUESTIONS AND ANSWERS
EXAM QUESTIONS AND ANSWERS
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EXAM QUESTIONS AND ANSWERS1
Answer to Question 1
(A) Ownership advantages can be defined as the competitive benefits that are gained by
organizations that aim to engage in the foreign direct investment or FDI based
activities. The companies are more likely to engage in foreign direct investment if
they have gained more competitive advantages. The competitive advantages of
investing firms are able to play a key part in ensuring the foreign direct investment.
The theory of ownership advantage mainly suggests that an organization which owns
a valuable asset is able to form a competitive advantage on a domestic basis. The
ownership advantage can also be used by the organizations to penetrate foreign
markets with the help of FDI (Adeola, Boso and Adeniji 2018). Outward foreign
direct investment or OFDI has the ability to increase the investment competitiveness
of a country and is able to ensure the long term growth of organizations. The
production processes are upgraded and new development based channels are also
formed with the support that is offered by the sustainable growth of organizations.
The extensive distribution networks can also be used by the organizations in order to
enhance the revenues and levels of profitability as well. The organizations belonging
to emerging markets can thereby implement OFDI in order to enhance their
operations and reach a larger group of consumers as well. Internationalization process
of the organizations is supported in a huge manner by the implementation of OFDI
and the use of various benefits that are provided by this method as well (Ahi et al.
2017).
(B) The lack of ownership advantage of the firms that belong to emerging countries can
have a key influence on the methods by which they aim at implementing OFDI or

EXAM QUESTIONS AND ANSWERS2
outward foreign direct investment. The firms that have their own valuable assets and
a major competitive advantage in the domestic market can use OFDI effectively in
order to enter a new country. The competitive advantages are considered to be useful
for the organizations to attract foreign direct investments. The organizations having
ownership advantage are also considered to be more likely to engage in the process of
foreign production and they can also easily increase their reach in the industry. OFDI
is thereby used a major channel by the organizations in order to gain a long term and
sustainable growth in the industry (Adeola, Boso and Adeniji 2018). The production
processes of organizations will be upgraded and levels of competitiveness will be
upgraded due to the implementation of OFDI by the firms that already have an
ownership advantage. The organizations belonging to emerging countries have
become more dependent on the OFDI in order to internationalize their operations.
The investing firms in developing countries are also considered to be a major factor
that has an impact on the internationalization plans of the firms (Alexander and Joe
2019).
Answer to Question 2
Joint venture is considered to be a solution that can be applied by the organizations in
order to start the international operations in a different country along with another company.
Joint venture is not similar to a partnership agreement as it has a definite end and is based on the
agreement or contract that is formed between the companies. The implementation of joint
ventures can however provide major advantages and disadvantages to the firms that are a part of
the developed agreement (Adeola, Boso and Adeniji 2018).
Advantages of a joint venture –

EXAM QUESTIONS AND ANSWERS3
Expertise and new insights – The formation of a joint venture can provide new
expertise and insights to the organizations. The market becomes much easier with
the help of agreements that have been developed between two countries.
Better resources – The development of a joint venture will provide access to the
better resources and the specialized technology and staff as well.
Joint ventures are temporary – The joint ventures are temporary agreements that
are formed between two organizations and the commitment is not considered to
be long term in nature (Arregle et al. 2017).
Costs and risks are shared by both parties – In case of the failure of joint venture
that losses and costs are shared by both the parties.
Joint ventures are flexible – Joint ventures can have limited lifespan and they are
able to cover only fraction of the activities that are performed by the
organizations.
There are many ways to exit the joint venture – Joint ventures are able to provide
different options to the organizations so that they are able to escape the non-core
business operations.
The organizations have knowledge related to products and services that are being
offered by them – The firms that are a part of the joint ventures have effective
levels of knowledge regarding the services and products that are being offered by
them to the customers (Arregle et al. 2018).
Relationships and networks are formed by joint ventures – Although the
partnerships are formed based on a specific goal the development of long lasting
business relationships are supported by the joint ventures.

EXAM QUESTIONS AND ANSWERS4
The organizations that are a part of the joint ventures can save their money by
sharing the costs that are related to marketing and advertising based activities.
The risks of discrimination are eradicated with the development of joint ventures.
Disadvantages of joint ventures –
Vague objectives – The objectives that are developed as a part of the joint venture
agreement can be vague in nature and are not communicated clearly to the
individuals.
Flexibility will be restricted – The levels of flexibility in joint ventures are
considered to be quite low and the participants need to enhance their focus on the
activities that are performed as a part of the joint venture agreement (Attig et al.
2016).
The balance of expertise, investment and assets is considered to be quite low
when the joint ventures are developed.
The clash of management styles and cultures can also result in poor integration
and co-operation among the participant of the joint venture.
The outside activities of participants are restricted in a huge manner when they
work as a part of the venture project (Blackburne and Buckley 2019).
The major limitations that have to be faced by the organizations when they aim at
pursuing the global strategy with the help of joint venture are related to lack of freedom to
implement different policies. The agreements that are developed at the start of joint venture
development have to be followed by the participants and they will also need to form the
operations with respect to the contract of joint venture. The cultural differences can cause major

EXAM QUESTIONS AND ANSWERS5
problems for organizations which aim at pursuing their global strategy with the implementation
of joint venture (Beugelsdijk et al. 2018).
Answer to Question 3
The field related to mergers and acquisitions has been able to attract different disciplines
that are explored as a part of management literature. The overseas acquisitions in developing
countries have also become highly important for the purpose of proper completion of research
that is related to the factors that have an impact on the process of mergers and acquisitions.
Mergers and acquisitions have been described as the most aggressive method of entering the
foreign markets and it mainly involves two organizations from two different countries. In the
context of international management acquisitions have been defined as the process which
involves an acquirer firm and a target organization which are headquartered in two different
countries (Blackburne and Buckley 2019). The cross border based deals are also able to play a
key part in ensuring the outward and inward transactions. The host economy receives direct
investment when the local firm is mainly acquired by a foreign MNC and this is referred to as the
cross border inward acquisition. Internationalization is considered to be a process which helps in
increasing the levels of involvement in the foreign markets.
The firm and industry specific factors have an impact on the overseas negotiations that
are made as a part of the merger and acquisition process. The firms that acquire US based
organizations have better levels of liquidity ratios and the targets on the other hand have low
price to earnings based ratio. The firms have been able to develop the financial advantages and
the low price-to-earnings can also participate in the outbound deals. The organizations with high
sales growth and greater intensity of advertising are able to participate in the overseas deals in
order to capture the first mover based advantages and the market share as well (Boermans and