01 Identify and explain two advantages to Alkin of using a joint venture to expand into country Z. [6]

[BASEL Moderator]

Alkin is a multinational company. It manufactures breakfast food products including many leading brands of cereal. Alkin plans to start selling in country Z, which is a fast-growing market. Alkin plans to form a joint venture with a local business, based in country Z. ‘Effective communication will be important to our success but I think there are many advantages in expanding this way’ said Alkin’s Managing Director. The Government of country Z is worried about the effect of multinational companies like Alkin on consumers.

01 Identify and explain two advantages to Alkin of using a joint venture to expand into country Z. [6]

Possible KN Points:
• Access to new markets
• Access to local expertise / ideas
• Wider range of contacts / better access to resources
• Increased capital / share costs
• Increased capacity
• Way to avoid government restrictions
• Less competition
• Economies of scale
• Build reputation