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Structural factors
Restructuring - Suggested answers
Activity 1
Briefly describe the differences between business amalgamations and a joint venture.
Both amalgamations and joint ventures involve two or more businesses working together to produce a product or service.
An amalgamation of two or more businesses is a permanent integration of the businesses to make a new larger business. This often saves infrastructure costs and opens new markets. An example of this type of restructure is when BHP amalgamated with Billliton Resources to make the new company BHP Billiton.
A joint venture is a temporary arrangement between two businesses that pool or merge their resources for a specific contact to supply goods or services. Both businesses share the profits proportionally and incur their own costs. An example of this type of restructure could be a resource company with natural gas reserves works together with a pipeline builder to supply natural gas to a collection point for shipment.
Activity 2
What does the term “outsourcing” mean?
Outsourcing is a structural change that is rapidly gaining support in the corporate world. It is based on the concept of contracting some business operations to outside suppliers who specialise in that specific product or service. The business then doesn’t have to specialise in many different areas of manufacture to produce their product. It has a profound impact upon the business organisation and its employees. Fewer fulltime staff and less resources and equipment are required. However, profits are improved for shareholders.
Activity 3
Give two examples of manufacturing industries that use outsourcing.
Some examples of businesses that use outsourcing techniques are the:
- automobile manufacturing industry,
- computer manufacturing industry,
- electronics industry
who each source components for outside suppliers.
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