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Explain How Joint Venture Can Enable Anheuser

Explain How Joint Venture Can Enable Anheuser

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Published by: azwan ayop on May 12, 2010
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08/21/2010

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1.
Explain how joint venture can enable Anheuser-Busch (AB) to achieve itsobjective of maximizing shareholder wealth.
A pure domestic company going to international level through severalstages; import and export, licensing and franchising, joint venture andestablished operation facilities abroad. The motives make a company gofor international trade is to find new market, economic cost of operationand seeking new knowledge and expertise. In case on joint venturebetween Anheuser-Busch and Kirin, this strategic alliance gives Anheuser-Busch an insight about Japanese culture and less risky foundation to enter Japanese market later.
Shareholder wealth maximization can beachieves by increase revenue and minimize the cost.
 
This JV helpsAnheuser Busch to penetrate Japan market without substantialinvestment abroad
. Having efficient network distribution within Japanese market and build stronger brand name will help Anheuser-Buschgaining foreign market share and contributing to incremental salesrevenue as the local market mature. While cost minimization can beachieve by mutual arrangement with JV partner, in this case KirinBrewery, to distribute Anheuser-Busch product and promoting Anheuser-Busch brand name in Japan efficiently. Build brand name throughadvertising is major cost in marketing as we can look, internationalcompany spend billions of dollar every year for advertising. And some of them fail because of lack local cultural awareness.
2.Explain how joint venture can limit the risk of international business.
 The common risks associated with international business are foreignexchange risk, political risk, government intervention risk, market risk andcultural risk. All those risk arose because of unfamiliar environment anduncertainty. Joint venture can limit those risks for reason
sharing basis
in term of knowledge and expertise, ease of market entry and localcompetition. Local company participation in joint venture manage tohandle complexes problem that foreign company always face whendealing with local business environment, local authority, local financialinstitution and local community. It can be conclude that partnering withlocal company will help foreign party to have better understanding in theforeign environment.
3.Explain how Anheuser Busch could lose some of its market share incountries outside of Japan as a result of this particular venture.
 
 Joint venture with Kirin Brewery mean that Anheuser Buschwilling to share its expansion strategy with Kirin
. Kirin could useAnheuser Busch’s strategy to enter market outside Japan and thisrelatively it can affect Anheuser Busch’s market share.
 
In my opinion, thebenefit and prospect Anheuser Busch derived from the JV arrangementoutweigh any adverse effect to the company wealth.
INTERNATIONAL FINANCIAL MANAGEMENTFIN 542
‘TEST 2 – CASE STUDY ON ANHEUSER BUSCH JOINT VENTUTE’
En. Ahmad Husni Bin Mohd Rashid
Lecturer FIN542FPP UITM Shah Alam
Mohamad Azwan Bin Ayop
2007118507BM222

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