MODULE-8

MANAGING GROWTH
FRANCHISING:
A franchise is a form of business ownership created by contract whereby a company
grants to a buyer the rights to engage in selling or distributing its products or services under a
prescribed business format in exchange for royalties or shares of profits.
The buyer is called FRANCHISEE, and the company that sells rights to its business concept
is called FRANCHISOR.
Franchising is a system of business acquisitions , where franchisor expands through a
network of income producing enterprises that share a common name, use common materials ,
sell similar products and benefit from integrated distribution systems and national brand
advertising. The franchisee usually receives a protected market , guaranteed supplies training
and technical assistance for site selection purchasing accounting and operations management.
TYPES OF JOINT VENTURES:
A joint venture is an agreement between two or more individuals or businesses
whereby both contribute to a joint business endeavor. They share in the expenses associated
with the project and they share in the profits realized. Joint ventures are very common in the
brick and mortar world, as well as, in the online world of Internet marketing
There are basically two types of joint ventures.the Insider Joint Venture and the Outsider
Joint Venture. Both kinds are profitable the difference is who the partners in the agreements
are the insider joint venture agreement allows all parties to it access to the same private areas
of the business such as the administration panel, accounting, sales records, and other insiders
knowledge. The product or service that is the focus of the agreement is usually developed as a
joint effort by the parties to the agreement. Ownership of the product or service is jointly
held.
The Outsider Joint Venture is the kind that is most common in the Internet marketing
arena. In this kind of joint venture, there are no common administration panel, accounting or
sales records. Each entity remains separate. Usually an individual or company has developed
a product or service but has no customer base to market it to. The individual or company will
approach an established marketer who does have a customer base, list or market share that
would be interested in the product or service. They enter into a joint venture agreement where
costs of marketing and profits made are shared. Sometimes there is an even split and
sometimes the split is on a percentage basis other than 50/50. The joint venture enterprise can
be profitable to all parties to the joint venture agreement and the cost of advertising is
minimal. The joint venture is an old idea that is being made new again via Internet marketing.

ACQUISITION AND MERGERS

MERGER:
Is defined as a combination of two or more companies into a single company
where one survives and the others lose their corporate existence.the survivor acquire the
assets as well as liabilities of the merged company or companies.
Types of merger
horizontal mergers
involves 2 firms operating and competing in the sane kind of
business activity. The acquiring company belongs to the same industry as the target company.
Eg: merger of TATA OIL MILLS COMPANY LTD(TOMCO) with HINDUSTAN
LEVER LTD(HLL)
The main purpose of horizontal merger is to obtain economies of scale in production
Vertical merger
These mergers occur between firms in different stages of production
operation. A company would like to take over another company or seek its merger with
that company to expand espousing backward integration to assimilate the sources of
supply and forward integration towards market outlets
Eg: the merger of Reliance Petrochemicals(RPCL) with Reliance Industries Ltd.
(RIL)
Conglomerate merger
Its a amalgamation of two companies engaged in unrelated
industries.
Eg: Mohta steel industries ltd merged with Vardhaman spinning mills ltd.
Motives/Reasons behind mergers
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procurement of supplies
market expansion & strategy
financial strength
diversification
taxation benefits
managerial motives
acquisition of specific assets
growth advantage

Acquisition
May be defined as a transaction or series of transaction whereby an
individual or group of individuals or company acquires control over the management of
the company by acquiring equity shares carrying majority voting power.
Kinds of takeover/acquisition
friendly takeovers:
in friendly takeover, the acquirer will purchase the controlling shares
after through negotiations and agreement with the seller
.
hostile takeover:
a person seeking control over a company, purchases the required
number of shares from non-controlling shareholders in the open market.