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Report on the ‘Sandford’ Joint Venture in East Timor
Date: 30th September 2011 For: George Jackson From: Mizanur Rahman
Executive Summary Freemantle Construction operates in a domestic environment against ever increasing competition in a saturated market, trying to maintain market share during economic downturn. In contrast Sandford has a strong international presence in the hotel/leisure industry and is looking at diversification to improve their competitive advantage and compliment their current offerings. The opportunity …show more content…
In general drivers for Sandford & Fremantle’s choice to diversify would be based on: i. ii. iii. iv. v. Sandford’s desire for growth Freemantle’s need to escape a stagnant market Both need to acquire the skills in the construction/tourism sector Both desire to spread risk Both desire to access a virgin market
Advantages & Disadvantage The principle advantages for this JV are: An increase in value/wealth to the firms, which would not be possible on their own. Economies of scale would be increased, assisting entry into the new market. Construction costs for Sandford would decrease. Economies of scope can be exploited by Freemantle delivering the required infrastructure and then the related tourism/leisure facilities. Provides movement away from declining activities for Freemantle. Spreading risk from interests in one area, as well as the risks involved in international JVs (IJVs).
The Principle disadvantages could be: Slowing growth in its core business, if focus is shifted. Potentially would add to management costs by implementing a separate team to run the JV. Loss could be incurred during market consolidation process resulting in some parts of the business being subsidized by other profitable parts.
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AR50126 Assignment Name: Mizanur Rahman
Diversification across national boundaries could result in the firms having to deal with varying political/legal requirements of the different