Page 54 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 1 Understanding business activity

Over the years there have been many examples of joint venture agreements.
■ One of the best known was between the Japanese consumer electronics company
Sony Corporation and the Swedish telecommunications company Ericsson to make
mobile phones. The joint venture brought together Sony’s consumer electronics
expertise with Ericsson’s technological leadership in the communications sector.
■ In 2007 Virgin Group announced a joint venture with Tata Group in India. The 50-50
joint venture combined the large network and customer base of Tata TeleServices
with Virgin Mobile. This enabled Virgin to enter a very profitable mobile phone
market, which was the fastest growing in the world at the time. As part of the deal,
Virgin committed to use its marketing expertise to target the youth of India, using

the slogan ‘Hop to the Hatke Service’ – Hatke is the Hindi for ‘diff erent’, ‘off beat’ or
‘not mainstream’.

CASE STUDY Jaguar Land Rover agrees joint venture with Chery in China

Jaguar Land Rover (JLR) and Chery Automobile have agreed a joint venture. This agreement will lead to the
production of Jaguar and Land Rover cars in China.
A new, jointly owned company will be formed to:

■ create a research and development facility
■ develop and manufacture new models
■ set up engine manufacturing operations
■ create a sales network in China.
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‘Demand for Jaguar and Land Rover vehicles continues to increase significantly in China,’ JLR’s chief executive Ralf
Speth and Chery’s chief executive Yin Tongyao said in a joint statement.
‘We believe that JLR and Chery can jointly realise the potential of these iconic brands in the world’s largest car market.’
Chery makes smaller, less luxurious cars than JLR, but has good knowledge of the Chinese market.
You can watch a news report of this joint venture at www.youtube.com/watch?NR=1&feature=endscreen&v=5Odz
sehYBGI. The report starts 3 minutes 22 seconds into the video.

TASK
a What is meant by ‘joint venture’?
b Identify two benefits to Chery of a joint venture with JLR
c Do you think JLR has made the right decision to enter a joint venture with Chery? Justify your answer.

Differences between unincorporated businesses and

limited companies
An unincorporated business is one which does not have a separate legal identity

from its owners. This means that the owners are legally responsible for the activities
of the business. Also, the owners have unlimited liability for the debts of the
business. Sole traders and partnerships are the best examples of unincorporated
businesses.
An incorporated business, such as a limited company, has a separate legal
identity from its owners. The company and not the owners (shareholders) is

legally responsible for the activities of the business. The owners of an incorporated
business have limited liability for the debts of the business.