Question

Divina Pharma Inc. and MF Electronics Inc. have together invested and created a new organization, FirstHealth Inc. to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction- -specific investments. However, the new organization operates independent of Divina Pharma and MF Electronics. Which of the following alternatives to integration does this scenario best illustrate?

A. a joint venture
C. a licensing contract
D. a corporate acquisition

Answer 1

Answer: A.) a joint venture

Explanation: A joint venture could be explained as a collaboration of resources involving to or more parties to fund or begin a new venture or business. This newly created venture does not have anything to do with previously owned business belonging to either of the collaborating parties. In the scenario above, Divina Pharma Inc and MF Electronics Inc. both pooled resources together to form a joint Venture named FirstHealth Inc. aimed at tackling a specific business problem. However, the collaboration does not mean both Divina and MF are now together as both are independent companies.