Business Deal

Posted in Finance, Accounting and Economics Terms, Total Reads: 1500

Definition: Business Deal

Business deal is a mutual agreement between two parties willing to do a business and is said to be finalised and complemented if two or more parties agree to the term and condition of the deal. The deal may be related to exchange of goods or providing the services to a particular organisation. Both parties sit together and agree to the terms and condition that they deem necessary to protect their interest and right. They both formally sign on the papers and finally conclude the deal.

Let us consider an example – Suppose there is a company A which specialises in advertising and branding of different goods and services and a second company B which has manufacturing as its core competency. Now company B needs to tie up with company A in order to avail its services. In the whole transaction both the parties are in a win-win situation as Company B has its product branded while company A gains revenue in the process.

Advantages of a Deal

1. It helps organisations to share and pool their resources leading to a better utilisation of the resources

2. It helps to plug the loopholes if any exist in a particular organisation.

3. It helps organisation to focus on its core competency without worrying about the other jobs that need to be completed.

4. When an organisation expands its business and enters some other territory deals with some native organisation helps to know the place better and get acquainted with the culture. For example- When Renault wanted to come to India it took help from Mahindra to know about the Indian condition. This deal also helped Renault to leverage the supply chain of Mahindra to go deeper in to the Indian Market.

Disadvantages of Deal

Many a time deal become a disadvantage to both parties if they fail to honour the deal and drag themselves into courtroom. There have been instances in the past where both the parties have faced bitter tensions and this has led to loss of resource and capital to both the organisation.

Another problem which company see in deal is the chance of possible backward integration. There are instances where a company which is lagging certain know how enters into a deal and then uses that deal to train its employee in that certain domain.

Hence, this concludes the definition of Business Deal along with its overview.


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