In Chapter 9 of the Hoskisson book, acquisition and restructuring strategies are discussed. Identify a company that has engaged in one of the strategies discussed, explain the strategy, and discuss if it was ultimately successful or not. Use concepts from class material to argue your point of view.
International strategy is the focus of Chapter 10, and the video gives a brief snapshot of Coca-Cola's international strategy. Are the concepts learned in this chapter relevant to an organization with only domestic operations? Explain. What additional learnings to you have from our assigned article, Codes of Good Governance?
i have to submit my paper through Turnitin, and I need a Plagiarism free paper with references. include in text citations for all references please make sure grammar is correct.
Slide 1 Competing for Advantage 1 Chapter 9 Acquisition and Restructuring Strategies PART III CREATING COMPETITIVE ADVANTAGE 1 The Strategic Management Process 2 Figure 1.6: The Strategic Management Process – A logical approach for responding to 21st century competitive challenges. Provides an outline of the content of the textbook by each chapter. Creating Competitive Advantage Business-level strategy – competitive advantages the firm will use to effectively compete in specific product markets Competitive rivalry and dynamics – analysis of competitor actions and responses is relevant input for selecting and using specific strategies Cooperative strategy – an important trend of forming partnerships to share and develop competitive resources Corporate-level strategy – concerns the businesses in which the company intends to compete and the allocation of resources in diversified organizations Acquisition and restructuring strategies – primary means used by diversified firms to create corporate-level competitive advantages International strategy – significant sources of value creation and above-average returns Merger and Acquisition Strategies Very popular strategies Especially cross-border acquisitions Offensive and defensive motives Problematic High failure rates Complex strategic decisions Impacted by economic volatility Uncertain returns Merger and Acquisition Strategies Discussion points: M&As have become popular strategies for firms of all sizes to grow and enter new markets. As the global economy improved after the deep recession in 2008, acquisition activity increased, but it is not near pre-recession levels. A large percentage of acquisitions in recent years have been made across country borders, many in emerging economies such as China and Brazil. Examples: Marfrig acquired Keystone Foods, JBS acquired Pilgrim’s Pride and Swift [These acquisitions were facilitated by Brazil’s national development bank (BNDES), which supports Brazilian firms in developing their international operations.] A firm may make an acquisition to increase its market power because of a competitive threat (defensive) or to enter a new market because of an available market opportunity (offensive). M&As should be used only when the acquiring firm will be able to increase its economic value through ownership and the use of an acquired firm’s assets. M&A strategies are not without problems – many acquisitions fail. (The focus of this chapter is on how they can be used to produce value for the firm’s stakeholders while avoiding the pitfalls of the acquisition process.) Complexity stems from the highly uncertain global economy. But M&As are used precisely to combat the risk associated with this uncertainty. As volatility brings undesirable changes to a firm’s primary markets, acquiring other companies shifts the core business to different markets. Evidence suggests that, at least for acquiring firms, acquisition strategies may not result in expected desirable outcomes. Researchers have found that shareholders of acquired firms often earn above-average returns from an acquisition, while shareholders of acquiring firms are less likely to do so, typically earning returns from the transaction that are close to zero (although unanticipated bidders receive more of a premium). In approximately two-thirds of all acquisitions, the acquiring firm’s stock price falls immediately after the intended transaction is announced, signaling investor skepticism about the likelihood that the acquirer will be able to achieve the synergies required to justify the premium price of the acquisition.Example: Google’s announced acquisition of Motorola Mobility 3 Mergers, Acquisitions, and Takeovers – The Differences Key Terms Merger Strategy through which two firms agree to integrate their operations on a relatively co-equal basis Acquisition Strategy through which one firm buys a controlling, 100 percent interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio or melding it with another division 4 Mergers, Acquisitions, and Takeovers: What Are the Differences? Discussion points: Merger Example: United and Continental Airlines merger in 2010 There are not many true mergers because one party is usually dominant. Example: DaimlerChrysler merger Most mergers are friendly transactions. Acquisition Partial acquisitions occur when the acquiring firm obtains less than 100% of the target firm. (To avoid confusion in this discussion, use of the word acquisition will always refer to a complete acquisition.) In the case of an acquisition, the management of the acquired firm reports to the management of the acquiring firm. Acquisitions can be unfriendly takeovers. Acquisitions are more common than mergers and takeovers, so the remaining discussion will focus on acquisitions. Mergers, Acquisitions, and Takeovers – The Differences Key Terms Takeover Special type of acquisition strategy wherein the target firm did not solicit the acquiring firm's bid Hostile takeover Unfriendly takeover strategy that is unexpected and undesired by the target firm 5 Mergers, Acquisitions, and Takeovers: What Are the Differences? Discussion points: Takeover Takeover bids often spawn bidding wars. Example: Southern Union bid for Energy Transfer Equity LP, countered by Williams Company The bidding process is one reason it is difficult for acquiring firms to create value. Hostile takeover Viewpoint of the acquired firm determines whether the takeover is hostile, rather than the claimed “intent” of the acquirer. Reasons for Acquisitions 6 Figure 9.1: Reasons for and Problems with Acquisitions – There are several reasons that an acquisition strategy is used by firms even though it may not result in achievement of a competitive advantage. Sources of Market Power Size of the firm Resources and capabilities to compete in the market Share of the market 7 Increase Market Power – Market power (defined in Chapter 8) exists when a firm is able to price and sell its goods or services above competitive levels or when the costs of its value chain activities or support functions are below those of its competitors. This is the primary reason that firms adopt acquisition strategies. Sources of Market Power Discussion points: Market power usually is derived from the size of the firm and its resources and capabilities to compete in the marketplace. It is also affected by the firm’s share of the market. One goal in achieving market power is to become a market leader. Example: United and Continental merger resulted in the combined company becoming the market leader in market share not only the U.S., but also in the entire world airline market Most acquisitions designed to achieve greater market power entail buying a competitor (horizontal), a supplier or a distributor (vertical), or a business in a highly related industry (related) to allow exercise of a core competence and to gain competitive advantage in the acquiring firm’s primary market. Types of Acquisitions to Increase Market Power Horizontal Acquisitions Vertical Acquisitions Related Acquisitions 8 Types of Acquisitions to Increase Market Power – Three types of acquisitions are used to increase market power and pursue a market leadership position. Discussion points: Acquisitions intended to increase market power are subject to regulatory review and to analysis by financial markets. Example: Brazilian JBS targeted National Beef Packing, the fourth-largest U.S. beef processor, but regulators in Washington filed an antitrust lawsuit indicating the acquisition would impose a "fundamental restructuring of the U.S. beef-packing industry" and "eliminate head-to-head competition” Example: Proposed merger between AT&T and T-Mobile was disapproved by the U.S. Justice Department In order to successfully achieve growth and market power through acquisitions, firms must understand the political/legal segment of the general environment (see Chapter 3). Horizontal Acquisitions Acquisition of a company competing in the same industry Increase market power by exploiting cost-based and revenue-based synergies Character similarities between the firms lead to smoother integration and higher performance 9 Horizontal Acquisitions Example: JBS Company Discussion points: Research suggests that horizontal acquisitions of firms with similar characteristics result in higher performance than when firms with dissimilar characteristics combine their operations. Horizontal acquisitions are often most effective when the acquiring firm integrates the acquired firm’s assets with its assets, but only after evaluating and divesting excess capacity and assets that do not complement the newly combined firm’s core competencies. What are some important similarities in firm characteristics that would make the integration of two firms in a horizontal acquisition proceed more smoothly? Strategy Managerial styles Resource allocation patterns Vertical Acquisitions Acquisition of a supplier or distributor of one or more products or services Increase market power by controlling more of the value chain 10 Vertical Acquisitions Example: Oracle acquisition of Sun Microsystems Related Acquisitions Acquisition of a firm in a highly related industry Increase market power by leveraging core competencies to gain a competitive advantage 11 Related Acquisitions Example: Bristol-Myers Squibb acquisition of Inhibitex Entry Barriers that Acquisitions Overcome Economies of scale in established competitors Differentiated competitor products Enduring relationships and product loyalties between customers and competitors 12 Overcome Entry Barriers – Barriers to entry (introduced in Chapter 3) increase the expense and difficulty ventures face as they try to enter a new market. Acquisitions are often used to gain immediate market access in industries with high barriers to market entry or to quickly enter international markets. Discussion points: Acquisition of an established company may be more effective than entering the market as a competitor offering a good or service that is unfamiliar to current buyers. When facing differentiated products, new entrants typically must spend considerable resources to advertise their goods or services and may find it necessary to sell at a price below competitors’ to entice customers. The higher the barriers to market entry, the greater the probability that a firm will acquire an existing firm to overcome them. Although an acquisition can be expensive, it does provide the new entrant with immediate market access. Firms trying to enter international markets often face quite steep entry barriers. For large multinational corporations, five emerging markets (China, India, Brazil, Mexico, and Indonesia) are among the 12 largest economies in the world, with a combined purchasing power that is already over half that of the Group of Seven industrial nations (United States, Japan, Britain, France, Germany, Canada, and Italy). Likewise, firms from emerging economies are pursuing substantive cross-border acquisitions. Example: JBS acquisitions in Latin America, U.S., and Australia Cross-Border Acquisitions Acquisitions made between companies with headquarters in different countries 13 Cross-Border Acquisitions – often made to overcome entry barriers Discussion points: Compared with a cross-border alliance (discussed in Chapter 10), a cross-border acquisition gives a firm more control over its international operations. Acquisitions often represent the fastest means to enter international markets and help firms overcome the liabilities associated with such strategic moves. Example: Japanese Takeda acquired Swiss drug maker Nycomed to increase sales in China fourfold New Product Development Significant investments of a firm’s resources are required to: develop new products internally introduce new products into the marketplace Profitability or adequate returns on investments are not certain 14 Reduce Costs and Risks Associated with New Product Development – Acquisitions are an alternative means of gaining access to new products (or current products that are new to the firm) to bypass the time and resources needed to develop and commercialize new products and to achieve more predictable returns than might result from internal product development. Discussion