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AT & T reached an agreement to acquire Time Warner Inc. for $85.4 billion. The deal is set to transform the phone company, AT & T, into a media corporation. Time Warner has a broad media line-up including networks such as TNT, CNN, Warner Bros, HBO channel, TV, and film studio. The acquisition seeks to formulate the first U.S wireless company providing online-video bundles competing nationwide. The business also aims to disrupt the traditional entertainment model and push the boundaries of mobile content for customers' benefit.
Strategic Aim, Strategy Pursued and Supporting Evidence
AT & T uses integration strategies for the successful acquisition of Time Warner Inc. and to access the market correctly. The firm employs integration to gain ownership of competitors. The method advances its market share and expands the business quickly. The initiative also helps AT & T to increase monopolistic characteristics without attracting the attention of the government and to gain industrial scales. The acquisition of Time Warner Inc. by AT & T expands AT & T's market power and dominance. The increase in the firm's size, capabilities and resources result in the firm's superior ability to compete in the market. The acquisition also seeks to overcome entry barriers into new markets. The cost of developing a new product is high, and, thus, the purchase helps AT & T produce current and new products at a cheaper rate. The procurement increases the speed at which AT & T access new markets (Thomas, Keach, Dana & Amol, 2016). It also intends to expand the firm's diversification and reshape the company's ambitious scope. The strategy also reduces adverse effects on the organization's financial performance of an intense rivalry with players in the industry. The approach also enables the firm to develop new capabilities and increase its particular technological capacity to expand its knowledge base.
Time Warner is a stable and prosperous wireless company that would quickly enable AT & T to compete nationwide with other cable companies. AT & T is purchasing a supplier of media content that will increase its production and operations levels in the market. It improves the company's ability to compete in the market favorably. The strategy also enables AT & T to develop new areas of growth. It makes a lot of sense for AT & T to pursue the plan since it will access new markets and increase its competitiveness (Dana, Shalini & George, 2016). The approach also helps AT & T improve its ability to maximize profits and attain market sustainability.
Merger and Acquisition Success and Failure
According to Dr. Robert Bruner, a professor at the Darden School, approximately 70% of the acquisitions and mergers fail. Managers and policy-makers need to understand the factors that lead to the failure or success of most acquisitions and mergers before entering into any deal to avert making the mistakes businesses make. One of the significant reasons acquisitions and mergers fail is due to venturing into a significantly unprofitable industry or failing to exit loss-making industry (Thomas et al., 2016). The industry-organization model observes that a sector contributes to about 20% of any company. Entering a profitable industry contributes to robust growth. Strong markets and industries are characterized by extreme and high levels of competition that generate substantial profits regardless of the activities of rival firms. The media industry is one of the highly profitable sectors, and the acquisition of Time Warner by AT & T will robustly influence the growth of AT & T as a company. Acquiring a business in an unfamiliar industry also contributes to the failure of mergers or acquisitions. It reduces a firm's strengths and minimizes the ability to maximize profits (Dana et al., 2016). AT & T's acquisition of Time Warner is in a familiar industry; hence, it is bound to succeed. Since AT & T is acquainted with the industry, it will optimize on its strengths to grow its market share.
Lack of significant economic benefits also fails an acquisition. An acquisition should surround the proper analysis of a product, its market synergy, and elaborately examine the economic benefits of the purchase to the acquiring firm. The resultant company must be appropriately structured with proper balances and checks. The board of directors and managers of the acquiring firm must adequately analyze every decision, move and business operation to ascertain that the deal is not one to cost the company ultimately.
Will this be a Successful Acquisition?
The acquisition will be successful since it is a deal in a profitable industry. Time Warner Inc. is a lucrative and sustainable firm operating in media, technology and entertainment industry. It is an industry with high potential for profit maximization. AT & T's entry into the industry is an advisable move that will facilitate sustainability and increase its ability to compete with rival firms in the market. The acquisition is also a move in the direction that AT & T understands better. As a telecommunications company, the purchase of Time Warner Inc. increases AT & T media holdings. The deal is appropriately structured and comes with vast economic benefits. Time Warner Inc. is an entertainment and media industry operating in film, television network, and TV entertainment. The acquisition of the company by AT & T will expand the business' market scope. It will improve profit margins and bestow a competitive advantage on AT & T over its competitors.
Dana Mattioli, Shalini Ramachandran and George Stahl. (2016). Wall Street Journal.
Thomas Gryta, Keach Hagey, Dana Cimilluca and Amol Sharma. (2016). Wireless carrier agrees to pay $107.50 a share in half-cash, half-stock deal.
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AT & T Compny - Business Strategy and Policy Final. Essay Example. (2022, Apr 21). Retrieved from https://speedypaper.com/essays/business-strategy-and-policy-final
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