Free Essay Sample on Merger and Acquisition/Strategic Competitiveness

Introduction

There are numerous strategic business motives why mergers and acquisitions (M&A) occur, but the most mutual reasons for firms’ combinations are the economic aspects. Merger entails the strategy by which companies agree to integrate their day-to-day operations on a comparative coequal basis. Acquisition, on the other hand, encompasses ways by which one company or organization buys 100%, or a controlling interest of another firm with the aim of making the acquired organization subsidiary corporate within its portfolio. These strategies, for many years, have been popular in the United States (US). Bauer et al. (2017) believed that M&A approaches played a significant role in the reform of US corporates during the 1980s as well as in the 1990s, and they continue providing benefits in the 21st century.

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Question 1

There are multiple reasons why M&A is popular in companies competing in worldwide markets. Firstly, when firms combine, there are increased capabilities. Enhanced capabilities offer opportunities for expanded development and research opportunities, robust manufacturing processes, or an array of core competencies a company wants to surge (Brueller et al., 2018). For instance, a firm might want to merge to leverage its costly manufacturing processes. For example, this was the hope of Ford when it acquired Volvo (Qi, 2019). Similarly, the capability may not necessarily be in a specific department but might come from the acquisition of a unique technology platform instead of opting to build one. M&A activities are highly embraced by Biopharmaceutical firms as a result of the extreme investment required for effective R&D in the markets. One of the greatest M&A activities occurred in 2011 within the biopharmaceutical industry, which was valued at $75 billion (Mazumdar-Shaw, 2018).

Secondly, M&A activities occur to enable firms to gain a bigger market share or competitive advantage. Corporations might decide to merge with the intent of gaining enhanced marketing or distribution networks (Bauer et al., 2017). Marketing and distribution networks provide firms with a wider customer base. An example of such acquisition was the purchase of Nycomed by a Japan-based Takeda Pharmaceutical Company, which was a Switzerland-based firm, to surge market progress in Europe. The agreement was valued at $13.6 billion (Mazumdar-Shaw, 2018).

Additionally, M&A activities surge the diversification of goods and services. Firms may merge to complement their current goods and services to acquire a competitive advantage over other competitors in the market. For instance, HP in 2008 purchased EDS to support its technology services, a deal valued at $13.9 billion (Sestino et al., 2020). Other factors that have increased the popularity of M&A in the global markets include the replacement of leadership, cutting costs, and ensuring the survival of a company (Brueller et al., 2018).

Question 2

International returns and diversification form one of the strategic competitiveness results, which are linked with international strategies, precisely with global diversification strategy. When a company, for example, Sony, expands, its sales of products and services across the globe increase to larger geographical markets and locations. In return, the company diversification will surge, and returns will decline initially. However, when the organization learns the ways of managing the enlarged geographical diversification, the returns will increase swiftly and position the firm within a competitive edge (Tasheva & Nielsen, 2020).

Enhanced innovation is another strategic competitiveness result. By utilizing the global diversification strategy, Sony will attain larger returns from their innovation because as a company becomes exposed to new processes and products, it acquires extensive knowledge concerning these activities and integrates this insight within their operations. By using this way, innovation is enhanced. As it is easier said than done, Sony would be required to generate adequate resources along with the skills to manage these activities effectively to outperform its competitors (Tasheva & Nielsen, 2020).

References

Brueller, N. N., Carmeli, A., & Markman, G. D. (2018). Linking merger and acquisition strategies to postmerger integration: a configurational perspective of human resource management. Journal of Management, 44(5), 1793-1818. https://doi.org/10.1177/0149206315626270

Bauer, F., Dao, M. A., Matzler, K., & Tarba, S. Y. (2017). How industry lifecycle sets boundary conditions for M&A integration. Long Range Planning, 50(4), 501-517. https://doi.org/10.1016/j.lrp.2016.09.002

Qi, L. (2019, January). Research on Technological Collaborative Innovation of Geely’s Acquisition of Volvo. In 3rd International Seminar on Education Innovation and Economic Management (SEIEM 2018). Atlantis Press. https://doi.org/10.2991/seiem-18.2019.110

Mazumdar-Shaw, K. (2018). 25 Years of Reforms that Led India’s Pharmaceutical and Biotech Industry towards Global Leadership. India Transformed: Twenty-Five Years of Economic Reforms, 569.

Sestino, A., Prete, M. I., Piper, L., & Guido, G. (2020). Internet of Things and Big Data as enablers for business digitalization strategies. Technovation, 102173. https://doi.org/10.1016/j.technovation.2020.102173

Tasheva, S., & Nielsen, B. B. (2020). The role of global dynamic managerial capability in the pursuit of international strategy and superior performance. Journal of International Business Studies, 1-20. https://doi.org/10.1057/s41267-020-00336-8