AQA Business Studies BUSS4 2012 - 21 June 2012 Thread
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Original post by sergeant1
I would use it as a one of the 3 examples and just use 2 other i researched 
So the example will be for or against and then i would choose (depending on whether i though for or against) 2 for FOR or 2 for AGAINST.
So the example will be for or against and then i would choose (depending on whether i though for or against) 2 for FOR or 2 for AGAINST.
ok thanks
, so it's just like merely an inclusion alongside your other examples for your argumentOriginal post by sergeant1
Thank You, you've got a few interesting ones in there
Original post by tdkr
for the sec B question, how much reference should you make to the businesses (not the ones you've researched about) mentioned in the question ?
thanks
thanks
I've looked at the mark schemes and it doesn't actually mention explicitly whether you should/how much you should mention other businesses or just the ones in the question so I'm not sure :/
Original post by tehonlyone
Thank You, you've got a few interesting ones in there
The interesting ones are probably ones hone i got bored of revising
Could anybody summarise for me the government intervention when Newscorp was going to take over BskyB? I dont understand it 
Hi I was wondering if this would be enough for the second point on the research task:
1. Sprint and Nextel
- In August 2005, Sprint acquired a majority stake in Nextel Communications in a $35 billion stock purchase. The two combined to become the third largest telecommunications provider.
- Before the merger, Sprint catered to the traditional consumer market, providing long-distance and local phone connections and wireless offerings. Nextel had a strong following from businesses, infrastructure employees and the shipping and logistics markets. By gaining access to each other's customer bases, both companies hoped to grow by cross-selling their product and service offerings
- Soon after the merger, mass of Nextel executives and mid-level managers left the company, citing cultural differences and incompatibility.
- Sprint was bureaucratic; Nextel was more entrepreneurial.
- Nextel was attuned to customer concerns; Sprint had a horrendous reputation in customer service, experiencing the highest churn rate in the industry.
- Cultural concerns worsened integration problems between the various business functions. Early in the merger, the two companies maintained separate headquarters, making coordination more difficult between executives at both camps.
-
2. Quaker Oats Company and Snapple Beverage Company
- Quaker Oats successfully managed the widely popular Gatorade drink and thought it could do the same with Snapple. In 1994, the company acquired Snapple for a purchase price of $1.7 billion.
- In addition to overpaying, management broke a fundamental law in mergers and acquisitions: make sure you know how to run the company and bring specific value-added skills sets and expertise to the operation.
- In just 27 months, Quaker Oats sold Snapple to a holding company for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple.
- MANAGEMENT PROBLEMS: Quaker Oats' management thought it could control its relationships with supermarkets and large retailers; however, about half of Snapple's sales came from smaller channels, such as convenience stores.
- Coke and Pepsi.
3. Daimler and Chrysler: The marriage was doomed to fail because it was built on sand, not on a solid rock foundation. It missed a basic building block from the start: honesty. Chrysler was bought and was subsequently treated like a stepchild, not a partner. The domination by one partner over the other filtered down through the rank and file.
- Contrasting cultures and management styles hindered the realization of the synergies. Daimler-Benz attempted to run Chrysler USA operations in the same way as it would run its German operations. On the other hand, the US based Chrysler encouraged creativity. While Chrysler represented American adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more traditional respect for hierarchy and centralized decision-making
- The relationship lacked vision and leadership to make it work. Employees didn’t know what the relationship was supposed to look like in the end. Leadership didn’t draw the picture, nor did they encourage the two companies to interlock.
1. Sprint and Nextel
- In August 2005, Sprint acquired a majority stake in Nextel Communications in a $35 billion stock purchase. The two combined to become the third largest telecommunications provider.
- Before the merger, Sprint catered to the traditional consumer market, providing long-distance and local phone connections and wireless offerings. Nextel had a strong following from businesses, infrastructure employees and the shipping and logistics markets. By gaining access to each other's customer bases, both companies hoped to grow by cross-selling their product and service offerings
- Soon after the merger, mass of Nextel executives and mid-level managers left the company, citing cultural differences and incompatibility.
- Sprint was bureaucratic; Nextel was more entrepreneurial.
- Nextel was attuned to customer concerns; Sprint had a horrendous reputation in customer service, experiencing the highest churn rate in the industry.
- Cultural concerns worsened integration problems between the various business functions. Early in the merger, the two companies maintained separate headquarters, making coordination more difficult between executives at both camps.
-
2. Quaker Oats Company and Snapple Beverage Company
- Quaker Oats successfully managed the widely popular Gatorade drink and thought it could do the same with Snapple. In 1994, the company acquired Snapple for a purchase price of $1.7 billion.
- In addition to overpaying, management broke a fundamental law in mergers and acquisitions: make sure you know how to run the company and bring specific value-added skills sets and expertise to the operation.
- In just 27 months, Quaker Oats sold Snapple to a holding company for a mere $300 million, or a loss of $1.6 million for each day that the company owned Snapple.
- MANAGEMENT PROBLEMS: Quaker Oats' management thought it could control its relationships with supermarkets and large retailers; however, about half of Snapple's sales came from smaller channels, such as convenience stores.
- Coke and Pepsi.
3. Daimler and Chrysler: The marriage was doomed to fail because it was built on sand, not on a solid rock foundation. It missed a basic building block from the start: honesty. Chrysler was bought and was subsequently treated like a stepchild, not a partner. The domination by one partner over the other filtered down through the rank and file.
- Contrasting cultures and management styles hindered the realization of the synergies. Daimler-Benz attempted to run Chrysler USA operations in the same way as it would run its German operations. On the other hand, the US based Chrysler encouraged creativity. While Chrysler represented American adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more traditional respect for hierarchy and centralized decision-making
- The relationship lacked vision and leadership to make it work. Employees didn’t know what the relationship was supposed to look like in the end. Leadership didn’t draw the picture, nor did they encourage the two companies to interlock.
Original post by smellycat123
Could anybody summarise for me the government intervention when Newscorp was going to take over BskyB? I dont understand it
The FCC said that in order for them to support the takeover News Corp must allow Sky News to be run independently. News Corp later pulled out of the bid due to the phone hacking scandal. They still own something like 30% of BskyB though.
This is an example of my essay together with my essay plan. Feel free to comment on my essay.
To what extent do you agree that a takeover or merger involving firms with different corporate cultures with inevitably result in failure?
Introduction:
- Define takeovers and mergers
- Define culture
- Importance of culture
- Differences in cultures exist in different companies
The case for:
- Clashes in cultures could result in resentment of stakeholders
- Resistance to cultural change
The case against:
- Integration planning to address cultural issues
- Post-merger integration in terms of operations
Evaluation:
- Depends on how strong is the corporate culture
- The difference in cultures
- How well a business addresses cultural issues
- How fast a business implement change
- What is meant by failure? Long-term or short-term
Examples:
- Tata / JLR
- Cadbury / Kraft
- Santander / Abbey
- L’Oreal / The Body Shop
A takeover is where a business gains a controlling interest in another business through a change of ownership. A merger is where two businesses combine to form a new business. Culture refers to the values, attitudes and beliefs of a business. It is undeniable that it could have a significant impact on the operations of a business as employees may bestrongly affectedy the cultures of a business. Differences in cultures exist in many businesses and could be an important factor in determining the success of a takeover or merger.
To a certain extent, a takeover or a merger involving firms with different corporate cultures could result in a failure because they may result in resentment of stakeholders. Stakeholders are individuals or groups of individuals who have an interest in a business. Resentment of stakeholders could have a significantly impact on the corporate image of a business as a business’s reputation is strongly affected by public perception. A good example of differences in cultures resulting in adverse stakeholder reactions is the takeover of the Body Shop by L’Oreal in 2006 as a strategy of diversification. The main difference in cultures is that the Body Shop has been perceived as an ethical business whereas L’Oreal has been criticized for animal testing. The deal was seen as unethical therefore existing customers of the Body Shop may have moved to other brands which were seen as more ethical. Another good example of clashes in cultures is the takeover of Innocent by Coca Cola in 2010. Innocent’s decision to supply fruit smoothies to McDonald’s has received media attention and customers’ criticism. This was because of the nature of Innocent as an ethically-friendly business which sources its ingredients from sustainable from sustainable supplies. Therefore, the success of a takeover will depend upon the similarity in cultures of the two businesses. Significant differences in cultures could result in public attention and an adverse impact on corporate image.
Equally important, if a takeover or merger involves firms with different cultures, there might be resistance to cultural change. As cultural change is inevitable in a takeover or merger, this could result in problems in integrating the two businesses successfully. A good example of this is the takeover of Cadbury by Kraft in 2010 to gain access to the global confectionary market. This was a hostile takeover because the initial offer was rejected by the shareholders of Cadbury. Kraft initially agreed to keep Cadbury’s factory in Keynsham before the deal. After the offer was accepted, the company decided to close the factory and move production to Poland to achieve significant cost savings. The result was resentment of Cadbury’s employees and a cut of over 400 jobs resulting in unemployment. Many senior staff of Cadbury left the business after the takeover. Cadbury has had a long history of Corporate Social Responsibility (CSR) and a British iconic image. The success of a takeover or a merger depends upon how well a business addresses cultural issues after the transaction. For example, the founders of Innocent were able to run the business separately after Coca Cola’s takeover.
On the other hand, takeovers and mergers involving businesses with different cultures may not result in failure because good integration planning could help prevent cultural issues from arising. Integration planning refers to how a business is going to run the targeted business after a takeover or a merger. This enables a business to understand the differences in cultures of the targeted business. A good example of this is the takeover of Jaguar Land Rover (JLR) by Tata Group in 2008. Tata was able to produce a detailed integration plan that it was able to share with and gain the support of key stakeholders in JLR including employees, government and trade unions. Tata’s integration plan focused on making good use of the existing factories in the UK and the potential returns that it was planning to accomplish. Despite taking place during an economic downturn leading to a fall in demand for luxury cars, JLR has made a success in improving its profitability and entering emerging markets like China and Latin America. As a result, this takeover has generated large shareholder value and gained supports from JLR’s stakeholders in the UK. Tata initially bought JLR at £1bn but the business now worth about £9 -10bn, besides a 42% increase in profitability in 2012. The success of a takeover or a merger will largely depend upon how well a business addresses cultural issues to prevent resistance to cultural change.
Another reason why a takeover or a merger which involves firms with different corporate cultures might be successful is because good post-merger integration could help prevent cultural problems. Post-merger integration is often difficult because of significant differences in corporate cultures and resistance to cultural change. A perfect example of this is the takeover of Abbey National by Santander in 2004. Santander quickly integrated its ICT systems with Abbey National to achieve cost-synergies. A main difference between Santander and Abbey National was that Santander put a large emphasis on front-office activities. Santander reduced the amount back-office staff of Abbey and provided extensive training to increase the number of front-office staff in order to deliver better customer services. The integration of Santander and Abbey has resulted in a successful takeover and more subsequent takeovers of UK banks by Santander to strengthen its market position in the UK. Hence, although cultural issues may hinder the success of a business, it depends on how fast a business implements change. It also depends on the effectiveness of change in management in managing cultural issues.
Overall, takeovers and mergers involving firms with differences in corporate cultures may not result in failure. What is meant by failure? It ultimately depends on whether a business is looking at short-term failure or long-term failure. Long-term failure is likely to be more detrimental to the success of a business. It depends on how significant is the cultural differences between two businesses. It also depends how strong the corporate cultures of a business are. A key influence to the success of a takeover or a merger is how fast a business implements change to prevent cultural issues.
To what extent do you agree that a takeover or merger involving firms with different corporate cultures with inevitably result in failure?
Introduction:
- Define takeovers and mergers
- Define culture
- Importance of culture
- Differences in cultures exist in different companies
The case for:
- Clashes in cultures could result in resentment of stakeholders
- Resistance to cultural change
The case against:
- Integration planning to address cultural issues
- Post-merger integration in terms of operations
Evaluation:
- Depends on how strong is the corporate culture
- The difference in cultures
- How well a business addresses cultural issues
- How fast a business implement change
- What is meant by failure? Long-term or short-term
Examples:
- Tata / JLR
- Cadbury / Kraft
- Santander / Abbey
- L’Oreal / The Body Shop
A takeover is where a business gains a controlling interest in another business through a change of ownership. A merger is where two businesses combine to form a new business. Culture refers to the values, attitudes and beliefs of a business. It is undeniable that it could have a significant impact on the operations of a business as employees may bestrongly affectedy the cultures of a business. Differences in cultures exist in many businesses and could be an important factor in determining the success of a takeover or merger.
To a certain extent, a takeover or a merger involving firms with different corporate cultures could result in a failure because they may result in resentment of stakeholders. Stakeholders are individuals or groups of individuals who have an interest in a business. Resentment of stakeholders could have a significantly impact on the corporate image of a business as a business’s reputation is strongly affected by public perception. A good example of differences in cultures resulting in adverse stakeholder reactions is the takeover of the Body Shop by L’Oreal in 2006 as a strategy of diversification. The main difference in cultures is that the Body Shop has been perceived as an ethical business whereas L’Oreal has been criticized for animal testing. The deal was seen as unethical therefore existing customers of the Body Shop may have moved to other brands which were seen as more ethical. Another good example of clashes in cultures is the takeover of Innocent by Coca Cola in 2010. Innocent’s decision to supply fruit smoothies to McDonald’s has received media attention and customers’ criticism. This was because of the nature of Innocent as an ethically-friendly business which sources its ingredients from sustainable from sustainable supplies. Therefore, the success of a takeover will depend upon the similarity in cultures of the two businesses. Significant differences in cultures could result in public attention and an adverse impact on corporate image.
Equally important, if a takeover or merger involves firms with different cultures, there might be resistance to cultural change. As cultural change is inevitable in a takeover or merger, this could result in problems in integrating the two businesses successfully. A good example of this is the takeover of Cadbury by Kraft in 2010 to gain access to the global confectionary market. This was a hostile takeover because the initial offer was rejected by the shareholders of Cadbury. Kraft initially agreed to keep Cadbury’s factory in Keynsham before the deal. After the offer was accepted, the company decided to close the factory and move production to Poland to achieve significant cost savings. The result was resentment of Cadbury’s employees and a cut of over 400 jobs resulting in unemployment. Many senior staff of Cadbury left the business after the takeover. Cadbury has had a long history of Corporate Social Responsibility (CSR) and a British iconic image. The success of a takeover or a merger depends upon how well a business addresses cultural issues after the transaction. For example, the founders of Innocent were able to run the business separately after Coca Cola’s takeover.
On the other hand, takeovers and mergers involving businesses with different cultures may not result in failure because good integration planning could help prevent cultural issues from arising. Integration planning refers to how a business is going to run the targeted business after a takeover or a merger. This enables a business to understand the differences in cultures of the targeted business. A good example of this is the takeover of Jaguar Land Rover (JLR) by Tata Group in 2008. Tata was able to produce a detailed integration plan that it was able to share with and gain the support of key stakeholders in JLR including employees, government and trade unions. Tata’s integration plan focused on making good use of the existing factories in the UK and the potential returns that it was planning to accomplish. Despite taking place during an economic downturn leading to a fall in demand for luxury cars, JLR has made a success in improving its profitability and entering emerging markets like China and Latin America. As a result, this takeover has generated large shareholder value and gained supports from JLR’s stakeholders in the UK. Tata initially bought JLR at £1bn but the business now worth about £9 -10bn, besides a 42% increase in profitability in 2012. The success of a takeover or a merger will largely depend upon how well a business addresses cultural issues to prevent resistance to cultural change.
Another reason why a takeover or a merger which involves firms with different corporate cultures might be successful is because good post-merger integration could help prevent cultural problems. Post-merger integration is often difficult because of significant differences in corporate cultures and resistance to cultural change. A perfect example of this is the takeover of Abbey National by Santander in 2004. Santander quickly integrated its ICT systems with Abbey National to achieve cost-synergies. A main difference between Santander and Abbey National was that Santander put a large emphasis on front-office activities. Santander reduced the amount back-office staff of Abbey and provided extensive training to increase the number of front-office staff in order to deliver better customer services. The integration of Santander and Abbey has resulted in a successful takeover and more subsequent takeovers of UK banks by Santander to strengthen its market position in the UK. Hence, although cultural issues may hinder the success of a business, it depends on how fast a business implements change. It also depends on the effectiveness of change in management in managing cultural issues.
Overall, takeovers and mergers involving firms with differences in corporate cultures may not result in failure. What is meant by failure? It ultimately depends on whether a business is looking at short-term failure or long-term failure. Long-term failure is likely to be more detrimental to the success of a business. It depends on how significant is the cultural differences between two businesses. It also depends how strong the corporate cultures of a business are. A key influence to the success of a takeover or a merger is how fast a business implements change to prevent cultural issues.
(edited 11 years ago)
Just threw together a powerpoint on diversification, if anyone wants it let me know.
Original post by Jtn Star
This is an example of my essay together with my essay plan. Feel free to comment on my essay.
To what extent do you agree that a takeover or merger involving firms with different corporate cultures with inevitably result in failure?
Introduction:
- Define takeovers and mergers
- Define culture
- Importance of culture
- Differences in cultures exist in different companies
The case for:
- Clashes in cultures could result in resentment of stakeholders
- Resistance to cultural change
The case against:
- Integration planning to address cultural issues
- Post-merger integration in terms of operations
Evaluation:
- Depends on how strong is the corporate culture
- The difference in cultures
- How well a business addresses cultural issues
- How fast a business implement change
- What is meant by failure? Long-term or short-term
Examples:
- Tata / JLR
- Cadbury / Kraft
- Santander / Abbey
- L’Oreal / The Body Shop
A takeover is where a business gains a controlling interest in another business through a change of ownership. A merger is where two businesses combine to form a new business. Culture refers to the values, attitudes and beliefs of a business. It is undeniable that it could have a significant impact on the operations of a business as employees may bestrongly affectedy the cultures of a business. Differences in cultures exist in many businesses and could be an important factor in determining the success of a takeover or merger.
To a certain extent, a takeover or a merger involving firms with different corporate cultures could result in a failure because they may result in resentment of stakeholders. Stakeholders are individuals or groups of individuals who have an interest in a business. Resentment of stakeholders could have a significantly impact on the corporate image of a business as a business’s reputation is strongly affected by public perception. A good example of differences in cultures resulting in adverse stakeholder reactions is the takeover of the Body Shop by L’Oreal in 2006 as a strategy of diversification. The main difference in cultures is that the Body Shop has been perceived as an ethical business whereas L’Oreal has been criticized for animal testing. The deal was seen as unethical therefore existing customers of the Body Shop may have moved to other brands which were seen as more ethical. Another good example of clashes in cultures is the takeover of Innocent by Coca Cola in 2010. Innocent’s decision to supply fruit smoothies to McDonald’s has received media attention and customers’ criticism. This was because of the nature of Innocent as an ethically-friendly business which sources its ingredients from sustainable from sustainable supplies. Therefore, the success of a takeover will depend upon the similarity in cultures of the two businesses. Significant differences in cultures could result in public attention and an adverse impact on corporate image.
Equally important, if a takeover or merger involves firms with different cultures, there might be resistance to cultural change. As cultural change is inevitable in a takeover or merger, this could result in problems in integrating the two businesses successfully. A good example of this is the takeover of Cadbury by Kraft in 2010 to gain access to the global confectionary market. This was a hostile takeover because the initial offer was rejected by the shareholders of Cadbury. Kraft initially agreed to keep Cadbury’s factory in Keynsham before the deal. After the offer was accepted, the company decided to close the factory and move production to Poland to achieve significant cost savings. The result was resentment of Cadbury’s employees and a cut of over 400 jobs resulting in unemployment. Many senior staff of Cadbury left the business after the takeover. Cadbury has had a long history of Corporate Social Responsibility (CSR) and a British iconic image. The success of a takeover or a merger depends upon how well a business addresses cultural issues after the transaction. For example, the founders of Innocent were able to run the business separately after Coca Cola’s takeover.
On the other hand, takeovers and mergers involving businesses with different cultures may not result in failure because good integration planning could help prevent cultural issues from arising. Integration planning refers to how a business is going to run the targeted business after a takeover or a merger. This enables a business to understand the differences in cultures of the targeted business. A good example of this is the takeover of Jaguar Land Rover (JLR) by Tata Group in 2008. Tata was able to produce a detailed integration plan that it was able to share with and gain the support of key stakeholders in JLR including employees, government and trade unions. Tata’s integration plan focused on making good use of the existing factories in the UK and the potential returns that it was planning to accomplish. Despite taking place during an economic downturn leading to a fall in demand for luxury cars, JLR has made a success in improving its profitability and entering emerging markets like China and Latin America. As a result, this takeover has generated large shareholder value and gained supports from JLR’s stakeholders in the UK. Tata initially bought JLR at £1bn but the business now worth about £9 -10bn, besides a 42% increase in profitability in 2012. The success of a takeover or a merger will largely depend upon how well a business addresses cultural issues to prevent resistance to cultural change.
Another reason why a takeover or a merger which involves firms with different corporate cultures might be successful is because good post-merger integration could help prevent cultural problems. Post-merger integration is often difficult because of significant differences in corporate cultures and resistance to cultural change. A perfect example of this is the takeover of Abbey National by Santander in 2004. Santander quickly integrated its ICT systems with Abbey National to achieve cost-synergies. A main difference between Santander and Abbey National was that Santander put a large emphasis on front-office activities. Santander reduced the amount back-office staff of Abbey and provided extensive training to increase the number of front-office staff in order to deliver better customer services. The integration of Santander and Abbey has resulted in a successful takeover and more subsequent takeovers of UK banks by Santander to strengthen its market position in the UK. Hence, although cultural issues may hinder the success of a business, it depends on how fast a business implements change. It also depends on the effectiveness of change in management in managing cultural issues.
Overall, takeovers and mergers involving firms with differences in corporate cultures may not result in failure. What is meant by failure? It ultimately depends on whether a business is looking at short-term failure or long-term failure. Long-term failure is likely to be more detrimental to the success of a business. It depends on how significant is the cultural differences between two businesses. It also depends how strong the corporate cultures of a business are. A key influence to the success of a takeover or a merger is how fast a business implements change to prevent cultural issues.
To what extent do you agree that a takeover or merger involving firms with different corporate cultures with inevitably result in failure?
Introduction:
- Define takeovers and mergers
- Define culture
- Importance of culture
- Differences in cultures exist in different companies
The case for:
- Clashes in cultures could result in resentment of stakeholders
- Resistance to cultural change
The case against:
- Integration planning to address cultural issues
- Post-merger integration in terms of operations
Evaluation:
- Depends on how strong is the corporate culture
- The difference in cultures
- How well a business addresses cultural issues
- How fast a business implement change
- What is meant by failure? Long-term or short-term
Examples:
- Tata / JLR
- Cadbury / Kraft
- Santander / Abbey
- L’Oreal / The Body Shop
A takeover is where a business gains a controlling interest in another business through a change of ownership. A merger is where two businesses combine to form a new business. Culture refers to the values, attitudes and beliefs of a business. It is undeniable that it could have a significant impact on the operations of a business as employees may bestrongly affectedy the cultures of a business. Differences in cultures exist in many businesses and could be an important factor in determining the success of a takeover or merger.
To a certain extent, a takeover or a merger involving firms with different corporate cultures could result in a failure because they may result in resentment of stakeholders. Stakeholders are individuals or groups of individuals who have an interest in a business. Resentment of stakeholders could have a significantly impact on the corporate image of a business as a business’s reputation is strongly affected by public perception. A good example of differences in cultures resulting in adverse stakeholder reactions is the takeover of the Body Shop by L’Oreal in 2006 as a strategy of diversification. The main difference in cultures is that the Body Shop has been perceived as an ethical business whereas L’Oreal has been criticized for animal testing. The deal was seen as unethical therefore existing customers of the Body Shop may have moved to other brands which were seen as more ethical. Another good example of clashes in cultures is the takeover of Innocent by Coca Cola in 2010. Innocent’s decision to supply fruit smoothies to McDonald’s has received media attention and customers’ criticism. This was because of the nature of Innocent as an ethically-friendly business which sources its ingredients from sustainable from sustainable supplies. Therefore, the success of a takeover will depend upon the similarity in cultures of the two businesses. Significant differences in cultures could result in public attention and an adverse impact on corporate image.
Equally important, if a takeover or merger involves firms with different cultures, there might be resistance to cultural change. As cultural change is inevitable in a takeover or merger, this could result in problems in integrating the two businesses successfully. A good example of this is the takeover of Cadbury by Kraft in 2010 to gain access to the global confectionary market. This was a hostile takeover because the initial offer was rejected by the shareholders of Cadbury. Kraft initially agreed to keep Cadbury’s factory in Keynsham before the deal. After the offer was accepted, the company decided to close the factory and move production to Poland to achieve significant cost savings. The result was resentment of Cadbury’s employees and a cut of over 400 jobs resulting in unemployment. Many senior staff of Cadbury left the business after the takeover. Cadbury has had a long history of Corporate Social Responsibility (CSR) and a British iconic image. The success of a takeover or a merger depends upon how well a business addresses cultural issues after the transaction. For example, the founders of Innocent were able to run the business separately after Coca Cola’s takeover.
On the other hand, takeovers and mergers involving businesses with different cultures may not result in failure because good integration planning could help prevent cultural issues from arising. Integration planning refers to how a business is going to run the targeted business after a takeover or a merger. This enables a business to understand the differences in cultures of the targeted business. A good example of this is the takeover of Jaguar Land Rover (JLR) by Tata Group in 2008. Tata was able to produce a detailed integration plan that it was able to share with and gain the support of key stakeholders in JLR including employees, government and trade unions. Tata’s integration plan focused on making good use of the existing factories in the UK and the potential returns that it was planning to accomplish. Despite taking place during an economic downturn leading to a fall in demand for luxury cars, JLR has made a success in improving its profitability and entering emerging markets like China and Latin America. As a result, this takeover has generated large shareholder value and gained supports from JLR’s stakeholders in the UK. Tata initially bought JLR at £1bn but the business now worth about £9 -10bn, besides a 42% increase in profitability in 2012. The success of a takeover or a merger will largely depend upon how well a business addresses cultural issues to prevent resistance to cultural change.
Another reason why a takeover or a merger which involves firms with different corporate cultures might be successful is because good post-merger integration could help prevent cultural problems. Post-merger integration is often difficult because of significant differences in corporate cultures and resistance to cultural change. A perfect example of this is the takeover of Abbey National by Santander in 2004. Santander quickly integrated its ICT systems with Abbey National to achieve cost-synergies. A main difference between Santander and Abbey National was that Santander put a large emphasis on front-office activities. Santander reduced the amount back-office staff of Abbey and provided extensive training to increase the number of front-office staff in order to deliver better customer services. The integration of Santander and Abbey has resulted in a successful takeover and more subsequent takeovers of UK banks by Santander to strengthen its market position in the UK. Hence, although cultural issues may hinder the success of a business, it depends on how fast a business implements change. It also depends on the effectiveness of change in management in managing cultural issues.
Overall, takeovers and mergers involving firms with differences in corporate cultures may not result in failure. What is meant by failure? It ultimately depends on whether a business is looking at short-term failure or long-term failure. Long-term failure is likely to be more detrimental to the success of a business. It depends on how significant is the cultural differences between two businesses. It also depends how strong the corporate cultures of a business are. A key influence to the success of a takeover or a merger is how fast a business implements change to prevent cultural issues.
great essay!! just printed it off for revision haha thanks!
Can some of you read the first essay i've written in weeks please?!
What grade do you think it will get?
What extent do you think that governments should intervene in takeovers and mergers?
Takeovers and mergers are 2 ways which a business can acquire another business. A takeover is a hostile approach whereas a merger is an agreed acquisition as both businesses believe there will be mutual benefits. An example of government intervention in a takeover is when the competition commission stopped the News International takeover of BSkyB.
I believe that governments should intervene in mergers if it is going to lead to job losses. If the effects of the takeover or merger are going to lead to negative effects on society then government intervention is vital. For example, heavy job losses will lead to an increase in government spending on benefits which would mean higher taxes for the working population, possibly leading to a decrease in consumption and an increase in saving. This may lead to a contraction of growth in the economy. An example of a government intervening in this way was Kraft's takeover of Cadbury. The government made sure Kraft would “continue to produce in the UK and to base Cadbury's marketing and sales here too”. This was good for the UK because it meant no jobs were lost as the factors that were based in the UK still were, post takeover. To evaluate, it may be hard to tell what had happened if the government didn't intervene. Kraft may have felt the need to do more to continue Cadbury's British identity. However, because the government set guidelines, Kraft may have felt the need to have less to do with Britain.
Another reason why I believe that governments shoulds intervene in takeover and mergers is if they reduce the amount of choice available in society (or increase prices) due to the combined market share of the 2 businesses monopolising the industry. A monopoly in an industry is considered to be a business with over 25% market share, pure monopolies are very rare and are likely only achieved due to natural barriers to entry, for example, regional water companies – they control the only water pipelines. I believe the lack of choice is bad for the societies that are democratic as they may undermine the values of society. For example, News International's proposed takeover of BSkyB was blocked because they would monopolise the media industry and this would have affected political decisions and voting patterns as the media may be able to influence their audience. Also, a monopoly is bad for society because they can restrict output and prices. This would allow them to earn greater profits at the expense of consumers who would inevitably face higher prices due to a lack of competition made by high barriers to entry. However, if a government intervenes, competition in an industry would be encouraged which would lead to greater efficiency, meaning the consumers would get cheaper prices. However, by blocking an acquisition that would lead to a monopoly would mean that possible benefits may disappear. Monopolies can lead to lower prices due to utilising more economies of scale, and by intervening in the market, these benefits will not be received by the public.
However, in some cases, I believe that governments should support takeovers and mergers. Even though 80% of takeovers fail, the ones that succeed are likely to be performing very well, even in the current economic circumstances. For example, the Tata takeover of JLR has been very successful despite difficulties shortly after the acquisition. The takeover has worked because unlike takeovers that have failed in the past such as Daimler and Chrysler, Tata do not try and force their culture on to JLR. They have realised that there is a lot of difference between the 2 companies. For example, Tata own the worlds cheapest car whereas Jaguar are a luxury brand. Also, the takeover has created synergies, which means that the expertise used in one business can be used to save costs in another. Tata used some of JLR's production techniques to help them cut production costs. This is a good reason why governments shouldn't intervene because if they did, then a lot of the benefits that have happened due to this takeover wouldn't have happened.
Government intervention at times is vital to prevent too much power for one business in a particular industry. This has its benefits because it can lead to increased competition in the market which encourages businesses to cut their costs as much as possible so that they can remain competitive. However, if they allow mergers and takeovers to happen, then the monopoly power could yield benefits such as increasing innovation which would lead to dynamic trade gains. Also, monopolies can make prices higher but this doesn't mean they have to, they may be able to increase profits more effectively in other ways. I also believe governments should intervene because they are likely to have better knowledge on future external conditions such as the economy. Therefore, they may be able to see why a takeover or merger will experience problems in the future, unlike the CEOs who run the businesses.
To conclude, I believe that governments should intervene in takeovers and mergers for a number of different reasons. They have more knowledge of external factors in their country than businesses, and know the likely effects the acquisition will have. They also can help protect those in society who would be vulnerable in society as a result of a takeover. Of course, there are factors that show why governments shouldn't intervene, but I believe they are weaker than the points for government intervention.
What grade do you think it will get?
What extent do you think that governments should intervene in takeovers and mergers?
Takeovers and mergers are 2 ways which a business can acquire another business. A takeover is a hostile approach whereas a merger is an agreed acquisition as both businesses believe there will be mutual benefits. An example of government intervention in a takeover is when the competition commission stopped the News International takeover of BSkyB.
I believe that governments should intervene in mergers if it is going to lead to job losses. If the effects of the takeover or merger are going to lead to negative effects on society then government intervention is vital. For example, heavy job losses will lead to an increase in government spending on benefits which would mean higher taxes for the working population, possibly leading to a decrease in consumption and an increase in saving. This may lead to a contraction of growth in the economy. An example of a government intervening in this way was Kraft's takeover of Cadbury. The government made sure Kraft would “continue to produce in the UK and to base Cadbury's marketing and sales here too”. This was good for the UK because it meant no jobs were lost as the factors that were based in the UK still were, post takeover. To evaluate, it may be hard to tell what had happened if the government didn't intervene. Kraft may have felt the need to do more to continue Cadbury's British identity. However, because the government set guidelines, Kraft may have felt the need to have less to do with Britain.
Another reason why I believe that governments shoulds intervene in takeover and mergers is if they reduce the amount of choice available in society (or increase prices) due to the combined market share of the 2 businesses monopolising the industry. A monopoly in an industry is considered to be a business with over 25% market share, pure monopolies are very rare and are likely only achieved due to natural barriers to entry, for example, regional water companies – they control the only water pipelines. I believe the lack of choice is bad for the societies that are democratic as they may undermine the values of society. For example, News International's proposed takeover of BSkyB was blocked because they would monopolise the media industry and this would have affected political decisions and voting patterns as the media may be able to influence their audience. Also, a monopoly is bad for society because they can restrict output and prices. This would allow them to earn greater profits at the expense of consumers who would inevitably face higher prices due to a lack of competition made by high barriers to entry. However, if a government intervenes, competition in an industry would be encouraged which would lead to greater efficiency, meaning the consumers would get cheaper prices. However, by blocking an acquisition that would lead to a monopoly would mean that possible benefits may disappear. Monopolies can lead to lower prices due to utilising more economies of scale, and by intervening in the market, these benefits will not be received by the public.
However, in some cases, I believe that governments should support takeovers and mergers. Even though 80% of takeovers fail, the ones that succeed are likely to be performing very well, even in the current economic circumstances. For example, the Tata takeover of JLR has been very successful despite difficulties shortly after the acquisition. The takeover has worked because unlike takeovers that have failed in the past such as Daimler and Chrysler, Tata do not try and force their culture on to JLR. They have realised that there is a lot of difference between the 2 companies. For example, Tata own the worlds cheapest car whereas Jaguar are a luxury brand. Also, the takeover has created synergies, which means that the expertise used in one business can be used to save costs in another. Tata used some of JLR's production techniques to help them cut production costs. This is a good reason why governments shouldn't intervene because if they did, then a lot of the benefits that have happened due to this takeover wouldn't have happened.
Government intervention at times is vital to prevent too much power for one business in a particular industry. This has its benefits because it can lead to increased competition in the market which encourages businesses to cut their costs as much as possible so that they can remain competitive. However, if they allow mergers and takeovers to happen, then the monopoly power could yield benefits such as increasing innovation which would lead to dynamic trade gains. Also, monopolies can make prices higher but this doesn't mean they have to, they may be able to increase profits more effectively in other ways. I also believe governments should intervene because they are likely to have better knowledge on future external conditions such as the economy. Therefore, they may be able to see why a takeover or merger will experience problems in the future, unlike the CEOs who run the businesses.
To conclude, I believe that governments should intervene in takeovers and mergers for a number of different reasons. They have more knowledge of external factors in their country than businesses, and know the likely effects the acquisition will have. They also can help protect those in society who would be vulnerable in society as a result of a takeover. Of course, there are factors that show why governments shouldn't intervene, but I believe they are weaker than the points for government intervention.
Seeing as this is essay club now..
To what extent is the use of takeovers and mergers an essential part of the growth strategy of any business that wishes to become a market leader?
Mergers and acquisitions are a big part of growing as a business. You can either grow internally by expanding your operations, or you can grow externally by adding to your business with the use of mergers or acquisitions. In this essay I will argue that it is not essential for organisations to externally grow, but I will look at the other side of the argument which is that it certainly helps businesses to become market leaders, before coming to a fully justified conclusion.
There are market leaders today that have not used the method of mergers and takeovers to achieve their status. They have climbed the business ladder by simply being the business they are and by offering great products and services. If you are the clear best choice for consumers then you won’t ever need to grow externally; all you need is good marketing, and the growth strategy will take care of itself. You can achieve high enough retained profits to expand where you like. Tesco is one such example. They have the best prices due to economies of scale, they have the cleanest stores, and whilst the customer service is good they are not overtly friendly, meaning customers feel at ease. Tesco is accessible; there is no identifiable class level associated it as opposed to upmarket Waitrose or downmarket Co-op. They have such a high market share (~30%) that they are banned from acquiring or merging. They have left mergers and acquisitions out of their business model, and instead built upon their global success using the above methods. Therefore, Tesco is a perfect example of how to achieve vast market dominance without the need to use external growth. Therefore with one of the biggest retailers in the world, we can determine that mergers and takeovers are not an essential part of the growth strategy for market leaders.
Whilst some companies use takeovers to secure their position, they are not essential for becoming a market leader. Companies analyse their position in the market, identify how they could be made stronger as a business and acquire other assets based on that information. When they acquire new businesses therefore, they fill a gap in their organisation where they are lacking, hence strengthening their position in the market. They have the strengths of another business to match their own weaknesses, and become stronger as a result. They then put themselves in a position where they can become a market leader, as they have the assets required for such a feat and have plugged the gap in the market. Amazon.com is a perfect example of this. Just forty five days after they launched their DVD section they were the market leader in online DVD sales. They then consolidated their position by buying IMDB, a British online company which catalogued almost every film ever made. Amazon added their reviews and movie expertise to their DVD department and became significantly stronger as a result. So whilst it was not essential for them to acquire IMDB to become the market leader, doing so strengthened their hold on the market significantly.
Becoming a market leader sometimes just depends on identifying gaps and developing on them, and has nothing to do with mergers and takeovers. If there is a gap in the market, and you can fill that gap and then protect your idea, you have done most of the work already. All you need to do is develop your idea and make it sellable. If you don’t have any competitors then you are by default the market leader. Your growth then comes from developing new ideas and improving your exiting products. Apple Inc are a perfect example of this. The late Steve Jobs was excellent at spotting gaps in the market and then creating a product to match that gap. He chose to grow internally using this method, and whilst Apple do take over companies, it is not their primary growth strategy. Their growth strategy is to create new and trendy products, and have proven to be very successful given that the iPad is and continues to be the best selling electronic piece of equipment of all time. Therefore, whilst Apple are far and away the market leader in this sector, they do it through internal growth and innovation, and have proved that it is by no means essential for them to take over companies to do it. They have all the power they need.
There are organisations however that became market leaders because they merged and/or acquired other businesses. There are times when two businesses are strong by themselves, but when combined with another could quite easily completely dominate the market. Companies merge for two main reasons; to cut costs (cost synergies) or to increase revenues. If you merge with the right organisation then you could double your revenues, however this is nearly impossible due to anti-monopoly bodies. With some companies in fact the only way you can grow is to buy another company. If your market is saturated, you’re going to need a new market. In 1999 Exxon, the leading oil company in the United States, merged with Mobil, the second largest oil company in the United States. The deal was worth $81bn, and was essential to both organisations as they couldn’t grow internally any more without buckling under their own weight. The merger was so large they had to sell parts of their business to get around European competition legislation. The merger therefore was essential for the growth of both Exxon and Mobil, and proves to us that sometimes it is the only way forward.
When companies are faced with competitors, usually they compete with them. Sometimes they don’t. Sometimes they buy them. This both eliminates competition and adds to the company in areas that, obviously, it couldn’t do well enough. Going back to the point about consolidating your position in the market, if you identify a gap in the market but someone has already taken it, the logical thing to do is to buy them and add their revenues to your revenues. You then therefore eliminate competition and strengthen your business at the same time. Some businesses are forced to make it part of their growth strategy to expand externally because they are faced with no other option. The other is to stagnate, cease innovating and eventually become outdated and out of business. Kraft was faced with this stark reality in 2010. One of their biggest competitors was the Cadbury chocolate manufacturer in the United Kingdom. In a takeover worth £11.5bn, Kraft eliminated their competition across the Atlantic. This was an essential part of their growth strategy because otherwise they would have no hope of ever capturing the British confectionery market. To put it into perspective, their biggest selling product was Philadelphia spreadable. They are nowe however the market leader in the United Kingdom, after the acquisition, which greatly strengthened their reach. To summarise this point therefore, I would say that in certain circumstances it is essential for businesses to take over other organisations if they wish to become a market leader. Sometimes there is no other way.
In conclusion, I fully believe that mergers and takeovers are not essential for all organisations growth strategies. Sometimes it is essential for the survival of the business, but if you innovate and capture the market early then it may be that you never have to grow externally, and everything you need is right there in your business.
The Intel Corporation produces microprocessors that are used in computers. It has a market share of over 75% and has been praised for its highly innovative culture. Do you think that an innovative culture can be relied on to guarantee the future success of a business? Justify your answer with reference to Intel and/or other organisations you know.
All of the most prolific billionaires do not do so from being the CEO of a company, or even identifying a market niche; they do it through innovation. Steve Jobs, Jeff Bezos, Howard Schultz, Bill Gates all made their wealth through creating something extraordinary and giving it to the world. I think that having an innovative culture is a big indication of having a successful business, but it is my opinion that it is by no means the only thing separating a business from success or failure. In this essay I will argue both ways however before coming to a fully justified conclusion.
Innovative cultures allow businesses to see the overall picture from an early stage. They can sense what people will want five years down the line, and this can give the business a huge advantage over everyone else in the market. Therefore, in a way they can guarantee future success, but only if the CEO successfully predicts how the market will morph. With some upstarts an innovative culture is the only thing that businesses have to go on in terms of guaranteeing future success, such is in the case with Jeff Bezos and Amazon.com. In the early days of the World Wide Web, around the time of the dot com boom and the subsequent crash, Jeff Bezos founded Amazon.com in his garage. He saw that websites in the early days were clunky, hard to navigate and only for the technologically astute, and as a result created a website that was friendly for all. Indeed, he holds the patent for the ‘One Click’ buying tool. He forced everything back into the business, making tables out of doors for example to cut costs. Workers were also heavily rewarded for ideas they brought to the table that could increase customer satisfaction. As a result of this early reputation building and foresight that users would want a seamless customer experience, Amazon remains one of the most valuable retail companies in the world and it is hard to imagine its failure. In this situation therefore it is hard to dispute that the innovative culture at Amazon guaranteed its success.
A culture of innovation can lead to identifying gaps in the market and creating a product or service to fill that gap. If everyone is constantly looking at new ideas that they can create to bridge a gap in their standard of living and being inspired to do so by a higher force, then the business is much more likely to succeed than a business where everyone lacks motivation and is unwilling to put forward suggestions. Again, you can not solely rely on an innovative culture to make a profit; you have to convert it into products and services, but it does go a long way. Steve Jobs of Apple had the same power as Jeff Bezos of Amazon.com. In Silicon Valley in California where the huge technology companies are located, they call it “The Vision Thing”. This is the power to inspire your employees so that they think that the business they are working for has a great purpose. This exists at Apple, and it shows. When the iPad was announced people said that there was no purpose for it and it would be a flop, but they couldn’t have been more wrong. It has since become the highest selling electronic gadget of all time. This innovative culture at apple has done the same thing countless times; identifying a gap where there was not thought to be a gap, creating a product for it and selling it by its millions. It is why Apple is currently the most valuable country in the world. In Apple’s case therefore, this innovative culture certainly guaranteed the success of the business.
There are businesses that have been successful, but failed to adapt and expand, and consequently die or suffer as a result. An essential part of being a business is growth, without it you can’t beat competitors and you can’t improve the customer experience. To not try and expand and innovate can only have one inevitable outcome, especially in today’s age of globalisation and rapid growth. Markets are expanding and retracting at a rate never seen before, something equally keenly felt by the photography industry. Kodak failed to adapt in the wake of camera manufactures such as Sony, Nikon and Canon capturing the market with their image. Kodak retained one of using disposable cameras and cheap digital cameras, and it simply wasn’t enough. As a result, they failed. If they had innovated however they could have easily continued to succeed as a business. The imaging world is becoming more and more important, as shown by Facebook’s seemingly inexplicable acquisition of Instagram for $1bn. There were ample opportunities for Kodak to retain their share in the market but they failed to do so by failing to update their image at the rate of their competitors. In this situation therefore it is certain that the lack of Kodak’s innovative culture led to their downfall. A contrasting example of a business that did capture this market well is Nikon. It is now seen as fashionable to be seen with a Nikon DLSR camera, whereas five years ago it was unheard of. They sensed the market was adapting and they used their innovative culture to pounce on it.
Indeed, there are also businesses that have had an innovative culture but have failed for other reasons. Going back to my point in the introduction, having an innovative culture is a big boost for most businesses, but it would be naive and complacent to rely on it entirely to allow you to succeed as a business. You can have the best innovation in the world, but if you incorrectly predict a market gap, then you will not make sales. In the case of Google, they have never failed as a business, but parts of their business have not succeeded. For example; when they launched Google Video in 2005 it was to combat YouTube, and try and capture their market. This did not work however and they ended up buying YouTube a year later. Google is renowned for its innovative culture, and they tried to innovate by creating a service to match YouTube’s. As it stands however the market was already filled and Google Video was never a success. They took it down a few years later and ploughed all of their resources into YouTube. This shows that whilst having an innovative culture can help you as a business to bridge gaps and try to fill them, if the gap is already filled then it is irrelevant whether you are innovative or not. People would never leave YouTube for another video sight, and so we can conclude from this that whilst Google Video was innovative, it was not successful. That is not to say that companies who are innovative cannot capture markets, such as Innocent Smoothies who own about 75% of the smoothie market in the UK, but it does mean that it is an incredibly hard battle to fight if the market is already filled.
In conclusion, I would say that having an innovative cultures gives businesses a huge head start on those that do not. Going into the workplace and feeling empowered to make real decisions that make a real impact on the outcome of the business make all the difference. It gives people massive foresight on what could work, as opposed to a workforce that is oppressed and decisions are often made by a board of high ranking employees that can only see things from the eyes of the shareholders. It allows the company to spot gaps and make products to fill those gaps. Having an innovative culture makes all the difference to the success of a business because it allows the business to keep up with the competition, and it also gives the business the knowledge to not try and develop in a market that is already highly saturated. All of this however must be considered alongside the fact that just having an innovative culture is not enough to guarantee the long term success of the business. You need to consider other things such as if the market is already filled, what the shareholders want (as that ultimately impacts on the leadership of the company) and other external market conditions. Only when you have considered these points and made sure you have covered them can having an innovative culture really make a difference.
Today, no business can successfully merge with another unless their aims and objectives are strategically aligned. To what extent do you agree with this statement?
Mergers can only really be fully successful if the aims and objectives, and indeed the culture of the businesses are the same. This does not necessarily need to happen before the merger; it could happen after it. But if the two companies do not align themselves to the same set of principles then it is likely that the merger will not be successful. It is my belief therefore that they do need to be strategically aligned, but they also need to be culturally aligned. In this essay I will look at both sides of the argument before coming to a fully justified conclusion.
The aims and objectives of the two companies can be perfectly strategically aligned, but if they are not culturally aligned then problems will be encountered. The individual employees need to want the same thing for the business in order for it to succeed. For example, if one employee wants to achieve high profits, whilst his counterpart in the other business wants to establish a good reputation, it is inevitable that they will fall out and it will create co-operation problems. Multiply this by tens of thousands and you have a large scale merger. Therefore, even if their aims and objectives are aligned strategically, culture needs to be considered as well. Fortunately, Disney and Pixar didn’t have this problem in what was probably the most successful merger of all time. Their cultures could not be more similar; whilst always striving for a profit they do it through entertaining people. It is a testament to the mindset of the employees that work at the two companies that the merger was so successful. This therefore is an example of a merger that was successful and the aims and objectives of the respective companies were both strategically aligned and culturally aligned.
Companies who go into a merger being strategically aligned already face a very easy deal and transition. Indeed, some examples of mergers are so strategically sensible that it is hard to see how they would fail. Therefore, if two companies’ aims and objectives are completely strategically identical, a successful merger is likely to occur. The merger between United and Continental Airlines agreed in 2010 would create the largest airline in the world. Their two main aims and objectives were to essentially overpower Delta Airlines and reduce air fares. When they combined, they brought mutual interests together to create a much stronger business. They could create cost synergies by trimming off unnecessary parts of their business, such as surplus staff/assets. It was in both of their interests to complete this merger, and they companies merged almost perfectly, if not for a technical issue in combining the booking systems. It is therefore a huge advantage if the aims and objectives of two businesses wanting to merge are strategically aligned, I believe that if the aims and objectives are strategically aligned, then you only need to make sure that the culture is also compatible for the merger to be successful. Obviously you need to maintain high sales and relatively low costs for the resulting business to be a long term success, but the merging itself will be successful.
There are businesses that have tried to merge and failed as a result of their aims and objectives not only not being strategically aligned, but polar opposites. A merger between two equal, large organisations has to have some level of cohesion and purpose. If the two companies want two different things then the merger will most likely not be successful, therefore the two companies need to be aligned in at least one way. In 2000 when TimeWarner merged with AOL, the two companies could not have been more different. AOL’s main aim was to provide internet acces for everyone, whilst TimeWarner still lacked even a website. Their main aim was to continue presenting people with information in magazines, films and twenty four hour news. Ten years later after a horrendous relationship between the two countries, they split. The reason it failed was because the leadership of both companies never took the time to convince their people to sell the products that they took on. It was a strategic failure and sort of a cultural failure. No one was emotionally invested or strategically invested in selling new products. To this extent therefore, I agree that a business cannot merge with another unless their aims and objectives are strategically aligned. A good example of a media company combining with an internet company is New York Times acquiring about.com, which saw their revenues go up due to advertising and added an excellent online arm to their empire.
Attention must be paid to reasons for failure outside of aims and objectives. The aims and strategies can be aligned within a business but if they are not managed effectively then of course they will not successfully merge. The businesses making the acquisition need to ensure that they can effectively manage the other businesses finances and sales before taking them on. Even if their aims and objectives are identical they need to be led appropriately. Therefore, extensive planning should be done to ensure that they are led correctly. When Quaker Oats bought Snapple in 1994, Quaker thought that they could manipulate large supermarket chains to get the prices that they wanted, not realising that half of Snapple’s products were sold in individual stores. They were also very poor at marketing Snapple once they had bought them, which led to a poor reputation being gained for Snapple. Therefore despite the aims and objectives being strategically aligned, they were forced to break off the merger because Quaker had not effectively managed Snapple. They had become complacent and believed themselves too big to fail.
In conclusion, I believe that whilst it is important for businesses to have similar strategic aims and objectives, it is also vital for them to consider the other implications of their work. Too often do businesses become complacent and think that wanting the same thing as the other business makes the move viable. This simply isn’t the case. The cultures also need to be the same and the management need to be competent enough to adapt to a new business entering the fold. However, whilst this is true it is also vital for businesses to have aims and objectives that are strategically aligned. As I said earlier, if one worker wants very high profits at the expense of ethics whilst another is obsessed with corporate social responsibility and being a carbon friendly business, then they will fall out, divisions will become evident and the merger or acquisition is likely to fail. Businesses therefore should put great emphasis on compromising between their aims and objectives before merging. They should also anticipate the difficulties in managing the new business, as there will surely be huge disparities between the leadership styles of both businesses. To summarise therefore, it is true that the aims and objectives of the businesses merging need to be strategically aligned, if not identical, but it would be foolish to say that having strategically aligned aims and objectives is the only thing governing the success of the merger or acquisition.
To what extent do you think that cutting costs is the best strategy for businesses to adopt in a recession?
Cutting costs, or cost synergies, is one of two main ways to better your cash flow. The other is, of course, raising your revenue. These two things become even more important when you are a business performing in a recession, because consumer spending will be a lot less and you need to focus more than ever on maximising your business performance. It is my opinion that cutting costs is not the best strategy for a business to take during a recession and that it should focus much more on other things.
Cutting costs is of course an important part of any business model that comes under attack from external market conditions. Over expansion can lead to costs that companies cannot sustain, and as a result of this they find themselves under threat. Therefore, if a business fears that it has over expanded it should stop immediately and focus on other things within the organisation. Through a cessation in expansion, businesses can cut costs and come out of the recession as a successful organisation. In the year 2000 Howard Schultz stepped down as the chief executive of the Starbucks Corporation. In 2008, at the height of the global financial crisis, he returned after Starbucks started to perform terribly. Sales were down and consumer interest was falling. He made the executive decision therefore to stop Starbucks’ strategy of aggressive overexpansion and instead plough all of the profits straight back into reforming the culture of Starbucks. The practise of putting the customer’s names on their cups comes from this transformation in culture; it stopped being a business that was always expanding and looking for new territory into a customer centric business. It could not survive in the recession with both high costs from over expansion and low revenues from customers who preferred to get their coffee from instant, supermarket coffee in light of their financial situation. In this situation therefore, the right decision for Starbucks was to cut costs and concentrate instead on other parts of their business.
External growth is an excellent way to form cost synergies but at the same time bring in valuable new talent with mutual aims. If two organisations that are struggling can identify why they are struggling and subsequently identify another business that shares both their values and aims/objectives, then a merger or acquisition could be an excellent strategy to adopt in a recession. However, if the two companies are not extremely well suited to be together it could be disastrous to merge, such as in the case of the 2000 AOL-TimeWarner merger. For some businesses however it can pull them from the brink of collapse, such as the 2010 merger between United and Continental airlines. They merged to cut costs so that they could lower their ticket prices and attract more business fliers, and also to combat Delta airlines, all because of the effect that the recession was having on the money consumers were spending and where they were spending it. The merger was a great success save for some technical problems. For the two companies therefore it was probably the best strategy that they could adopt in the recession, because it both increased their market and cut costs considerably. A similar case of this is the merger between British Airways and Iberia. It saves them £350m a year which allows them to target a greater segment of the market.
Internal growth is also a good strategy to adopt in a recession that does not involve cutting costs. If anything, it increases them. Internal growth is expanding without the use of mergers or acquisitions, for example a restaurant chain establishing a new branch is internal growth. It can be a very good strategy for businesses to adopt in a recession because it allows your business to branch out into different markets and perhaps increase your revenues where otherwise you were not doing so. Therefore, if a business can grow internally and capture a new market it can help greatly during a recession because more revenue is added to the business. It can also help cut costs, for example if you externally grow by creating your own distribution centre, you save money in the long run from paying a third part to do it. A good example of a business that has internally grown in a recession is ‘YO! Sushi’. In 2008, at the height of the recession, they opened nine new stores, whereas previously they had only opened six in any one year. The chief executive Robin Rowland saw that people would keep buying the food offered, and so opened more and more stores. Instead of cutting costs, he continued expanding into more areas because he knew that YO! was extremely popular. In fact, not a single restaurant makes a loss. If he cut costs however it could be seen as a decline in the quality of the service, which would in the long term do more harm than investing in new restaurants. In this situation therefore, cutting costs would not have been a good strategy because it could have had a detrimental effect on the reputation of ‘YO! Sushi’.
Some strategies are completely unchanged, recession or not. No attempts to cut costs are made, and now business plans are rapidly drawn up to deal with the financial situation. Some businesses are not affected by recession. They are very few, but they do exist. Discount stores are a good example of this. Apart from keeping higher stock than usual, they normally do very well out of a recession as people look to save in any way possible. In this case therefore the best strategy is to keep offering the standard of customer service and prices that you already do. If you change you risk upsetting the balance and causing customers to leave for your competitors. Wal-Mart, the largest retailer one earth, did extraordinarily well out of the recession. This is because they offer quality goods at very low prices. Wall Street predicted for their stock to rise 2.4% in the year after the recession. It actually rose 5%. People flocked to wal-mart as a good alternative to other relatively high priced stores. If consumers can cut ten dollars out of every grocery shopping trip then it very quickly adds up. If Wal-mart changed however, then it may not have remained in the eyes of the consumer as a cheap shop to go to. In a way its reputation as being low-budget ensured that it survived through the recession. People that had not necessarily shopped there before went there because they knew that is where they could find bargains. A contrasting example of a supermarket that has not done so well is Tesco in the USA. Whilst it continues to achieve very high profits in the United Kingdom, unfavourable exchange rates have pushed its profits down all the way into a £186m loss. The poor exchange rates are due to the recession, and it is arguable that if they lowered their costs significantly they could make a profit in the US.
In conclusion, cutting costs is essential for some businesses in recession. If consumers are spending less then of course, you need to cut costs to continue making a profit. In this case therefore, cutting costs would be the best strategy for businesses that sell luxury products. Starbucks for example is not an essential product; the coffees are not cheap and it is more of a social symbol than anything. In reality there is very little taste difference between a Tesco coffee or a star bucks coffee. Starbucks therefore needs to update its price strategy to stay at equilibrium with people’s disposable income. Other businesses however such as airlines merge to combine their strengths and create cost synergies, enabling them to reach a wider market. Internal growth such as that of ‘YO! Sushi’ is also important; you need to keep up your image of being a reputable business, especially in recession. People are expecting more for less, and so businesses cannot falter on their customer service at any time. In the case of ‘YO!’, they kept adapting and innovating to keep up with the recession. They made their business a good place to go in light of the recession. Perhaps not cheap, but it makes people feel both cultured and wanted. The staff are friendly and eating authentic sushi has more of a selling point than a burger and chips. Therefore whilst costs are a big factor in recession strategies, you also need to consider customer service. Too often do businesses become complacent in the light of rapid growth and neglect the smaller details. Discount stores do not seek their recession strategies in cost cutting, but keeping their image high. They need to invest more than ever in making sure people know that you are the store with the lowest prices, as Wal-Mart does effectively. To summarise however, businesses must make some sort of consideration towards the average consumer in recession. Whether it is through traditional cost cutting, great customer service or just being there for customers, they cannot neglect to consider that the average consumer has quite a small disposable income. All the businesses mentioned above have survived because in some way they have seen that in order to get through the recession, they need to adapt to what the customer needs.
To what extent is the use of takeovers and mergers an essential part of the growth strategy of any business that wishes to become a market leader?
Mergers and acquisitions are a big part of growing as a business. You can either grow internally by expanding your operations, or you can grow externally by adding to your business with the use of mergers or acquisitions. In this essay I will argue that it is not essential for organisations to externally grow, but I will look at the other side of the argument which is that it certainly helps businesses to become market leaders, before coming to a fully justified conclusion.
There are market leaders today that have not used the method of mergers and takeovers to achieve their status. They have climbed the business ladder by simply being the business they are and by offering great products and services. If you are the clear best choice for consumers then you won’t ever need to grow externally; all you need is good marketing, and the growth strategy will take care of itself. You can achieve high enough retained profits to expand where you like. Tesco is one such example. They have the best prices due to economies of scale, they have the cleanest stores, and whilst the customer service is good they are not overtly friendly, meaning customers feel at ease. Tesco is accessible; there is no identifiable class level associated it as opposed to upmarket Waitrose or downmarket Co-op. They have such a high market share (~30%) that they are banned from acquiring or merging. They have left mergers and acquisitions out of their business model, and instead built upon their global success using the above methods. Therefore, Tesco is a perfect example of how to achieve vast market dominance without the need to use external growth. Therefore with one of the biggest retailers in the world, we can determine that mergers and takeovers are not an essential part of the growth strategy for market leaders.
Whilst some companies use takeovers to secure their position, they are not essential for becoming a market leader. Companies analyse their position in the market, identify how they could be made stronger as a business and acquire other assets based on that information. When they acquire new businesses therefore, they fill a gap in their organisation where they are lacking, hence strengthening their position in the market. They have the strengths of another business to match their own weaknesses, and become stronger as a result. They then put themselves in a position where they can become a market leader, as they have the assets required for such a feat and have plugged the gap in the market. Amazon.com is a perfect example of this. Just forty five days after they launched their DVD section they were the market leader in online DVD sales. They then consolidated their position by buying IMDB, a British online company which catalogued almost every film ever made. Amazon added their reviews and movie expertise to their DVD department and became significantly stronger as a result. So whilst it was not essential for them to acquire IMDB to become the market leader, doing so strengthened their hold on the market significantly.
Becoming a market leader sometimes just depends on identifying gaps and developing on them, and has nothing to do with mergers and takeovers. If there is a gap in the market, and you can fill that gap and then protect your idea, you have done most of the work already. All you need to do is develop your idea and make it sellable. If you don’t have any competitors then you are by default the market leader. Your growth then comes from developing new ideas and improving your exiting products. Apple Inc are a perfect example of this. The late Steve Jobs was excellent at spotting gaps in the market and then creating a product to match that gap. He chose to grow internally using this method, and whilst Apple do take over companies, it is not their primary growth strategy. Their growth strategy is to create new and trendy products, and have proven to be very successful given that the iPad is and continues to be the best selling electronic piece of equipment of all time. Therefore, whilst Apple are far and away the market leader in this sector, they do it through internal growth and innovation, and have proved that it is by no means essential for them to take over companies to do it. They have all the power they need.
There are organisations however that became market leaders because they merged and/or acquired other businesses. There are times when two businesses are strong by themselves, but when combined with another could quite easily completely dominate the market. Companies merge for two main reasons; to cut costs (cost synergies) or to increase revenues. If you merge with the right organisation then you could double your revenues, however this is nearly impossible due to anti-monopoly bodies. With some companies in fact the only way you can grow is to buy another company. If your market is saturated, you’re going to need a new market. In 1999 Exxon, the leading oil company in the United States, merged with Mobil, the second largest oil company in the United States. The deal was worth $81bn, and was essential to both organisations as they couldn’t grow internally any more without buckling under their own weight. The merger was so large they had to sell parts of their business to get around European competition legislation. The merger therefore was essential for the growth of both Exxon and Mobil, and proves to us that sometimes it is the only way forward.
When companies are faced with competitors, usually they compete with them. Sometimes they don’t. Sometimes they buy them. This both eliminates competition and adds to the company in areas that, obviously, it couldn’t do well enough. Going back to the point about consolidating your position in the market, if you identify a gap in the market but someone has already taken it, the logical thing to do is to buy them and add their revenues to your revenues. You then therefore eliminate competition and strengthen your business at the same time. Some businesses are forced to make it part of their growth strategy to expand externally because they are faced with no other option. The other is to stagnate, cease innovating and eventually become outdated and out of business. Kraft was faced with this stark reality in 2010. One of their biggest competitors was the Cadbury chocolate manufacturer in the United Kingdom. In a takeover worth £11.5bn, Kraft eliminated their competition across the Atlantic. This was an essential part of their growth strategy because otherwise they would have no hope of ever capturing the British confectionery market. To put it into perspective, their biggest selling product was Philadelphia spreadable. They are nowe however the market leader in the United Kingdom, after the acquisition, which greatly strengthened their reach. To summarise this point therefore, I would say that in certain circumstances it is essential for businesses to take over other organisations if they wish to become a market leader. Sometimes there is no other way.
In conclusion, I fully believe that mergers and takeovers are not essential for all organisations growth strategies. Sometimes it is essential for the survival of the business, but if you innovate and capture the market early then it may be that you never have to grow externally, and everything you need is right there in your business.
The Intel Corporation produces microprocessors that are used in computers. It has a market share of over 75% and has been praised for its highly innovative culture. Do you think that an innovative culture can be relied on to guarantee the future success of a business? Justify your answer with reference to Intel and/or other organisations you know.
All of the most prolific billionaires do not do so from being the CEO of a company, or even identifying a market niche; they do it through innovation. Steve Jobs, Jeff Bezos, Howard Schultz, Bill Gates all made their wealth through creating something extraordinary and giving it to the world. I think that having an innovative culture is a big indication of having a successful business, but it is my opinion that it is by no means the only thing separating a business from success or failure. In this essay I will argue both ways however before coming to a fully justified conclusion.
Innovative cultures allow businesses to see the overall picture from an early stage. They can sense what people will want five years down the line, and this can give the business a huge advantage over everyone else in the market. Therefore, in a way they can guarantee future success, but only if the CEO successfully predicts how the market will morph. With some upstarts an innovative culture is the only thing that businesses have to go on in terms of guaranteeing future success, such is in the case with Jeff Bezos and Amazon.com. In the early days of the World Wide Web, around the time of the dot com boom and the subsequent crash, Jeff Bezos founded Amazon.com in his garage. He saw that websites in the early days were clunky, hard to navigate and only for the technologically astute, and as a result created a website that was friendly for all. Indeed, he holds the patent for the ‘One Click’ buying tool. He forced everything back into the business, making tables out of doors for example to cut costs. Workers were also heavily rewarded for ideas they brought to the table that could increase customer satisfaction. As a result of this early reputation building and foresight that users would want a seamless customer experience, Amazon remains one of the most valuable retail companies in the world and it is hard to imagine its failure. In this situation therefore it is hard to dispute that the innovative culture at Amazon guaranteed its success.
A culture of innovation can lead to identifying gaps in the market and creating a product or service to fill that gap. If everyone is constantly looking at new ideas that they can create to bridge a gap in their standard of living and being inspired to do so by a higher force, then the business is much more likely to succeed than a business where everyone lacks motivation and is unwilling to put forward suggestions. Again, you can not solely rely on an innovative culture to make a profit; you have to convert it into products and services, but it does go a long way. Steve Jobs of Apple had the same power as Jeff Bezos of Amazon.com. In Silicon Valley in California where the huge technology companies are located, they call it “The Vision Thing”. This is the power to inspire your employees so that they think that the business they are working for has a great purpose. This exists at Apple, and it shows. When the iPad was announced people said that there was no purpose for it and it would be a flop, but they couldn’t have been more wrong. It has since become the highest selling electronic gadget of all time. This innovative culture at apple has done the same thing countless times; identifying a gap where there was not thought to be a gap, creating a product for it and selling it by its millions. It is why Apple is currently the most valuable country in the world. In Apple’s case therefore, this innovative culture certainly guaranteed the success of the business.
There are businesses that have been successful, but failed to adapt and expand, and consequently die or suffer as a result. An essential part of being a business is growth, without it you can’t beat competitors and you can’t improve the customer experience. To not try and expand and innovate can only have one inevitable outcome, especially in today’s age of globalisation and rapid growth. Markets are expanding and retracting at a rate never seen before, something equally keenly felt by the photography industry. Kodak failed to adapt in the wake of camera manufactures such as Sony, Nikon and Canon capturing the market with their image. Kodak retained one of using disposable cameras and cheap digital cameras, and it simply wasn’t enough. As a result, they failed. If they had innovated however they could have easily continued to succeed as a business. The imaging world is becoming more and more important, as shown by Facebook’s seemingly inexplicable acquisition of Instagram for $1bn. There were ample opportunities for Kodak to retain their share in the market but they failed to do so by failing to update their image at the rate of their competitors. In this situation therefore it is certain that the lack of Kodak’s innovative culture led to their downfall. A contrasting example of a business that did capture this market well is Nikon. It is now seen as fashionable to be seen with a Nikon DLSR camera, whereas five years ago it was unheard of. They sensed the market was adapting and they used their innovative culture to pounce on it.
Indeed, there are also businesses that have had an innovative culture but have failed for other reasons. Going back to my point in the introduction, having an innovative culture is a big boost for most businesses, but it would be naive and complacent to rely on it entirely to allow you to succeed as a business. You can have the best innovation in the world, but if you incorrectly predict a market gap, then you will not make sales. In the case of Google, they have never failed as a business, but parts of their business have not succeeded. For example; when they launched Google Video in 2005 it was to combat YouTube, and try and capture their market. This did not work however and they ended up buying YouTube a year later. Google is renowned for its innovative culture, and they tried to innovate by creating a service to match YouTube’s. As it stands however the market was already filled and Google Video was never a success. They took it down a few years later and ploughed all of their resources into YouTube. This shows that whilst having an innovative culture can help you as a business to bridge gaps and try to fill them, if the gap is already filled then it is irrelevant whether you are innovative or not. People would never leave YouTube for another video sight, and so we can conclude from this that whilst Google Video was innovative, it was not successful. That is not to say that companies who are innovative cannot capture markets, such as Innocent Smoothies who own about 75% of the smoothie market in the UK, but it does mean that it is an incredibly hard battle to fight if the market is already filled.
In conclusion, I would say that having an innovative cultures gives businesses a huge head start on those that do not. Going into the workplace and feeling empowered to make real decisions that make a real impact on the outcome of the business make all the difference. It gives people massive foresight on what could work, as opposed to a workforce that is oppressed and decisions are often made by a board of high ranking employees that can only see things from the eyes of the shareholders. It allows the company to spot gaps and make products to fill those gaps. Having an innovative culture makes all the difference to the success of a business because it allows the business to keep up with the competition, and it also gives the business the knowledge to not try and develop in a market that is already highly saturated. All of this however must be considered alongside the fact that just having an innovative culture is not enough to guarantee the long term success of the business. You need to consider other things such as if the market is already filled, what the shareholders want (as that ultimately impacts on the leadership of the company) and other external market conditions. Only when you have considered these points and made sure you have covered them can having an innovative culture really make a difference.
Today, no business can successfully merge with another unless their aims and objectives are strategically aligned. To what extent do you agree with this statement?
Mergers can only really be fully successful if the aims and objectives, and indeed the culture of the businesses are the same. This does not necessarily need to happen before the merger; it could happen after it. But if the two companies do not align themselves to the same set of principles then it is likely that the merger will not be successful. It is my belief therefore that they do need to be strategically aligned, but they also need to be culturally aligned. In this essay I will look at both sides of the argument before coming to a fully justified conclusion.
The aims and objectives of the two companies can be perfectly strategically aligned, but if they are not culturally aligned then problems will be encountered. The individual employees need to want the same thing for the business in order for it to succeed. For example, if one employee wants to achieve high profits, whilst his counterpart in the other business wants to establish a good reputation, it is inevitable that they will fall out and it will create co-operation problems. Multiply this by tens of thousands and you have a large scale merger. Therefore, even if their aims and objectives are aligned strategically, culture needs to be considered as well. Fortunately, Disney and Pixar didn’t have this problem in what was probably the most successful merger of all time. Their cultures could not be more similar; whilst always striving for a profit they do it through entertaining people. It is a testament to the mindset of the employees that work at the two companies that the merger was so successful. This therefore is an example of a merger that was successful and the aims and objectives of the respective companies were both strategically aligned and culturally aligned.
Companies who go into a merger being strategically aligned already face a very easy deal and transition. Indeed, some examples of mergers are so strategically sensible that it is hard to see how they would fail. Therefore, if two companies’ aims and objectives are completely strategically identical, a successful merger is likely to occur. The merger between United and Continental Airlines agreed in 2010 would create the largest airline in the world. Their two main aims and objectives were to essentially overpower Delta Airlines and reduce air fares. When they combined, they brought mutual interests together to create a much stronger business. They could create cost synergies by trimming off unnecessary parts of their business, such as surplus staff/assets. It was in both of their interests to complete this merger, and they companies merged almost perfectly, if not for a technical issue in combining the booking systems. It is therefore a huge advantage if the aims and objectives of two businesses wanting to merge are strategically aligned, I believe that if the aims and objectives are strategically aligned, then you only need to make sure that the culture is also compatible for the merger to be successful. Obviously you need to maintain high sales and relatively low costs for the resulting business to be a long term success, but the merging itself will be successful.
There are businesses that have tried to merge and failed as a result of their aims and objectives not only not being strategically aligned, but polar opposites. A merger between two equal, large organisations has to have some level of cohesion and purpose. If the two companies want two different things then the merger will most likely not be successful, therefore the two companies need to be aligned in at least one way. In 2000 when TimeWarner merged with AOL, the two companies could not have been more different. AOL’s main aim was to provide internet acces for everyone, whilst TimeWarner still lacked even a website. Their main aim was to continue presenting people with information in magazines, films and twenty four hour news. Ten years later after a horrendous relationship between the two countries, they split. The reason it failed was because the leadership of both companies never took the time to convince their people to sell the products that they took on. It was a strategic failure and sort of a cultural failure. No one was emotionally invested or strategically invested in selling new products. To this extent therefore, I agree that a business cannot merge with another unless their aims and objectives are strategically aligned. A good example of a media company combining with an internet company is New York Times acquiring about.com, which saw their revenues go up due to advertising and added an excellent online arm to their empire.
Attention must be paid to reasons for failure outside of aims and objectives. The aims and strategies can be aligned within a business but if they are not managed effectively then of course they will not successfully merge. The businesses making the acquisition need to ensure that they can effectively manage the other businesses finances and sales before taking them on. Even if their aims and objectives are identical they need to be led appropriately. Therefore, extensive planning should be done to ensure that they are led correctly. When Quaker Oats bought Snapple in 1994, Quaker thought that they could manipulate large supermarket chains to get the prices that they wanted, not realising that half of Snapple’s products were sold in individual stores. They were also very poor at marketing Snapple once they had bought them, which led to a poor reputation being gained for Snapple. Therefore despite the aims and objectives being strategically aligned, they were forced to break off the merger because Quaker had not effectively managed Snapple. They had become complacent and believed themselves too big to fail.
In conclusion, I believe that whilst it is important for businesses to have similar strategic aims and objectives, it is also vital for them to consider the other implications of their work. Too often do businesses become complacent and think that wanting the same thing as the other business makes the move viable. This simply isn’t the case. The cultures also need to be the same and the management need to be competent enough to adapt to a new business entering the fold. However, whilst this is true it is also vital for businesses to have aims and objectives that are strategically aligned. As I said earlier, if one worker wants very high profits at the expense of ethics whilst another is obsessed with corporate social responsibility and being a carbon friendly business, then they will fall out, divisions will become evident and the merger or acquisition is likely to fail. Businesses therefore should put great emphasis on compromising between their aims and objectives before merging. They should also anticipate the difficulties in managing the new business, as there will surely be huge disparities between the leadership styles of both businesses. To summarise therefore, it is true that the aims and objectives of the businesses merging need to be strategically aligned, if not identical, but it would be foolish to say that having strategically aligned aims and objectives is the only thing governing the success of the merger or acquisition.
To what extent do you think that cutting costs is the best strategy for businesses to adopt in a recession?
Cutting costs, or cost synergies, is one of two main ways to better your cash flow. The other is, of course, raising your revenue. These two things become even more important when you are a business performing in a recession, because consumer spending will be a lot less and you need to focus more than ever on maximising your business performance. It is my opinion that cutting costs is not the best strategy for a business to take during a recession and that it should focus much more on other things.
Cutting costs is of course an important part of any business model that comes under attack from external market conditions. Over expansion can lead to costs that companies cannot sustain, and as a result of this they find themselves under threat. Therefore, if a business fears that it has over expanded it should stop immediately and focus on other things within the organisation. Through a cessation in expansion, businesses can cut costs and come out of the recession as a successful organisation. In the year 2000 Howard Schultz stepped down as the chief executive of the Starbucks Corporation. In 2008, at the height of the global financial crisis, he returned after Starbucks started to perform terribly. Sales were down and consumer interest was falling. He made the executive decision therefore to stop Starbucks’ strategy of aggressive overexpansion and instead plough all of the profits straight back into reforming the culture of Starbucks. The practise of putting the customer’s names on their cups comes from this transformation in culture; it stopped being a business that was always expanding and looking for new territory into a customer centric business. It could not survive in the recession with both high costs from over expansion and low revenues from customers who preferred to get their coffee from instant, supermarket coffee in light of their financial situation. In this situation therefore, the right decision for Starbucks was to cut costs and concentrate instead on other parts of their business.
External growth is an excellent way to form cost synergies but at the same time bring in valuable new talent with mutual aims. If two organisations that are struggling can identify why they are struggling and subsequently identify another business that shares both their values and aims/objectives, then a merger or acquisition could be an excellent strategy to adopt in a recession. However, if the two companies are not extremely well suited to be together it could be disastrous to merge, such as in the case of the 2000 AOL-TimeWarner merger. For some businesses however it can pull them from the brink of collapse, such as the 2010 merger between United and Continental airlines. They merged to cut costs so that they could lower their ticket prices and attract more business fliers, and also to combat Delta airlines, all because of the effect that the recession was having on the money consumers were spending and where they were spending it. The merger was a great success save for some technical problems. For the two companies therefore it was probably the best strategy that they could adopt in the recession, because it both increased their market and cut costs considerably. A similar case of this is the merger between British Airways and Iberia. It saves them £350m a year which allows them to target a greater segment of the market.
Internal growth is also a good strategy to adopt in a recession that does not involve cutting costs. If anything, it increases them. Internal growth is expanding without the use of mergers or acquisitions, for example a restaurant chain establishing a new branch is internal growth. It can be a very good strategy for businesses to adopt in a recession because it allows your business to branch out into different markets and perhaps increase your revenues where otherwise you were not doing so. Therefore, if a business can grow internally and capture a new market it can help greatly during a recession because more revenue is added to the business. It can also help cut costs, for example if you externally grow by creating your own distribution centre, you save money in the long run from paying a third part to do it. A good example of a business that has internally grown in a recession is ‘YO! Sushi’. In 2008, at the height of the recession, they opened nine new stores, whereas previously they had only opened six in any one year. The chief executive Robin Rowland saw that people would keep buying the food offered, and so opened more and more stores. Instead of cutting costs, he continued expanding into more areas because he knew that YO! was extremely popular. In fact, not a single restaurant makes a loss. If he cut costs however it could be seen as a decline in the quality of the service, which would in the long term do more harm than investing in new restaurants. In this situation therefore, cutting costs would not have been a good strategy because it could have had a detrimental effect on the reputation of ‘YO! Sushi’.
Some strategies are completely unchanged, recession or not. No attempts to cut costs are made, and now business plans are rapidly drawn up to deal with the financial situation. Some businesses are not affected by recession. They are very few, but they do exist. Discount stores are a good example of this. Apart from keeping higher stock than usual, they normally do very well out of a recession as people look to save in any way possible. In this case therefore the best strategy is to keep offering the standard of customer service and prices that you already do. If you change you risk upsetting the balance and causing customers to leave for your competitors. Wal-Mart, the largest retailer one earth, did extraordinarily well out of the recession. This is because they offer quality goods at very low prices. Wall Street predicted for their stock to rise 2.4% in the year after the recession. It actually rose 5%. People flocked to wal-mart as a good alternative to other relatively high priced stores. If consumers can cut ten dollars out of every grocery shopping trip then it very quickly adds up. If Wal-mart changed however, then it may not have remained in the eyes of the consumer as a cheap shop to go to. In a way its reputation as being low-budget ensured that it survived through the recession. People that had not necessarily shopped there before went there because they knew that is where they could find bargains. A contrasting example of a supermarket that has not done so well is Tesco in the USA. Whilst it continues to achieve very high profits in the United Kingdom, unfavourable exchange rates have pushed its profits down all the way into a £186m loss. The poor exchange rates are due to the recession, and it is arguable that if they lowered their costs significantly they could make a profit in the US.
In conclusion, cutting costs is essential for some businesses in recession. If consumers are spending less then of course, you need to cut costs to continue making a profit. In this case therefore, cutting costs would be the best strategy for businesses that sell luxury products. Starbucks for example is not an essential product; the coffees are not cheap and it is more of a social symbol than anything. In reality there is very little taste difference between a Tesco coffee or a star bucks coffee. Starbucks therefore needs to update its price strategy to stay at equilibrium with people’s disposable income. Other businesses however such as airlines merge to combine their strengths and create cost synergies, enabling them to reach a wider market. Internal growth such as that of ‘YO! Sushi’ is also important; you need to keep up your image of being a reputable business, especially in recession. People are expecting more for less, and so businesses cannot falter on their customer service at any time. In the case of ‘YO!’, they kept adapting and innovating to keep up with the recession. They made their business a good place to go in light of the recession. Perhaps not cheap, but it makes people feel both cultured and wanted. The staff are friendly and eating authentic sushi has more of a selling point than a burger and chips. Therefore whilst costs are a big factor in recession strategies, you also need to consider customer service. Too often do businesses become complacent in the light of rapid growth and neglect the smaller details. Discount stores do not seek their recession strategies in cost cutting, but keeping their image high. They need to invest more than ever in making sure people know that you are the store with the lowest prices, as Wal-Mart does effectively. To summarise however, businesses must make some sort of consideration towards the average consumer in recession. Whether it is through traditional cost cutting, great customer service or just being there for customers, they cannot neglect to consider that the average consumer has quite a small disposable income. All the businesses mentioned above have survived because in some way they have seen that in order to get through the recession, they need to adapt to what the customer needs.
Original post by IrishPerson
great essay!! just printed it off for revision haha thanks!
Really. Which part was good to you?
woww thanks sentashi!! LOVIN THESE ESSAYS GREAT WAY TO REVISE
Original post by BowerzZ
Can some of you read the first essay i've written in weeks please?!
What grade do you think it will get?
What extent do you think that governments should intervene in takeovers and mergers?
Takeovers and mergers are 2 ways which a business can acquire another business. A takeover is a hostile approach whereas a merger is an agreed acquisition as both businesses believe there will be mutual benefits. An example of government intervention in a takeover is when the competition commission stopped the News International takeover of BSkyB.
I believe that governments should intervene in mergers if it is going to lead to job losses. If the effects of the takeover or merger are going to lead to negative effects on society then government intervention is vital. For example, heavy job losses will lead to an increase in government spending on benefits which would mean higher taxes for the working population, possibly leading to a decrease in consumption and an increase in saving. This may lead to a contraction of growth in the economy. An example of a government intervening in this way was Kraft's takeover of Cadbury. The government made sure Kraft would “continue to produce in the UK and to base Cadbury's marketing and sales here too”. This was good for the UK because it meant no jobs were lost as the factors that were based in the UK still were, post takeover. To evaluate, it may be hard to tell what had happened if the government didn't intervene. Kraft may have felt the need to do more to continue Cadbury's British identity. However, because the government set guidelines, Kraft may have felt the need to have less to do with Britain.
Another reason why I believe that governments shoulds intervene in takeover and mergers is if they reduce the amount of choice available in society (or increase prices) due to the combined market share of the 2 businesses monopolising the industry. A monopoly in an industry is considered to be a business with over 25% market share, pure monopolies are very rare and are likely only achieved due to natural barriers to entry, for example, regional water companies – they control the only water pipelines. I believe the lack of choice is bad for the societies that are democratic as they may undermine the values of society. For example, News International's proposed takeover of BSkyB was blocked because they would monopolise the media industry and this would have affected political decisions and voting patterns as the media may be able to influence their audience. Also, a monopoly is bad for society because they can restrict output and prices. This would allow them to earn greater profits at the expense of consumers who would inevitably face higher prices due to a lack of competition made by high barriers to entry. However, if a government intervenes, competition in an industry would be encouraged which would lead to greater efficiency, meaning the consumers would get cheaper prices. However, by blocking an acquisition that would lead to a monopoly would mean that possible benefits may disappear. Monopolies can lead to lower prices due to utilising more economies of scale, and by intervening in the market, these benefits will not be received by the public.
However, in some cases, I believe that governments should support takeovers and mergers. Even though 80% of takeovers fail, the ones that succeed are likely to be performing very well, even in the current economic circumstances. For example, the Tata takeover of JLR has been very successful despite difficulties shortly after the acquisition. The takeover has worked because unlike takeovers that have failed in the past such as Daimler and Chrysler, Tata do not try and force their culture on to JLR. They have realised that there is a lot of difference between the 2 companies. For example, Tata own the worlds cheapest car whereas Jaguar are a luxury brand. Also, the takeover has created synergies, which means that the expertise used in one business can be used to save costs in another. Tata used some of JLR's production techniques to help them cut production costs. This is a good reason why governments shouldn't intervene because if they did, then a lot of the benefits that have happened due to this takeover wouldn't have happened.
Government intervention at times is vital to prevent too much power for one business in a particular industry. This has its benefits because it can lead to increased competition in the market which encourages businesses to cut their costs as much as possible so that they can remain competitive. However, if they allow mergers and takeovers to happen, then the monopoly power could yield benefits such as increasing innovation which would lead to dynamic trade gains. Also, monopolies can make prices higher but this doesn't mean they have to, they may be able to increase profits more effectively in other ways. I also believe governments should intervene because they are likely to have better knowledge on future external conditions such as the economy. Therefore, they may be able to see why a takeover or merger will experience problems in the future, unlike the CEOs who run the businesses.
To conclude, I believe that governments should intervene in takeovers and mergers for a number of different reasons. They have more knowledge of external factors in their country than businesses, and know the likely effects the acquisition will have. They also can help protect those in society who would be vulnerable in society as a result of a takeover. Of course, there are factors that show why governments shouldn't intervene, but I believe they are weaker than the points for government intervention.
What grade do you think it will get?
What extent do you think that governments should intervene in takeovers and mergers?
Takeovers and mergers are 2 ways which a business can acquire another business. A takeover is a hostile approach whereas a merger is an agreed acquisition as both businesses believe there will be mutual benefits. An example of government intervention in a takeover is when the competition commission stopped the News International takeover of BSkyB.
I believe that governments should intervene in mergers if it is going to lead to job losses. If the effects of the takeover or merger are going to lead to negative effects on society then government intervention is vital. For example, heavy job losses will lead to an increase in government spending on benefits which would mean higher taxes for the working population, possibly leading to a decrease in consumption and an increase in saving. This may lead to a contraction of growth in the economy. An example of a government intervening in this way was Kraft's takeover of Cadbury. The government made sure Kraft would “continue to produce in the UK and to base Cadbury's marketing and sales here too”. This was good for the UK because it meant no jobs were lost as the factors that were based in the UK still were, post takeover. To evaluate, it may be hard to tell what had happened if the government didn't intervene. Kraft may have felt the need to do more to continue Cadbury's British identity. However, because the government set guidelines, Kraft may have felt the need to have less to do with Britain.
Another reason why I believe that governments shoulds intervene in takeover and mergers is if they reduce the amount of choice available in society (or increase prices) due to the combined market share of the 2 businesses monopolising the industry. A monopoly in an industry is considered to be a business with over 25% market share, pure monopolies are very rare and are likely only achieved due to natural barriers to entry, for example, regional water companies – they control the only water pipelines. I believe the lack of choice is bad for the societies that are democratic as they may undermine the values of society. For example, News International's proposed takeover of BSkyB was blocked because they would monopolise the media industry and this would have affected political decisions and voting patterns as the media may be able to influence their audience. Also, a monopoly is bad for society because they can restrict output and prices. This would allow them to earn greater profits at the expense of consumers who would inevitably face higher prices due to a lack of competition made by high barriers to entry. However, if a government intervenes, competition in an industry would be encouraged which would lead to greater efficiency, meaning the consumers would get cheaper prices. However, by blocking an acquisition that would lead to a monopoly would mean that possible benefits may disappear. Monopolies can lead to lower prices due to utilising more economies of scale, and by intervening in the market, these benefits will not be received by the public.
However, in some cases, I believe that governments should support takeovers and mergers. Even though 80% of takeovers fail, the ones that succeed are likely to be performing very well, even in the current economic circumstances. For example, the Tata takeover of JLR has been very successful despite difficulties shortly after the acquisition. The takeover has worked because unlike takeovers that have failed in the past such as Daimler and Chrysler, Tata do not try and force their culture on to JLR. They have realised that there is a lot of difference between the 2 companies. For example, Tata own the worlds cheapest car whereas Jaguar are a luxury brand. Also, the takeover has created synergies, which means that the expertise used in one business can be used to save costs in another. Tata used some of JLR's production techniques to help them cut production costs. This is a good reason why governments shouldn't intervene because if they did, then a lot of the benefits that have happened due to this takeover wouldn't have happened.
Government intervention at times is vital to prevent too much power for one business in a particular industry. This has its benefits because it can lead to increased competition in the market which encourages businesses to cut their costs as much as possible so that they can remain competitive. However, if they allow mergers and takeovers to happen, then the monopoly power could yield benefits such as increasing innovation which would lead to dynamic trade gains. Also, monopolies can make prices higher but this doesn't mean they have to, they may be able to increase profits more effectively in other ways. I also believe governments should intervene because they are likely to have better knowledge on future external conditions such as the economy. Therefore, they may be able to see why a takeover or merger will experience problems in the future, unlike the CEOs who run the businesses.
To conclude, I believe that governments should intervene in takeovers and mergers for a number of different reasons. They have more knowledge of external factors in their country than businesses, and know the likely effects the acquisition will have. They also can help protect those in society who would be vulnerable in society as a result of a takeover. Of course, there are factors that show why governments shouldn't intervene, but I believe they are weaker than the points for government intervention.
A reasonably good attempt I would say but try to include more explicit and specific examples. I think it is more advisable for you not to use 'to evaluate' to show evaluation. Instead use 'it depends on'. Also, you should make your definition in the first paragraph clearer and make more evaluation. You could mention something about the Competition Commissions. There are many good examples that you can make use of like the proposal of Cadbury's law and the takeover of Safeway by Morrisons.
Original post by Jtn Star
A reasonably good attempt I would say but try to include more explicit and specific examples. I think it is more advisable for you not to use 'to evaluate' to show evaluation. Instead use 'it depends on'. Also, you should make your definition in the first paragraph clearer and make more evaluation. You could mention something about the Competition Commissions. There are many good examples that you can make use of like the proposal of Cadbury's law and the takeover of Safeway by Morrisons.
Good enough for me to get an E (Need that for a B overall)
Original post by Sentenashi
Do you know what marks you got for those essays Sentenashi ?
(edited 11 years ago)
Original post by tehonlyone
Do you know what marks you got for those essays Sentenashi ?
Essay number 1: 28/40, 34/40 once I made the conclusion bulkier.
Essay number 2: 29-36/40
I can't find the marks for the other two, but I haven't gotten under 30 marks by using these:
http://tutor2u.net/blog/index.php/business-studies/comments/buss4-the-seven-point-scale-for-perfect-paragraphs
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