Edexcel Business Studies Unit 3

Yeah. Why arent you guys doing the question? do it and post it up so we can mark each others and improve our own answers

[definition] A merger is the process where two firms join together to act as one organisation and benefit from economic and managerial synergies.

[point 1] First, Nestlé will see firm increases in revenue and profits if they take an inorganic growth route, for example merging with local Chinese chocolate manufacturers. By doing this, they will eliminate local competition, as well as expanding company size and local expertise.

[point 2] Second, mergers will allow Nestlé to diversify their product range in China without diluting or confusing their brand image. This means they can cover a wider area of the Chinese consumer market, generating more revenue, and benefitting further from economies of scale.

[However 1] However, inorganic growth can be risky, particularly in foreign markets. Debts can easily be incurred, and the process of mergers and takeovers are generally distasteful transactions. It could resultantly be hard to motivate workers, and managerial discrepancies and disagreements may occur. There are also risks of expanding the line of command throgh horizontal integration, and large costs involved, e.g. employing more managers for different branches of the company.


Man, that took me way too long. Anyone care to mark?

Go easy on me

def: merger is when two companies join together to create a larger business

- benefit from gaining employees with knowledge of new market in China, could help to reduce cultural differences and language barriers. reduce time and money spent in researching new market

- reduces competition in huge potential market (1.3b people), increase profits and market share and can compete against no.1 candy brand in china Mars.

- could be risky due to competition from mars, already have backing from consumers and sponsered olympics, well known to customers and nestle could be targetting for price wars.

very vague, but a few little points!

Go easy on me please.


A takeover is essentially when one firm buys another or buys at least 51% share in another business.

Nestle has recently bought 60% stake in China’s Hsu Fu Chi. There are many benefits in this for Nestle. Firstly this will enable Nestle to better exploit purchasing economic of scale. This is that as Nestle will increase output for example bulk buying ingredients such as sugar etc it will be able to buy at a lower cost per unit and so reducing Nestlé’s average cost. This would firstly raise competitiveness for Nestle as they can now pass on lower retail prices or they could simply absorb larger profit margins which could be re-invested into R&D or other costs such as market research which would be requires when entering a foreign market such as China.

Secondly this takeover will help Nestle acquire local knowledge. For example as the stimulus depicts the Chinese market is rather unique and diverse for example cucumber cookies etc and this is something new to Nestle however through acquiring Hsu Fu Chi Nestle integrate and overcome these barriers much easily and so this will firstly reduce costs such as market research and through the ability to provide more localised products Nestle will be able to increase sales which may yield greater profits.

However in evaluation there are also many drawbacks to the takeover. Firstly it could lead to diseconomies of scale for Nestle. This is because if the firm grows too large then it could demotivate workers as they feel less valued within a much larger firm and so productivity will fall and average costs rise. Moreover if Nestle doesn’t rationalize efficiently then this could lead do duplication of roles further decreasing efficiency and raising average costs and so reducing profits for Nestle.

Secondly the takeover could be unsuccessful if there is clash of corporate culture which is very possible as both Nestle and Hsu Fu Chi come from different countries/backgrounds etc and so there could be poor integration between workers leading to further inefficiencies.

To conclude yes in the shorter run Nestle will be faced with rather high costs of setting up in the Chinese market however in the long run this is most likely to yield great profits and a high return on the investment as the Chinese confectionary market is showing positive growth since 2005 and has grown 65%

Go easy on me please.


A takeover is essentially when one firm buys another or buys at least 51% share in another business.

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Lol, there's no doubt that would be full marks for an 8 mark question, probably 12 or 15 as well, but practically can you write that in 8 minutes? I'm told its mark-a-minute principle.

Also I'm told you don't need a conclusion for the 8 markers? Im just saying because I know the importance of not wasting too much time on the lower mark questions so you can get onto the 12 and 15 markers in time.

i told you to search " nestle hsu fu chi" in google it will be the second link it opens in full that way

second link is from financial times and it says i have to register. i registered and it said i already viewed too many articles...

second link is from financial times and it says i have to register. i registered and it said i already viewed too many articles...