1.
In your own words and using referenced quotes describe the difference between
organic growth, merger & acquisition and strategic alliance.
Organic growth is mainly is
the initiatives which center of attention on bringing innovation in the
appearance of new products and services, recognizing opportunities for present
offering in markets or making more revenue from present offering from market
i.e. from current customers. Another name of organic growth may be organic
development. This is the strategy of Do it yourself” also is the primary method
of strategy development in which firm fabricate their own capabilities.
The two challenges for organic
growth are:
Þ Counter to
customer pressure for better product and services.
Þ Nurturing a
loyal customer base with satisfying customers.
A different leadership capability
is essential for strong organic growth. There are various capabilities among
them four capabilities are mentioned below:
1.
Focusing on
customers: ‘Understanding
the customer needs and desire’ was the no 1 practice for organic growth
researchers suggested. It does not mean that customers were not important in
merger or acquisition or strategic alliances. On the opposing, the importance
of the customer reverberated that ‘understanding customer needs and desire’ was
placed no 1 practice for leaders in merger and acquisition and strategic
alliances as well. Nevertheless, the focuses of customer emerge to be magnified
in organic growth.
2.
Experimenting
and innovating:
Leaders highlight innovation in their recommendation to other leaders of
organic growth mainly through experimentation and building a climate that
protect those which have promise, demands new ideas and protect people who produce
ideas by screening failure as learning.
3.
Executing
relentlessly:
For of all business unit leaders must locate clear performance objectives,
performing an organic growth strategy is about sustaining and creating growth.
While execution may appear clear-cut, different respondents found it challenging.
For successful organic growth there are three practices in essential which are:
·
Getting
knowledge from failure.
·
Consign
clear roles and responsibility.
·
Focusing
the firm on accomplish the strategy.
4.
Sticking to a
few critical Priorities: To attain the customer loyalty leaders suggests “focusing
on few things” and keeping it simple” is the crucial point. Every organic leader maintains employers
concentrate intently on their customers anticipating their future needs and
identifying and meeting current needs.
Merger and
acquisition
is different from strategic alliances is that two firms come together to form a
new form that is possess by acquiring corporations. Therefore, there is a
greater integration of the operations and cultures in the two entities in
merger and acquisition than is strategic alliances.
The
Challenges of merger and acquisition are:
Þ
Organization
cannot get synergies or supply the value of the deal.
Þ
Secondly
leaders follow merger or acquisition to creating the foundation for long-term
outcomes which obtain from stock or other assets of acquire company.
Þ
Providing
the stakeholder and shareholder satisfaction or deal made sense was another
crucial challenge.
There
are various leadership capabilities to make merger and acquisition work. Among
them four main factors are enlisted below:
1.
Adapting quickly
to change and ambiguity: To step up the value of acquisition, business unit
leaders might be very flexible. These leaders are geared up to adjust their
plans to challenging conditions, such as an acquisition opportunity suddenly
present itself, regulatory changes not playing out as anticipated, and others. Post
adaptability and acquisition remains crucial.
2.
Bridging
differences in processes, values style and cultures: A critical
success part of the merger and acquisition is that how well two companies knit
together to create more value than the sum of the parts. Leaders recognize that
these five factors like process, culture, people, price as well as integration
are important. Among them culture is the most important one that readily
embrace the employees of the acquire organization.
3.
Focusing on
market trends and competitors: Flourishing leaders of merger and
acquisition growth examine the external environment continuously to recognize
potential acquisition targets and competitive threats. There is the leader responsibility is the
whole company growth not just her or his unit growth or single unit growth. The
external environment plays a crucial role in helping leaders know where to situate
their acquisition bets.
4.
Improving
processes endlessly:
Organization which grows by merger and acquisition place a high premium on
speed of acquisition, while they are under pressure to exhibit value to
shareholders and protection analyst. The most victorious merger and acquisition
leaders have consistent process for managing the ‘mechanics’ of incorporate two
organizations, and they do so promptly. The mergers and acquisition leaders
focused more on process discipline fairly than other growth strategies.
Strategic
alliances
generally to include condition where two businesses join forces to utilize a
market opportunity while holding their individual distinctiveness. Strategic
alliances necessitate both parties to invest and take risk in anticipation of
return. They are also discretionary; the party desire to engage in organization
and can pick to terminate at any time.
The
Challenges of strategic alliances are as follows:
Þ Creating
a shared purpose across two companies.
Þ
Creating
the similar ground rapidly.
Þ
Line
up with successful unit growth, structure and plans.
For
successful strategic alliance leaders must focus on following things:
1.
Collaborating
across boundaries:
While creating a climate in which employee’s sense like owners distinguish high
performance from on-par performers, despite of strategy, alliance leaders had a
distinctive take on this perform. They speak about the climate of ownership widening
across managerial boundaries, both internal and external. They highlight the
importance of receiving their own employees on the same page and encompass
concrete goals and well definite processes.
2.
Building
flexible, information and rich networks of customers: One method
leader’s champion collaboration was throughout building a network is an attempt
to respond to a quickly changing environment. Strategic alliances leaders are
much more alert on building such networks than the organic growth leaders.
These networks both external and internal step up the flow of information
between two corporations.
2. Give an example of a company
that has grown through a) organic growth, b) merger or acquisition and c)
strategic alliance.
The examples of companies that
have growth through organic growth, merger or acquisition and strategic
alliances are as summarized below respectively:
Organic
growth:
Deborah
who work in a bank of America has been endorse to director of loan syndicate
for a main bank. The loan syndications unit provides a mature and very
competitive business market. The unit had not developed in revenue for some
years. Deborah was promoted with the hope of promoting considerable growth. Her
goals were to twice the unit’s revenue in a year without surrender profitability.
This is possible after 3 years by adopting the organic growth leadership style.
Merger
and acquisition:
John
Hammergren was the CEO of McKesson, a medical service business which had a long
track record of growth through acquisition. In 1999, McKesson attain HBOC
company, which he later exposed, was fashioned with accounting fraud. Subsequent
to a small earnings re-statement, owner sold off $ 9 billion or almost semi of
McKesson’s market capitalization. Hammergren was named CEO and tackle the
enormous task of building not only the previous McKesson, but the HBOC as well.
Hammergren recognize the state of shock and straight away set about leading the
recovery process, which is possible and he succeed.
Strategic
alliances:
The
vice president of Takeda Pharmaceuticals of North America informs us a story
that highlight how important is to set up trust at the outset of a strategic
alliance. He and his team gather with the CEO of another firm to discover a
partnership. The CEO arrived 90 minutes late and was impolite to the Vice
President and his team, performing as if the delay was their blunder. The Vice
President requests the CEO for a private discussion. He advises the CEO that he
was not the vendor to be discharge rather than a probable business partner, and
that all great partnership has a basis of respect and trust. He maintains the
CEO to say sorry the team. The CEO obeys and the atmosphere of the meeting
improved considerably.
3. Briefly discuss the merger between Britvic and AG
Barr. What advice would you give to the new Board?
CASE STUDY
1) Evaluate the case
for the merger
What are the
positives and benefits? What should work well?
Ø Previous to the merger
Britvic was producing Tango and AG Barr was the producer of IrnBru. Subsequent
to the merger the new mutual company is known as Barr Britvic Soft Drinks plc
and this company total expected annual sale is more than £1.5 billion. AG Barr
shareholders own 37% shares and Britvic shareholders own 63% shares.
§ These are the positives
and benefits :
Þ
Huge cash flow is
generated to cover the debt of Britvic which is around £600 million. Britvic
can take benefit to cover its debt as everyone knows bar is almost free of
risk.
Þ
Britvic have good
relation to the Pepsi which help to raise their sales. In addition, Barr will
be capable to sell their goods and services to the consumers of Britvic.
Þ
Both firm cut their cost
where Britvic is strong in definite market, and then it will be easier for AG
to go in that market and vice-versa.
Þ
Barr will get more
benefit as the foremost vision for company to merge is benefit. For example, it
owns 37% of the share of the mutual company and will supply to only 16% sales
by which it will have a return of 23%.
Þ
Reliable customers of
both the business will be purchasing the products of the lately merged company
which facilitates customers to shift these two brands from other brands.
Þ
Scale production
provides advantage to both the companies.
Þ
By gaining some market
shares they may also be able to compete with coca-cola company
Þ
Britvic will too, be
advantage from the Barr. Britvic makes only 9% where Barr makes an operating
profit of 14%. Even though, Britvic’s semi of the turnover appears from low
margin bottling, Barr will help Britvic to minimize the gap.
What are the negatives and potential risks? What problems might
occur?
§ These are the negative
and potential risks :
Þ It may not be possible to compete
with number one brand coke-cola.
Þ Merger allows lay off their workers
which is harmful. In which, Britvic lay off their 500 workers. These
circumstances not motivate the workers and workers feel unsecure while working
which reduce efficiency as well.
Þ We recognize that Barr is almost debt
free whereas Britvic has a net debt of £600 million
which is negative point. It may hinder the economic condition of newly mutual
company. In addition, if the debt of Britvic rises, the profit of Barr will be
lesser.
Þ Barr merely owns 37%
share where Britvic owns 63% of shares, still Barr appear to gain more profit
in which Barr supply 16% of the total sales and will get 23% revenue which may
not benefit to Britvic.
Þ Customers feel difficult
to shift from one brand to another brand so Barr may not be profit in relation
with Pepsi.
Þ Though, Barr will get an
opportunity to sell their drinks to the Britvic’s consumers however it might be
very tricky in the case French drinkers.
Þ If the customers are not
satisfying from one product they lead may lead to distract or harm another
product. If the loyal customer of Britvic had a bad practice with the service
or product of Barr, then the customer may shift to another brand.
Þ If one company goes for
bankruptcy, then another will also be affected, so special consideration is
needed.
.
2) What advice would
you give the newly formed Board?
These are the advices
which I want to give advice to the newly formed board:
Ø Effective communication should be sustained with customers.
Ø Board need to innovate different strategies by which they can be
able to compete with coke-cola.
Ø One company should support another brands in terms of customers,
marketing as well as other policies.
Ø Board should manage to provide training their workers and also
provide them bonus and rewards which increase the efficiency and both company
is benefited though merger.
Ø They should need to have dedicated mission, vision and goals for
accomplishment of organization goals and objectives.
Ø They should must research their customers about what consumes
wants which is a important element for the growth of organization.
Ø For adding more and more customers different marking and
advertisement strategies is required, so they should organize such activities.
Ø Shareholders of company named Britvic is confused, so management
team need to solve their problems with the help of appropriate means of
communication.
Ø More capital is required for large scale of production which reduces
the cost, through which company can meet their breakeven point sooner.
Furthermore, they require obtaining synergies’
with yearly savings, supply chain management as well as procurement savings.
References:
1.
Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th
Edition, Pearson Education, Chapter 6.
2.
Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th
Edition, Pearson Education, Chapter 10.
3.
P.
Gaughan, Mergers, Acquisitions and Corporate Restructurings, 4th edition,
Wiley, 2007.
4.
Phillippe Haspeslagh, 1999,
FT Mastering Strategy.
5.
R.
Schoenberg, ‘Mergers and acquisitions: motives, value creation and
implementation’, The OxfordHandbook of
Corporate Strategy, Oxford University Press, 2003, chapter 21.
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