week 16

 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.  

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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.