center-500047180511000065000Academic English skills coursework
The factors of business taking over or merging with other business to pursue growth -5000628015590006143625
Introduction of Merging and Acquisition.
Modern society has more and more businesses may consider in deciding to merge and takeover other businesses, which could keep expanding that are common things in business and also around people’s lives. This essay will outline the main factors could motivate businesses to pursue growth by merging and acquisition. Economic growth and business financial issue could affect business take action to merge and takeover other businesses.
2. Concepts and define merger and acquisition.
Merging and acquisition can be defined as the combination within two or more organisations thereby becoming a new corporation that to achieve the market strategies. To be specific, the difference between merging and acquisition is the way of them that one is the combination between two companies another is the bought other corporations. Moreover merging and acquisition could happened because of varies reasons that of strategy implementation. In order to achieve one or more strategic objectives it may be necessary for company. In hostile takeovers the acquirer may attempt to buy large amounts of the target’s shares on the open market. The problem with this action is that the target’s share price will tend to increase in value as soon as any large-scale purchases are detected. CITATION DrW16 l 2057 (Dr William Wallace., 2016) Mergers and acquisitions are becoming a strategy of choice for companies attempting to maintain a competitive advantage and to place them in front of other companies. Corporations spend a lot of money every year in pursuit of this strategy and they are in permanent search for the best transaction in order to satisfy their needs. CITATION Rad15 l 2057 (Radu CIOBANU., 2015)3. Economies and financial influence merging and acquisition within businesses.
There are many reasons could influence organisations to merger and taking over to pursue growth. First one is the economies of scale which was given by merging that could reduce the financial costs of two or more companies into one. Moreover this could increase the market competition due to the financial costs reduce and also could reduce the price of products. In real life, this can be proved in Sainsbury – Asda merger and after merger its market share.
Table SEQ Table * ARABIC 1 Supermarket market share, Tejvan Pettinger (2018)
Second reason is purchasing economies/bulk buying. The most significant potential benefits of this merger are giving the new firm greater scope to gain lower prices for suppliers. Sainsbury CEO states it is necessary to compete with the likes of Amazon who are turning their attention to UK grocery market. But, if they still have a two brand approach – e.g., Asda baked beans and Sainsbury’s baked beans – will there be that much difference. CITATION Tej17 l 2057 (Pettinger, 2017)The third reason is Investment in technology which motivated the Sainsbury’s better service and delivery for its guests by online shopping. For example, the new company after its merging will have more capacity to invest in this kind of technology improvement that could take more advantages in future market competition power to itself.
4. Reasons of merging.
By consider advantages of company mergers to determine what the benefits may be for its unique business situation is a good way for figure out why companies would chose merging.
4.1Penetrate a New Market.
Successful businesses have identified a need in a market and they need to fulfill that need. CITATION Kim18 l 2057 (Leonard, 2018) For example, if a business wants to have lager market share, it needs to merger with another business which familiar with itself that occurs merging. If an Asian company wants to penetrate a new market that it never penetrated before. It may merger with another company which in that geographical area it never penetrated before. It is also work on a small brand of company.
4.2Better Fulfill Consumer Needs.
Business leaders always need to consider the consumer’s experience with the company and its products or services. A merger should function to better serve the existing customer base of the companies. CITATION Kim18 l 2057 (Leonard, 2018) For example, online shopping companies in China always merger with express company that giving customers a one-stop-shopping experience with credible services thus made themselves had more profits to earn.
4.3 Financial Power.
When companies grow, they are able to benefit from economies of scale which means the cost of produce will decreases due to the increases in market share. Moreover, more and more profits earned as company’s merging, the financial power increases that company will have more investment by its credit and investors. Therefore merging creates positive cash flow and credit conditions for companies.
4.4To spread the risk of the huge cost of developing new technology.
This factor is particularly significant in the aerospace/aircraft and pharmaceutical industries. CITATION Abe l 2057 (Francis, n.d.)5. Reasons of taking over companies.
The companies in the best position to buy out another company are those with extra cash and balance sheets that have reached maximum revenue potential and need to make a strategic change in order to grow. CITATION Mar l 2057 (McCarron, n.d.) Rather than build another business organically, most businesses acquire, according to PricewaterhouseCoopers.
5.1 International Growth.
Organizations want to make their products available around whole world that they could take over other businesses. For example, companies do not to create a new brand to expand its scope of business, therefore only taking over other businesses that had grown.
Another reason companies take over other companies is to diversify products and expand new revenue streams. CITATION Mar l 2057 (McCarron, n.d.)6. The main purposes of Sainsbury’s merging.
There are many