Merger, acquisition and International strategies
Choose two (2)public corporation in an industry with which you are familiar. One (1)that has mergers and
acquisitions and operations solely within the U.S. Research each company on its own Website, the public
flings on the Securities and Exchange Commission EDGAR database (http://www.sec.gov/edgar.shtml).
in the University’s online databases, and any other sources you can find. The annual report willoften
provide insights that can help address some of these questions.
Write a six page paper in which you:
- For the corporation that has acquired another company, merged with another company, or been
acquired by another company,evaluate the strategy that led to the merger or acquisition to determine
whether or not this merger or acquisition was a wise choice. Justify your opinion. - For the corporation that has not been involved in any mergers or acquisitions, identify one company
that would be a profitable candidate for the corporation to acquire or merge with and explain why this
company would be a profitable target. - For the corporation that operates internationally, briefly evaluate its international business-level
strategy and international corporate-level strategy and make recommendations for improvement.
Merger, acquisition and international strategies are not a new phenomenon on the
business world. They have been there and will continue as long as profits need to be increased.
More mergers are bound to happen during the economic recession as corporations come together
to support each other achieve profits and other organizational objectives.
Background
According to Ray (2011), there are five strategies of merging described by companies.
Conglomerate merging involves two or more companies coming together for unrelated business
activities. They may be firms with nothing in common or companies looking to merge to extend
their product or market line. Companies merge depending on their economic functions, purposes
of business objectives and improving relationships between the corporations/companies asserts
Ray (2011). Horizontal merger occurs between companies that operate in the same industry and
a consolidation means improved services and reduced competition. Market extension mergers
happen when two companies dealing with similar products but from different markets come
together. It facilitates a larger client base. Product extension takes place between firms that deal
with different products but operate in the same market while vertical mergers occur between two
MERGER AND ACQUISITION 2
companies that produce different goods and services for a specific finished product. Having the
background information on merging helps our study lay a strong basis on the impact of mergers.
Objectives
To investigate corporations merge and a local firm
Literature review
When the two airlines announced their merge in 2013, wall street, financial blogs, Forbes
and other lead newspapers totally flipped at the news reporting on every detail and what was
expected in the future as a result of the merge. The horizontal merger between the two airlines
was definitely a big thing happening between two airlines dealing with similar services (flights)
and operating in the same space. The US group airlines expressed their interest to merge with the
US parent company for the first time in January 2012. Two months later, Tom Horton AMR’s
CEO stated that he was willing to merge the airlines. Letting the American airlines know about
what the US airways merge was capable of doing, it was announced that the merger would yield
to more than 1.5billion dollars per year in cost saving and added revenue figures.
The consolidation of the two corporations was welcome with jubilations as clients and
customers counted the benefits that the merger will bring. For other airlines, it was a great idea
bearing in mind that the merge meant one competitor down but still tricky to figure out how they
would be competing against two great service airlines on the same skies. According to Ray
(2011), more competition means that potential synergies lead to greater potential gains for the
two merging airlines in the market share. Other airlines would however have to seek for creative
ways to remain viable. The main goal of merging between American airline group and US
airways was to create a larger corporation that will add value and increase their market share.
True to their goals, the US airline merge has achieved that faster than it imagined.
Merging the two airlines was a wise choice that has paid off well. Because of the merge,
the new airline is termed as the largest airline in the globe handling more than 6700 international
and local flight to 56 countries with about 40billion dollars for operating revenue. The
corporation is not only welcoming great profits but has also opened up numerous job
opportunities locally and internationally with over 100,000 employees working in various
stations. The merge has not slowed down and it has massive plans for the flight service industry.
It plans to take it delivery of services to the next level through introducing 607 new aircrafts,
which include narrow and wide body aircrafts. With 517 narrow body aircrafts and 90 aircrafts
with a wide body, the flight service will have taken the flight industry to another level. The
airlines operational single certificate should be complete by next year giving the integration more
advantages to grow together.
While merging has numerous benefits and is viewed as a great way to grow corporations,
some corporations remain closed to the idea of merging. Westjet unlike American airline and US
airways has not spread its wings internationally and is relatively new. Impressive growth rates
are notable, causing reasons to believe that it has potential to get bigger that what it actually is
currently. Clive Biddoe founded west jet in 1996 with a team of likeminded partners. They
believed that with so many airlines taking over they would be able to form an airline that would
offer passengers less pay services and still deliver exceptional flights. Their philosophy of three
aircrafts and fives destinations with 220 friendly attendants of west jet saw them start their
journey. They would later grow to a company with 9700 west jetters flying to 88 destinations
across the network with the youngest fleet of boeing aircrafts. Their committed efforts and
passion to grow and impact lives has seen them rise slowly but surely.
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A merge between west jet and air Canada would be profitable for the corporation largely.
West jet airlines is a great competitor with Air Canada thus directly affecting the rivalry between
the airplanes and their plans to join other US partners. Merging the two airlines would mean that
their operations and goals will be aligned. Consequently, their profits and opportunities to reach
more customers will increase. Working together as one company will save the airlines many
hurdles that solo companies face daily. Through merging, there possibility of sharing risks and
profits increase. This means that one company does not have to bear losses alone or share profits
on their own. Since the profits are expected to increase with a merge, it is likely that more
benefits will be enjoyed once the companies come together. The two airlines will also get bigger
market access and client bases.
AMR corporation group unlike west jet operates internationally. As an international
airline, its international business level differs from the corporate level strategy. Doing business at
the international level is not the same as doing business at the corporate level. International
business can be exciting and interesting yet complex at the same time. It demands more than the
local/corporate business, calls for, and has more responsibilities. For its international business
operations, AMR developed an elevating level to deal with the international business. Michael
Porter’s national diamond strategy is an effective approach of explaining international business
level strategy.
Factor conditions
Demand conditions related supporting industries
Strategy, structure and rivalry
Factor of production is whereby a corporate firm creates important factors such as skilled
resources in this case the flight services. The demand for more flight services grows larger than
at local level and the local airline devotes itself to foreign markets creating a competitive edge
for the service. The more the flight services from the company, the more the national advantage.
Demand conditions lead to the service dominance internationally and high performance while
related and supporting flight become supportive.
International corporate level strategy is divided into multi-domestic, global and
transactional strategy. Multi-domestic strategy has decisions decentralized in each country while
the global strategy has its products or services standardized. Transactional strategy seeks to
achieve local responsiveness and global efficiency. American airline utilizes strategic positioning
through superior networking at the US airlines offering nonstop services that is used by many
domestic and international clients. Its international operations include the Caribbean, Europe,
Japan, Asia, Latin America, Canada and Mexico amongst other global states following its merge.
The international strategy differs from the local strategy in that operating only in US is different
from operating globally for US airlines and American airlines. Globally the airline uses the three
strategies to meet all client needs and increase profits.
The difference between corporate and international marketing strategy is the number of
people that the company deals with. When a firm decides to go international, it increases its
capacity to produce more services to other people from different cultures, backgrounds and
interests argues Paul and Kapoor (2008). As a result, the firm may at times be forced to change
its objectives to meet the varying populations of other clients. To grow internationally, it had to
learn and acquire new skills to help it spread not forgetting the different laws and regulations
governing different states. The culture, level of competition, market intelligence, politics,
international law, technology and logistics are applied to the international marketing strategies
(Paul and Kapoor, 2008). At the corporate level, the porter’s five theory was used to examine the
MERGER AND ACQUISITION 4
flight industry and help it establish its strategy level. Through analyzing its supplier power,
threats of new entrants, substitutes and buyer power they managed to deal with their rivals and
become the best.
West jet airlines should consider a suitable business and corporate strategy that will help
them gain a competitive advantage over other airlines. A business strategy involves making
company decisions and creating ways to maintain them through competitive advantages. West jet
can evaluate their company’s flight services target a larger market and identify the competitors to
have a competitive advantage over the others. Though they are a small company and cannot
enjoy the same privileges like US airlines group, they can enjoy economies of scale through
keeping their costs affordable and getting more customers. The use of a differentiation strategy
that emphasis on exceptional flight services are factors that customers will value highly and find
worth to pay for. Using promotions and functions is a good business strategy for west jet.
At the corporate level, west jet can identify opportunities outside the flight industry
services. Contemplating diversity is a great idea or even thinking of additional business strategies
for the company (Ireland et al. 2008). The umbrella company will have to contribute to effective
profitable advantages for the firm. West jet can for example incorporate a food service to their
clients making the decision profitable for the flight customers and the company as well.
In conclusion, merging companies are likely to benefit more internationally and locally. They
enjoy greater profits and have more opportunities for growth and reaching more clients.
However, local firms also stand a chance of making it through improvising creating business and
corporate strategies.
References
Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2008). Understanding business strategy:
Concepts and cases. Mason, OH: South-Western Cengage Learning.
Paul, J., & Kapoor, R. (2008). International marketing: Text and cases. New Delhi: Tata
McGraw-Hill.
Ray, K. G. (2011). Mergers and acquisitions: Strategy, valuation and integration. New Delhi:
PHI Learning Private Limited.
