Corporate Growth A major acquisition is the fastest way to compensate for a company's failure to...
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Corporate Growth Corporate Growth A major acquisition is the A major acquisition is the fastest way to compensate for fastest way to compensate for a company's failure to grow a company's failure to grow organically organically (via internal means) (via internal means) You don't get a gazelle by You don't get a gazelle by breeding dinosaurs. breeding dinosaurs. – “ “ When Dinosaurs Mate,” G. Hamel, When Dinosaurs Mate,” G. Hamel, WSJ WSJ
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Dell acquired gaming PC maker Alienware to expand position in high-end niche segment (prices start at $5995)
Transcript of Corporate Growth A major acquisition is the fastest way to compensate for a company's failure to...
Corporate GrowthCorporate Growth
A major acquisition is the fastest A major acquisition is the fastest way to compensate for a way to compensate for a company's failure to grow company's failure to grow organically organically (via internal means)(via internal means)
You don't get a gazelle by breeding You don't get a gazelle by breeding dinosaurs.dinosaurs.– ““When Dinosaurs Mate,” G. Hamel, When Dinosaurs Mate,” G. Hamel, WSJWSJ
Best Path to Growth?Best Path to Growth?FordFord
– JaguarJaguar– MazdaMazda
General MotorsGeneral Motors– SaabSaab
Hewlett-PackardHewlett-Packard– CompaqCompaq
UnileverUnilever– KnorrKnorr– Ben & JerryBen & Jerry
Daimler-BenzDaimler-Benz– ChryslerChrysler
Corporate strategy Corporate strategy solutionssolutions
Starbuck’sStarbuck’sSouthwest AirlinesSouthwest AirlinesToyotaToyotaDellDellWal-MartWal-MartNikeNike Business strategy Business strategy
solutionssolutions
Dell acquired gaming PC maker Alienware to expand position in high-end niche segment (prices start at $5995)
Entering New BusinessesEntering New Businesses WHY?WHY?
– Does business fit?Does business fit?o Financiallyo Strategicallyo Culturally
HOW?HOW?– Acquisition or mergerAcquisition or merger– Internal start-upInternal start-up– Joint venturesJoint ventures– AllianceAlliance
Justifications for M&AJustifications for M&A Attractiveness testAttractiveness test
– Industry factorsIndustry factors– Core competenciesCore competencies– Strategic positionStrategic position
Cost of entry testCost of entry test– Buy outstanding sharesBuy outstanding shares– CashCash– Contributions to merger or JVContributions to merger or JV
Better off testBetter off test– Synergies, econ. of scale/scopeSynergies, econ. of scale/scope– Consolidation of resources, activities Consolidation of resources, activities – Leverage strategic assets for Leverage strategic assets for competitive competitive
advantageadvantage??
Blue CircleBlue CircleUnrelated Diversified FirmUnrelated Diversified Firm
HQ
CementCementProducts
Bricks GasStoves
LawnMowers
Unrelated to Other Units Unrelated to Other Units or or
Core CompetenceCore Competence
OKOK
BoddingtonsBoddingtonsRelated Horizontal Diversified FirmRelated Horizontal Diversified Firm
HQ
Pubs
RestaurantsHotels Health
ClubsNursingHomes
Related to Other Units Related to Other Units viavia
Core CompetenceCore Competence
Adidas-Reebok MergerAdidas-Reebok Merger
+vs.
++EmployeesEmployees 26,10026,100 24,60024,600U.S. Market U.S. Market
ShareShare 21.1%21.1% 36.3%36.3%Global Global Market Market ShareShare
25.0%25.0% 33.2%33.2%
Net IncomeNet Income $517.9 mil$517.9 mil $1.2 bil$1.2 bil
Hot ProductHot Product SmartShoe SmartShoe + Nelly’s shoe line+ Nelly’s shoe line
L. Armstrong L. Armstrong apparelapparel
+ iPod Sport Kit+ iPod Sport Kit
Adidas-Reebok MergerAdidas-Reebok Merger
Adidas-ReebokAdidas-Reebok Why?Why? Better off?Better off?
Adidas-Reebok MergerAdidas-Reebok Merger
+vs.
Gillette
Personal Grooming
SmallAppliances
Oral Care
PortablePower
Gillette
Personal Grooming
SmallAppliances
Oral Care
PortablePower
PEST PEST PEST PEST
Gillette
Personal Grooming
SmallAppliances
Oral Care
PortablePower
Value Chain AnalysisValue Chain AnalysisGillette’s acquisition of Duracell allows it to Gillette’s acquisition of Duracell allows it to leverage the following strategic assets across leverage the following strategic assets across business units (synergies)business units (synergies)
PROCTER & GAMBLE
Soaps Food Beverages PaperProducts
Gillette
RazorsCore Product
Mr. CoffeeMachines
DuracellBatteries
Oral-BToothbrush
M&A ExerciseM&A Exercise
Nokia
Nextel
Sony-Ericsson
Netscape
Red HatMotorola
AMDCircuit City
Nokia should acquire _________________Nokia should acquire _________________
Apple
XM-Sirius RadioBlackberry Palm
Other?Other?
Attractiveness TestAttractiveness Test Why is the _________ industry attractive to Why is the _________ industry attractive to Nokia?Nokia?
1.1.
2.2.
3.3.
4.4.
5.5.
Cost of Entry TestCost of Entry TestCan Nokia afford to acquire ___________?Can Nokia afford to acquire ___________?
Yes No
Better-off Test Better-off Test (1)(1)The acquisition of _____ gives it the following position in The acquisition of _____ gives it the following position in strategic space in the _____ industrystrategic space in the _____ industry
Dimension 1
Dimension 2
Nokia
Cell Phones
Better-off Test Better-off Test (2)(2)Nokia’s acquisition of ______ allows it to leverage the Nokia’s acquisition of ______ allows it to leverage the following strategic assets across business units following strategic assets across business units (synergies)(synergies)
Better-off Test Better-off Test (3)(3)Nokia’s acquisition of ________ gives it the following Nokia’s acquisition of ________ gives it the following business unit portfoliobusiness unit portfolio
Long-termIndustry
Attractiveness
Competitive Advantage
High
Med
Low
Strong Avg. Weak
Mobile Phones
