Business and Management
Submitted By kro04
Workshop 4 Problems
November 1, 2011
David R. Gray, Ph.D
1. Why are acquisition strategies popular in many firms competing in the global economy?
Because of globalization; deregulation of multiple industries in many different economies and favorable legislation; the number and size of domestic and cross-border acquisitions continues to increase; especially from emerging economies
2. What reasons account for firms’ decisions to use acquisition strategies as a means to achieving strategic competitiveness?
To increase market power; overcome entry barriers to new markets or regions; avoid costs of developing new products and increase the speed of new market entries; reduce the risk of entering a new business; become more diversified; reshape their competitive scope with different portfolio of businesses; and enhance their learning.
3. What are the seven primary problems that affect a firm’s efforts to successfully use an acquisition strategy?
Difficulty of effectively integrating the firms involved; incorrectly evaluating the target firm’s value; creating debt loads that preclude adequate long-term investment; overestimating the potential for synergy; creating a firm that is too diversified; creating an internal environment in which managers devote increasing amounts of their time and energy to analyzing and completing the acquisition; developing a combined firm that is too large (thereby necessitating extensive use of bureaucratic, rather than strategic, controls)
4. What are the attributes associated with a successful acquisition strategy?
Acquiring and target firms have complementary resources that can be the basis of core competencies in the newly created firm; acquisition is friendly, thereby facilitating integration of the two firms’ resources; the target firm is selected and purchased...