434 FINAL

434 FINAL - R easons for Acquisitions (7) Increased Market...

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Reasons for Acquisitions (7) Increased Market Power Horizontal Acquisitions – acquisition of a company competing in the same industry Vertical Acquisitions – acquisition of a supplier/distributor of goods/services sold Related Acquisitions – acquisition of a close competitor New Market/Product Spread Risk (due to uncertain environment) Diversification Shift Core Business to Different Markets New Capabilities Reshaping the Firm’s Competitive Scope Other Reasons: Overcoming Entry Barriers, Increased Speed to Market, & Cost of New Product Development * Acquisition should only be used when the acquiring firm will be able to increase its value through ownership of acquired firm and its assets. Problems in Achieving Acquisition Success (7) Integration Difficulties Melding corporate cultures, linking financial and control systems, resolving issues w/ new executives Inadequate Due Diligence Improper evaluation of target firm for acquisition – many ways an acquisition would be harmful to firm Large Debt Inability to Achieve Synergy The two company’s assets are not worth more in conjunction than if used standing alone Other Reasons: International Corporate-Level Strategy (8) Multi Domestic – highly decentralized, each country relatively independent Focus on competition within each country separately, assumes market segmentation Expands firm’s market share in each individual locality Global – centralized and controlled by home country Offers standardized products across country markets Emphasizes economies of scale
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This note was uploaded on 12/07/2009 for the course MGMT 434 taught by Professor Roberttrumble during the Spring '09 term at VCU.

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434 FINAL - R easons for Acquisitions (7) Increased Market...

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