BUS 499 Assignment 4 Merger, Acquisition, and International Strategies*****Already A++ Rated Tutorial Use as Guide Paper*****

BUS 499 Assignment 4 Merger, Acquisition, and International Strategies

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Mergers and Acquisitions: Assuming rationality from all players, mergers and acquisitions deals originate out of specific strategic corporate requirements. In reality, the advisors (both legal & financial) and middlemen also play a significant role in the original activity. Acquirers / targets may focus on players for a potential acquisition. Buying players implies horizontal integration. There are lot of risks (financial as well as operational) involved and challenges in mergers and acquisitions face by company which is acquiring and target companies as which are listed below:-

• Synergies sometimes do not generate real cash flows as expected.

• Financial Risk arises from the amount of debt (taken to acquire other corporation) in a company’s capital structure. Impact of changing debt on valuation

• Increase in debt increases value over surge in interest tax yield

• Interest Tax shield gain is partially offset by increase in cost of equity

• There are complex processes involved in mergers and acquisition .It is difficult to compare betas measured against different indices due to differences in composition of index.

• Changing financial leverage affects the systematic risk that shareholder’s face.

• Risks when the acquirer and the Acquirer-Target merging entities are in two different countries

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. (Facebook acquiring WhatsApp)

There are many reasons that a company consider before doing any merging or acquisition activity. Hence it can be safely considered that Facebook too has considered the factors related to the same.

First of all, the number of users of WhatsApp is around 450 million. WhatsApp was initially released in the year of 2009. In the span of just over 4 years having over 450 million users itself suggests that the growth of the company is phenomenal. Facebook have achieved just over 100 million in the initial 4 years. This provides the past history of growth for the company.

Another factor is the future growth. WhatsApp is adding around 1 million users daily which is one of the highest in the industry. These are the number of new users that the company is able to add. This shows the future growth potential of the company. Hence the valuation would increase a lot.

Another important factor is the synergy between the two companies. Facebook too has a messenger integrated in their website. But they are unable to provide direct strong competition to the WhatsApp. This means Facebook is left with two options:

• First one is that the company must change the messenger so as to attract the customers.

• Second is that the company must do some M&A activity.

Facebook went for the second option.

Now comes the valuation part. Facebook knows the power of online medium. They have a complete idea of using the online medium to increase the revenue. Hence with the growth potential that the WhatsApp has in the future, Facebook would be able fully utilize the potential and rather be able to increase the margins for the company in the future. This is the main reason that they have valued the company with $19 billion.

This is definitely based on the real facts and the synergy that the WhatsApp messenger would provide it to the Facebook and hence this deal might prove to the profit booster for the company.

For the corporation that has not been involved in any mergers or acquisitions, identify one (1) 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. (Publix Super Markets)

Established by George W. Jenkins in 1930, Publix Super Markets is the major and swift-growing employee-owned supermarket chain in US. Publix has its store operations in Florida, South Carolina, Georgia, Tennessee and Alabama.. It has grown into a Fortune 500 company with more than 1,000 stores

General Information 

• One of the tenth largest-volume superstore chains in the USA

• Retail sales of $27.5 billion in year 2012

• Current employee count of more than 166,000

Publix is known for its values of making the customer experience pleasurable; the Publix pledge to never knowingly dissatisfy customers is famous in the industry. The Company sells grocery products including dairy, bakery, produce, meat, deli,and seafood health and beauty care, and other products and services.

These products(food and non food products) are delivered to the supermarkets through Company distribution centers or directly from the suppliers.

For the corporation that operates internationally, briefly evaluate its international business-level strategy and international corporate-level strategy and make recommendations for improvement (Apple INC)

Globalization has a great influence on the way the ideas were conceived, created and finally delivered in the form of new technology thereby impacting the operational model of multinational corporations. Interestingly, the conception of business idea happens at one place while execution happens at some other part of globe for the delivery of final product in the third place. The company always wants to keep improving their product and keep focuses on new innovation .Apple Inc is one of Fortune 500 companies which has capitalized innovatively on the offerings of globalization along with its smart thinking.

Apple’s international business-level strategy is making the best products and sells them around the world and uses China as their number one manufactures. All the products of Apple be it iPod, iPad, iPhone, Apple TV etc. cite exciting examples in the impact of globalization on product/technology conception, design, and execution. The components are manufactured in various parts of the world like China, Taiwan/Singapore and Korea. The final product is brought together and put in shape by a Taiwan firm named Inventec Corporation located at Mainland China. Thus, it presents the true example of globalization and technology as an enabler in manufacturing of world fame device.

Apple is adequately rewarded for the novelty that the company has introduced in the product. The slice in the revenue captured by company’s design, delivery, and sales surpasses the worth of its manufactured components. Even though to a great extent the iPod is not factory-made in the United States, it is designed and retailed in US, and U.S. firms do fairly well in the bargain.

During March 2013, Apple had patented the technology called Augmented Reality (AR) which can identify the objects in the live videos streaming. The company introduced 7thiOS operating system along with OS X Mavericks,the 10th version of Mac OS X, and also a new Internet radio service called iTunes Radio during the Worldwide Developer's Conference held in June 2013.

Apple can improve their international business-level strategy by providing free applications to the customers .If Apple provide some free services or apps or discounts for the customers who pay higher price for Apple products, it can help customers to remain stick with Apple and hence will decrease customer switching issues.

In February , 2014, Tim Cook (Apple’s CEO) met Turkish President, Abdullah Gül in Ankara to discuss the company's involvement in Faith project- Turkish government aimed to integrate state-of-the-art information technology into Country’s public education system. Tim announced that the country’s first Apple Retail Store will be opened in Istanbul in around April 2014.

For the corporation that does not operate internationally, propose one business-level strategy and one corporate-level strategy that you would suggest the corporation consider.

(Southwest Airlines)

Southwest Airlines Co. is a major U.S. airline and the world's largest low-cost carrier, headquartered in Dallas, Texas. The airline was recognized in 1967[2] and approved their current name in 1971. Today, Southwest is the nation's major carrier in terms of originating domestic passengers boarded serving 76 destinations in 38 states and the District of Columbia

International business-level strategy the resources and capabilities established in the home country frequently allow the firm to pursue the strategy into markets located in other countries

Southwest international business-level strategy would be to expand their flights internationallyTo increase profitability, diversification should allow the company to lower costs, differentiate its products, or better manage industry rivalry. They should lower costs at times of major events(Olympic Games in 2016) in such a way that demand for Southwest airlines increases leading to growth in revenues and hence profits.

The company can create routes to selected destinations for more profit growth strategy.

Many problems can be resolved if corporate management directly audits all business divisions, however, doing so requires both time and effort from corporate managers Southwest Airlines can compete with other major recognize airlines by expanding their route and keep offering discounted services from different destination .The low affordable flight fare along with non mandatory services at subsidized rate in select cities and countries can bring lot revenues to the company.

References:

http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/telecoms/10663911/Facebooks-WhatsApp-deal-has-unnerved-phone-companies.html

http://www.publix.com/

http://www.bi-lo.com/

https://www.apple.com/

https://www.inkling.com/read/strategic-management-cases-rothaermel-1st/chapter-4/the-resource-based-view

http://www.southwest.com/