Mergers Essay Example

  • Category:
    Management
  • Document type:
    Essay
  • Level:
    Undergraduate
  • Page:
    1
  • Words:
    591

Question 1

There has an increase of mergers in the business world due to the need to leverage business competitiveness on financial, managerial and technological resources on a bigger scale. Companies end up combining their resources and capacity thus they gain an edge over its competitors. One such kind of merger is vertical in nature when two companies in different industries combine to form on big company. For example an automobile company might purchase a parts company so as to control factors such as production or create a competitive edge over its competitors (Deresky, 2014). Vertical mergers are meant to expand reach and leverage on factors of production or consumption to boost the company. An example of this merger is the E-Bay merger with PayPal which were in different industries. This deal allowed for E-Bay to grow its business and that of PayPal through the businesses generated from E-Bay. Vertical mergers also create an opportunity for acquisition or takeover of the business by the target company (Fisher, 2006).

Question 2

Cross border alliances or mergers sometimes face lots of problems related to business culture, legal framework and national interests. Businesses operating in two different economic and regional environments might not share the same business ideals. Therefore, it becomes an impediment for both companies to strike alliances. For example, companies operating in China are used to a restrictive and government controlled environment of business (Fisher, 2006). This is different from other economies such as the United States and other European countries. Other reasons include managerial differences or intellectual and technological transfer issues that impede cross border alliances. For instance, companies operating in highly technological circles such as the aviation and telecommunications sector cannot merge to cross border differences (Deresky, 2014). Managerial differences stem from cultural differences which create protectionist policies against cross border alliances. In some cases, security reasons cannot allow for cross border alliances especially for companies dealing in military technologies and products. An example is the refusal of an offer for RIM (Research-In-Motion) who own BlackBerry phone technology and patents by a Chinese Investors.

Question 3

National culture is evident within the operation and design of strategies for organizations and companies. As a result, companies in most cases have different operational cultures due to differences in cultures. National culture variables such as power distance and individualism differ in different countries. For example, China has a high power distance and low levels of individualism compared to the United States which has a low power distance and high levels of individualism. These national cultures affect issues around labour, managerial and major business practices within an organization (Adler, 2002). An example of an organization that is reminiscent of this issue is Mittal Steel which is owned by an Indian businessman. The company is managed by close relatives of the owner, Mr. Lakshmi Mittal and thus its merger with Arcelor faced a lot of opposition from Europe. Consequently, the European owners of Arcelor were afraid of the plans of the Mittal Steel. The European owners wanted to safeguard their culture in terms of steel production as a national resource that could not be sold to companies of other nationalities (Fisher, 2006). Moreover, the Indian government were in support of merger since it would benefit a home-grown company.

References

Deresky, H., International Management: Managing Across Borders and Cultures. Essex: Pearson, 2014.

Adler, N., International Dimensions of Organisational Behaviour. Boston: Thomson, South Western, 2002.

Fisher, G., Hughes, R., Griffin, R, and Pustay, M., International Business: Managing in the Asia Pacific. Frenchs Forest, NSW: Pearson Education, 2006.