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Business Organisation and policy report - Essay Example

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Companies are constantly looking for newer ways to grow and mergers and acquisitions are supposed to offer companies such opportunities. Mergers and acquisitions (M&A) are a popular form of corporate development as they are seen as long-term strategic orientation of the firm. …
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Download file to see previous pages A study by Harvard Business Review finds that companies spend over $2 trillion in acquisitions while the failure rate of M&As is between 70 to 90 percent There have been no efforts to learn why combinations fail and mergers and acquisitions continue to be mismanaged. Despite the large number of failures, executives still consider acquisition a key strategy to achieving business objectives. This investigation presents a report on why boards of directors continue to take over other firms. This would be derived through investigation of a successful and an unsuccessful merger.
Exxon Corporation and Mobil Corporation, the two largest marketers of gasoline, were direct, significant and powerful competitors in at least 40 metropolitan areas from Maine to Virginia. Both these organizations competed in several products and geographic markets in the United States. This was a horizontal merger – merger of two competitors, which would result in the biggest non-government oil company in the world.
There are two primary reasons of mergers and acquisitions – to boost current performance and to reinvent the business model. M&As are also driven by the need for market expansion and for product diversification. Exxon Corp. Chairman Lee R. Raymond and Mobil Corp. Chairman Lucio A. Noto were realistic in their expectations from the merger. They recognized the need to cut costs due to changes in the oil industry. In fact these were the precise reasons for the merger – changes in the oil industry and the need to cut costs. Early intentions can influence subsequent integration. Leadership has to put forward a clear and convincing rationale to people on both sides that the merger is more than a cost-cutting deal , which was done in the case of Exxon and Mobil....
There are two primary reasons of mergers and acquisitions – to boost current performance and to reinvent the business model (Christensen, Alton, Rising and Waldeck, 2011). M&As are also driven by the need for market expansion and for product diversification (Duncan and Mtar, 2006). Exxon Corp. Chairman Lee R. Raymond and Mobil Corp. Chairman Lucio A. Noto were realistic in their expectations from the merger. They recognized the need to cut costs due to changes in the oil industry. In fact these were the precise reasons for the merger – changes in the oil industry and the need to cut costs. Early intentions can influence subsequent integration. Leadership has to put forward a clear and convincing rationale to people on both sides that the merger is more than a cost-cutting deal (Baxter, 1999), which was done in the case of Exxon and Mobil. The merger of Exxon and Mobil was inspired by the merger of BP with Amoco and ARCO. They too wanted to reach the heights of the new market leader and they relied purely on financial analyses (Marks, Mirvis and Brajkovich, 2001). There was no strategic intent and the decisions were based on empire-building. 2.1 Speedy entry to new product/market area The most profitable part of business is this industry is oil exploration and this merger would give them a competitive edge in this activity. This merger was a response to aggressive and excessive exploration behaviour by competing major players as each of them was trying to maintain its relative standing in the industry (Krishnan, Joshi and Krishnan, 2004). This relative positioning was important because mature oligopoly was prevalent in the industry. Mergers such as this become a strategic tool to exit some players and contract the industry (Voola, 2006). Excessive capacity ...Download file to see next pagesRead More
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