McDonalds Acquisition of Boston Market Corporation, Acquisition of Sonic Corporation - Case Study Example

MERGERS AND ACQUISITIONS d MERGERS AND ACQUISITIONS INTRODUCTION Mergers and acquisitions are strategic organizational moves to acquire or join a potential business venture that can be leveraged in their favor. The reasons for mergers and acquisitions are various, ranging from gaining exposure to international markets to driving our potential competition (Marks & Mirvis, 2001). However, a business’s decision to acquire or merge with another business needs to be realistic so that the additional resources that need to be applied to uplift the acquired business are provided for. Many organizations have gained tremendous profitability through mergers and have managed to tip in the scales in their favor effectively. For example when Disney saw that cartoons and theme parks are not enough to satisfy the diversified need of its target market they successfully acquired Pixar studios and have belted out several successful movies like the Toy story and Wall-E, ever since (Dumon, 2009). The merger was integrated with the Disney and Pixar’s overall organizational philosophies and both the businesses complemented each other, making it a successful and profitable venture. That being said, the corporate world is full of examples of unsuccessful mergers and acquisitions as well. For example, The Quaker Oat company’s acquisition of the Snapple beverage company. Apart from overpaying at the time of acquiring Snapple they overlooked the compatibility of the their business’s resources and expertise with the company they were acquiring and ultimately they not only posted a loss but also sold it at a price that was much less than the value of Snapple. Thus, mergers and acquisitions can go both ways provided that the top level of the organization has the expertise to weigh the pros and cons and collaborate with business that can complement theirs. This paper will shed light on two such companies. Firstly, an example of a successful international chain that acquired a business that helped them gain strategic advantage. The second example will be that of an organization that operates solely in the United States and has not ventures into the acquisition or merger activities. By linking the success story of the first example we will be able to establish a prospective merger opportunity for the second company and create strategies that can help them benefit from this business collaboration. MCDONALD’S ACQUISITION OF BOSTON MARKET CORPORATION McDonalds is not a new name in the world of fast food chains. Operating in more than 100 countries worldwide, it is one of the strongest brands of today’s corporate world. The service level, business operations and organizational philosophy has contributed greatly to the strength of the brand in today’s world. It has come a long way since its inception in 1948 as a small hamburger joint in San Bernardino, CA and is now considered as a multibillion dollar company that generates revenues that surpass majority of the other market players in the same industry. McDonalds strategic decisions have proved to be highly profitable and successful and the company has shown great expertise in leveraging business opportunities through mergers and acquisitions (Corporation, 2014). Out of the many such ventures the most successful ones have been the Chipotle Mexican Grille and Donatos Pizzeria that resulted in increase in profitability and wider outlet coverage. They carried on capitalizing on acquisitions and took another profitable step in 2000 by acquiring Boston Corporation which had filed for bankruptcy in 1998 but recovered soon through the retail sales of its home style meals. Strong in the northern part of the US with significant number of brand followers and retail outlets, McDonalds saw this as an opportunity that could be salvaged for their favor. The 850 outlets retained at the time of acquisition were kept in operating position after the acquisition however; McDonalds faced a number of challenges. Firstly the trend of health conscious masses emerged that deemed McDonalds as unhealthy food that had less nutritional value and contributed towards health problems. This was coupled with another contradiction about McDonalds claiming that their fries used 100%vegetable oil however it used beef extracts too. This brought the fast food chain under the limelight and it became difficult for them to deal with so much on their plate. As a result they had to downsize the other acquired chains like Donaltos Pizzeria so that their resources could be allocated to rescuing the brand from the growing concerns. McDonalds invested heavily in building a positive image in the mindsets of the people through PR and customer engagement activities. Along with this, transparency became a key concern for the company as well, thus, they had to revamp their menu to include healthier meals. This was accompanied by company claims of compliance with health standards and the managerial focus on making sure that the company did what it claimed. In this way McDonalds was able to regain itself from potential law suits and loss of customer base. Even though their own brand was doing well, the management of McDonalds realized that they will be in the best position to strengthen their core brand if they concentrate their resources on just that. Thus, they gave up on the other acquisitions and sold the Boston market corporation to Sun Capital Partners with 180million in assets and 89 million in liabilities in 2007. This was a profitable sale of a successful business and McDonalds was able to ascertain where its strength lies, prioritizing resource allocation to the main brand. The example of acquisition of Boston Market Corporation by McDonalds and its subsequent profitable sales can prove to be a learning example for Sonic Corporation. SONIC CORPORATION –POTENTIAL ACQUISITION OPPORTUNITY AND RELATED STRATEGIES Sonic Corporation is a chain of drive in fast food restaurants in the US with more than 3000 outlets and a vast base of loyal customers. Sonic Corporation has not taken up any merger or acquisition activity since its inception in 1990. The McDonalds case study can help them identify potential businesses they can acquire and the strategies that they can formulate in order to make the acquisition/merger a feasible one. The success of sonic corporation is attributed greatly to the organizational practices aimed towards making their employees feel valued. Since the service business is all about being able to reflect the company’s ideology through the quality of service, customer interactions, valuing feedback etc., and sonic corporation allows its employees to become minority partners at its various chains. This gives them the sense of ownership and they strive better to perform well so that they are the ultimate beneficiaries of their efforts. The merger suggestion for Sonic Corporation is that of ruby Tuesday that is a multinational food retail chain that specializes in casual dining. The chain operates in a number of countries and hence will open avenues for Sonic Corporation to take its business abroad as well (Sec.gov, 2014). In this way they will be able to cater to the international market with their offering that has been met with great popularity within the US. McDonalds is able to hold successful operations all over the world due to their commitment towards proving the best offering. For this they apply differentiation strategies that customize the offerings according to the needs and taste buds of the people in the country it is operating in. for example, McDonalds does not offer beef items in India where the cow is considered a sacred animal. Similarly they offer halal meat in countries with Muslim population. One corporate level strategy that the sonic corporation can apply with the merger is that of continuing its tradition of valuing their employees. If the same is applied in the international market as well not only ill the employees feel valued but they will also strive to work better as they will be the ones benefitted in the end. One business level strategy would be to give certain level of power and authority to the employee to make decisions up to certain levels to cater to the diverse target market and make the service level efficient and customized, this could involve catering to special needs of customers, taking personalized orders and carrying out campaigns to increase sales at their outlets. Another strategy could be that of employing locals to represent the business so that they don’t feel like outsiders when they step into a multinational chain. In this way, sonic corporation can diversify its portfolio by adding a retail service along with its existing drive-thru one. CONCLUSION Mergers and acquisitions, if done right, can help organizations climb the ladder to further success. However, it is very important that they have the available resources and expertise to accommodate and run another business well. A non-profit venture is a useless business strategy and is bound to be a burden in the long run. The example of McDonalds shows that ne should only take on as much as it can handle. Even though it did manage to make the acquired business a profitable one, it deemed it best to sell it off when it could go at a good price and focus its resources in handling the emerging challenges to its core business. For sonic corporation, it is an opportunity to acquire or merge with ruby Tuesday in order to diversify its portfolio and also to tap into international markets. REFERENCES: Corporation, M. (2014). History of McDonalds Corporation – FundingUniverse. Fundinguniverse.com. Retrieved 6 June 2014, from http://www.fundinguniverse.com/company-histories/mcdonald-s-corporation-history/ Dumon, M. (2009). Biggest Merger and Acquisition Disasters. Investopedia. Retrieved 6 June 2014, from http://www.investopedia.com/articles/financial-theory/08/merger-acquisition-disasters.asp Marks, M., & Mirvis, P. (2001). Making mergers and acquisitions work: Strategic and psychological preparation. The Academy Of Management Executive, 15(2), 80--92. Sec.gov,. (2014). form10-k_2011.htm. Retrieved 6 June 2014, from http://www.sec.gov/Archives/edgar/data/68270/000006827011000026/form10-k_2011.htm Read More