Mergers, Acquisition and International Strategies - Case Study Example

Mergers, Acquisition and International Strategies Introduction A merger is de d as the legal arrangement of more than one corporation to form a new and more complex company. On the other hand, acquisition defines the purchase of one company by another company although there is no formation of a new company. International strategies are strategies through which companies sell their goods and services outside their domestic markets since international markets have been confirmed to produce potential opportunities. Moreover, international strategies tend to increase market size, greater economies of scale and greater returns on major capital investments among other issues (Weber, 2013). Question One ArcelorMittal is a renown multinational company that has been rated as the world’s first steel company with approximately 250,000 employees in 60 countries. Moreover, it is one of the leading suppliers in steel products and Iron ore particularly in Canada, North America and other parts of the world. ArcelorMittal was founded in 2006 through the merger of Arcelor and Mittal Steel, although the business was initially set up by Mr. Lakshmi N Mittal. On the other hand, Arcelor was founded in early 2002 through other minor companies. Of importance to note is that at the time of the merger with Mitta Steel, Arcelor had been confirmed as the second largest steel company in the production of Steel across the world. Positive Impact on the merger In 2007, a year after the Company was fully settled in the merger, their market strength was refurbished through continuous pursue of their expansive growth strategy where they were able to transact with over 35 countries worldwide. Apparently, at the start of the year 2008, the Company continued to make investments where transaction were announced in countries such as Australia, Brazil, Costa Rica, France, Russia, Turkey among other countries which were made complete. At the same time, the Company managed to suspend most of their markets as a result of the deteriorating economic situation in its mother country thus curbing the presumed loss (Kumar, 2012). Additionally, the Company managed to carefully restart some projects that had temporarily been stopped to capture growth in the main emerging markets and mining. As a result, the capital expenditure increased by 100% in the year 2011 adding up to US$1.3 billion. At the same time, the group grew keen interest in major development programs that were intended to lead to growth of current mines and emerging ones. According to facts, the merger has continuously grown into one steel Company that has put considerable emphasis on the growth of its mining business. Moreover, there has been continuous progress of increasing the production of Iron ore from the current capacity of around 56 tonnes to approximately 90 tonnes from the developing mines of the Company. It is for undoubted reasons that a merger between these two companies that have their interest in the same field was for their advantage especially in making maximal profit. Essentially, both Mittal and Arcelor were leading companies before the merger and the strategy to merge could be argued as the best decision that the two companies made in 2006. Consequently, since they merged they have maintained their position as the leading manufacturers of steel across the world with more than 35 transactions confirmed. Furthermore, they have continuously gained experienced to handle both the new and existing markets (Kumar, 2012). Question Two Profitable Merge Apparently, one merger that could be profitable in the food industry is between McDonald’s and Mr.Empanada. McDonald’s Corporation has been confirmed as the world’s largest chain of companies for fast foods restaurant. Its home is in the United States although it is found in approximately 119 other countries worldwide. Having been founded in 1940 by Richard and Maurice McDonalds, the company has continuously been able to serve its list of customers and their ever changing preferences. Conversely, Mr.Empanada is a small rapid company that has a Spanish original although their foods are not exclusively Spanish. Since its inception approximately a decade ago, the company has managed to open six franchised locations other than its main branch that is located in Tampa, United States. The Corporation has been argued as one of the best in relation to selling, training and coordinating new and potential franchise locations. Moreover, Mr. Empanada takes pride in their restaurants, and extreme care in the manufacture and preparations of their food items, hence demonstrating their total commitment to its brand and reputation. Impact of the profitable target In case Mr. Empanada Corporation acquires a merge with McDonald’, then there will be clear brand enhancement since McDonald’s has a strong brand that has enabled it to remain as one of the most selling brands in fast foods across the world. As such, customers affiliated to Mr.Empanada will have more reasons to trust the products from a larger and known Corporation (Martin & Chaney, 2012) Similarly, McDonald’s will have the opportunity to strengthen their various ways of manufacturing and preparing their food items. Consequently, it has been argued that Mr. Empanada has one of highest levels of food production especially on the machines that they use. Another profitable impact in the suggested merger is that both McDonald’s and Mr. Empanada are involved in selling, training and coordinating new and potential franchise locations. As such, the merger between the Corporations will benefit the new formed company in strengthening the whole project of managing the Franchise locations. There will also be incorporation of different marketing strategies that are meant to come up with more profitable concepts. In a general sense, both Corporations are capable of experiencing greater efficiency, diversification, increased economies of scale, and greater investments that are the basics of mergers and acquistation. Question Three ArcelorMittal Corporation is a multinational company that has both international business -level and corporate level strategy. In regard to international business- level strategy, the Corporation aims at ensuring that it captures the leading positions in the value chain of steel particular on mining, distribution and processing. Furthermore, the Corporation strives to attain operational excellence through safety which is the first priority, benchmarking, and the involvement in the maximum practice in their continuous operations. Similarly, innovations in the products and processes have been argued to support the complete market competition (Verbeke, 2013). In order to achieve this business strategy and further maintain it, the Corporation has ensured that there is a strong balance sheet that enables future growth; the best talent in relation to employees is developed and retained. The Corporation has a decentralised organisation structure that is crucial for its position as a multinational corporation. Finally, there is presence of a clear licence within its operation which plays a huge role in recognising the company’s obligation to act responsibly towards all stakeholders. Equally, the Corporation has an international corporation-level strategy that has a huge role towards the achievement of business strategy. Basically, this corporate strategy plays around four main areas which include; investing in people, making steel more sustainable, enriching the communities and transparent governance. Firstly, through corporate level strategy, the Corporation is inspired by the ideas, hard work and commitment that translate to the success of the business. Of importance is that the Corporation ensures that there is dignity and respect while treating these people. Secondly, the Corporation is committed in making contribution towards developing and sustaining local communities. This is mostly done through being sensitive to the local cultures, priorities and other related factors in open discussions and partnership in local organisations. Thirdly, the Corporation ensures that steel is made more sustainable by use of technology that redefine the process of making steel, initiating more sustainable practices and making positive contribution towards most of the climate challenge that are present. In most cases, partnership with customers and suppliers ensure that most environmental goals are achieved through innovative steel products. Finally, ArcelorMittal has the strongest corporate level strategy comprising of transparent governance that continuously insists on visible and open governance that is able to predict future consequences and manage risks that are present during their operations. Recommendations The Corporation should strive to ensure that it gains and maintains the highest number of Iron- ores mines across the world. This ensures that there is reduction in swings of their presumed prices to potential customers and suppliers. The Corporation should focus more on vertical integration, consolidation and geographical diversification in order to improve profitability across their entire market. Apparently, the Corporation engages in actual mining which has been confirmed to cause environmental impacts through air, water and land. As such, the Corporate should be in a position to compensate all living things that are might be negatively affected either directly or indirectly by the mining operations. Economists have argued that the sole reason for a business to exist is making profit. Thus the Corporation should abandon any operation that does not reflect profit making. ArcelorMittal should strive to ensure that the market demand is met by their supply. This is because the ever increasing demand for steel has rapidly increased across the world although the company is unable to handle them currently. Question Four Mr. Empanada is one of the smallest food companies in Tampa, United States. Being a Corporation, it requires a business –level strategy and a corporation– level strategy to retain its competitive advantage. Proposed Business -level Strategy The most effective business –level strategy is the use of integrated low cost also known differentiation strategy. The strategy entails being able to adapt to changes in the environment, learning new skills and technologies and increased effectiveness across business units as the main facilitators in improving their general ability. As a result, customers realize value through the features of the Corporation’s product, as well as, low pricing. For instance, Southwest airlines is one of the many corporations that utilise this strategy to maintain a competitive advantage. Nevertheless, this strategy should be utilised properly to avoid unsuccessful management of the competitive force and strategic competitiveness thus not achieving the main aim on the strategy. Proposed Corporate –level Strategy The most effective corporate –level of strategy is the use of value-creating strategy. Value creating strategy comprises of a situation where a business puts more emphasis on edging out its competitors through striving to achieve a larger market share. Essentially, the strategy is aimed at ensuring that there is added value on the business, bot original and perceived. Moreover, there should be more scrutiny on the economies of scope to ensure that resources and competences of the Corporation. This strategy should be practiced across the Corporation to ensure that there is reduced costs particularly on production and there is increase in efficiency. In general, both the corporate level strategy and the business level strategy are capable of moving Mr. Empanada to an international level in a systematic and impeccable growth. References: Kumar, B. (2012).Mega mergers and acquisitions: case studies from key industries. Basingstoke: Palgrave Macmillan. Martin, J. & Chaney, L. (2012).Global business etiquette: a guide to international communication and customs. Santa Barbara, Calif.: Praeger Verbeke, A. (2013) International business strategy: rethinking the foundations of global corporate success. Cambridge: Cambridge University Press Weber, Y. (2013).Handbook of research on mergers and acquisitions. Cheltenham: Edward Elgar. Read More