Corporate Strategy - Essay Example

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Name Instructor Task Date Global passenger and cargo airline industries have tasted periods of profitability and losses in the past with the latter being attributed to hikes in fuel prices, and airline manufacturing materials. Dynamics of the industry have also had an impact on the new and existing airline companies…
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Corporate Strategy
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Download file to see previous pages The company changed its name to Air France KLM, though the two companies operate separately. Delta Airlines had a merger with Northwest Airlines in the years between 2008 and 2010 that made the former become the world’s No.2 passenger carrier after United Airlines. The company still maintains the Delta name. We also visit United Airlines that merged with Continental Airlines in 2010 to become the world’s largest airline company/carrier. Airline acquisitions and mergers have implications on airline customers and employees. These business moves have some interlinked factors that are important in understanding what really takes place; Efficiency, approvals, competition, strife and benefits to the airline customers (Kelly et al, 2002). In the airline industry, mergers and acquisitions are purely strategic and are pursued after putting several factors into consideration: Service quality and image of the other airline, possibility of the other airline company to have partnerships with airlines considered industry rivals and the area covered by the other airline, which is of interest. Strategically speaking, an airline entity would merge with another airline company that operates on different routes from those that it operates. This expands flight coverage and helps in avoiding overlapping of flights in any given routes. One of the effects of acquisitions and mergers on airline customers is that air fares increase. Such business moves reduce the number of operators thus reduction in competition. The result is an increase in fares and rates. Acquisitions and mergers are most active when there are equity markets with low volatility and low rates in interests. There is also an upward trend in mergers and acquisitions, when stocks trade in low multiples. Mergers and acquisitions have the tendency of being instigated and driven by market conditions and factors that are favorable (Kelly et al, 2002). The drive to transact mergers and acquisitions mainly starts with the parties involved who have strategic objectives that are to be achieved at the tail end of such transactions. The strategic objectives of selling and buying converge in a manner that fuels the transaction process. For instance, the parties involved may enter into such agreements in order to stay afloat in the market or the merger and acquisition plan will facilitate a leaner, profitable, and successful company. These transactions could be done with the objective of strategically positioning the resultant business entity for the necessary growth. There are strategic reasons that explain the existence of these kinds of businesses: financial growths, achievement of vertical integration, outdo competition, asset acquisitions, expansion into new markets, gaining of intellectual property (IP), acquisition of new customers and clientele, expansion into complimentary services and products, and the need to outdo threats on entity services and products (Bierly & Coombs, 2004). There were developments that led the above named airline companies to venture into these kinds of agreements. United airlines merger with continental airlines was driven by the urge to create the world’s most lucrative airline that would taste success in the competitive domestic and global airline sector. The resultant entity would offer unique and superior services and products to its prospective customers. The resultant company would also serve a global airline network of 370 destinations. The ...Download file to see next pagesRead More
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