Acquisition Strategy Analysis - Essay Example

? Acquisition Strategy Paper When organizations and businesses have not been provided with adequate resources and supplies, the ownership may appear to be towards an acquisition or merger strategy. This is a way of strengthening that particular company. This kind of strategy performs the duties of a checklist on behalf of the business’ owners, in order to see to it that every crucial issue has been addressed and other possible alternatives considered before any acquisition or merger strategy can be initiated. This paper will mention two organizations that are under a different industry operation but make use of acquisition strategies in order to make their positions stronger in today’s competitive business world (Chan, 2003). Advantage presented by a merger or acquisition to either two or even more organizations is an option of strategic positions that are attractive for the ability to achieve operating economies, thus strengthening the effects of the organization’s competitiveness and competencies, resulting to new avenues that allow more innovative market opportunities. An acquisition can be referred to as a combination between two or even more organizations or companies whereby, one of them thoroughly buys and assumes all the operations or processes of the other one. These strategies, if properly researched and handled, can result to generation of an enormous amount of profit to the organization; however, not every single company that makes use of mergers or acquisitions can be termed as successful. Most companies are yet to meet their goals or expectations as a result of acquisitions performance. In fact, a handful of the organizations have epically failed (Gamble & Thompson, 2011). One of the companies that has sailed through this risky venture is Cisco Systems. Ever since 1993 when it made an original acquisition, it has merged a whopping 110 firms. It has however, had a fair account of failures and flubs although over 90% of its workers always opt to stay since 2002. Its business, largely built by this strategy has boomed over the years. The firm’s switches and routers, which are devices for networking, maintain internet humming through a computer talk-to-talk mechanism, have had the ability to capture over 68% of the gradually expanding 23 billion dollar markets. Sixteen years ago after its publicity, its market capitalization was approximately 120 billion dollars, which is vastly larger than that of Xerox, Apple, and Dell combined. Cisco has managed to sail through whereas several because of its expertise in professionalizing processes which most firms occasionally embark on when they need them or when they are greedy to make more profits. The Airspace former CEO once said that most of the companies he had interacted with rarely use acquisition strategies and in fact, integration is their job at night. He went ahead to say that, unlike the others, Cisco consists of individuals whose initiative is to strategize both during the day and night. Acquisition therefore, to him, is the company’s core function (Gamble, 2011). According to experts, Cisco is a highly successful company in terms of identification of new technologies in the market and taking calculated corporate risks mainly in markets that are new. However, the main point to note is that the firm’s acquisition and merger operation strength lies elsewhere. The firm noticed that technology acquisition cannot only lie on technology but the people as well. Hooper, the CEO, said that the firm’s most strategic and useful asset is the people. The people in this case mean the firm’s expertise. He says that once the firm loses product managers and technologists who may have created, say, a router to a link after an acquisition, then it may be said to have lost an immense deal of products which might have only existed in the heads of those employees. The core nucleus to the firm’s acquisition machine may be said to be its development group. It comprises of 40 individuals securely tucked to a cubicle firm that is nondescript situated in its office complex in San Jose (Kelly, 2009). This BD group consists of extremely diverse staff with qualifications that beat the norms. They unanimously conduct diligence to targeted companies, identify potential consumers, integrate upcoming companies and negotiate with particularly senior executives. For years, this group has been working under certain principles that are basic: buy small quantities, buy at an early date in the life cycle of the product and, above everything else, put individuals from whom they are acquiring first. The senior VP says that this aims at making the venture an art and not an integrated science. All these have ensured Cisco stays amongst the top list of firms that are remarkably successful at acquisition. The second company that has successfully employed the art of acquisition is Evonik, which can be termed as a leading company specialized in chemicals. Its strategy has over the years attained full support by its owners and has put its core focus on a profitable and rapid growth, and an unusually steady increase in the company’s value (Mayers, 2007). The management that has based itself on an active portfolio gives Evonik a high priority as a way of attaining an approach through value-based systems. This company’s systems of operation are always under regular screening in order to sustain profitability and ensure its corporate strategy. The company has maintained its strategic plan of bolt-on acquisitions in personal care fields, silica, coating additives and pharmaceutical polymers. It has direly strived to attain the requirements that many other companies have failed to meet over the years. These requirements may include targets based on internal return and strategic fit. A number of procedures have been strictly followed by this company in preparing, making and analyzing acquisitions. These may include clear cut rules as regards approval and responsibility processes. It has made it its aim to conduct due diligence on potentially acquired acquisitions before going for them. This therefore, means that it has had enough research as regards the company it would like to take over from before fully engaging itself into the strategy. The research entails a clear identification and systematic evaluation of every single opportunity and risk. The process’ key aspects are management development potential, management quality, strategic focus and any other environmental, legal and financial risks. The main secret to the company’s success is its ability to identify an upcoming company and immediately integrate it to the company’s group. This aids in an easier integration into its risk controlling and management processes. It has also developed systematic procedures that aid in strategic management divestments with the aim of ensuring businesses’ new growth as a result of ownership change. The company has also been quick at implementing management based on post-transactions in order to be able to monitor closely, any guarantee and liability risks that may come up as a result of divestments (O’Brien, 1989). Through this, it has managed to rise above the norms and establish a strong market base as compared to its competitors. It has also been able to widen its business scope as a result of the intensive market research. Its competitors too have not been spared since it has ardently capitalized on their weaknesses to manage this otherwise economically unviable strategy. Conclusion The strategic move timing has its own advantages as a way of acquiring competitive advantage. Managers to companies have an obligation to accomplish which is the vice of being exceedingly careful while considering the relevance or setbacks, which accompany first movers against fast followers against wait-and-see-late-movers (Jeffrey, 1998). References Chan , J. (2003). Googles Acquisition Strategy. Retrieved from ProQuest database. this is the name of the text we are using Gamble, J., & Thompson, A. (2011). Essentials of Strategic Management: the Quest for Competitive Advantage (2nd ed.). New York: McGraw-Hill.   Jeffrey L.W, Lonnie D.B & Kevin C.D. (1998). System Analysis and Design Methods 5th Edition. New York: McGraw-Hill Companies. Kelly, R and Casey G. C. (2009). Introduction to Information Systems: Enabling and Transforming Business. Third Edition. John Wiley & Sons Ltd, New Jersey Mayers, C. 2007. Solutions of fleet management systems. Retrieved on 17thOctober,2011 from http://www.e-drivetech.com/solutions/fleet-management O’Brien, J (1999). Management Information Systems – Managing Information Technology in the Internetworked Enterprise. Boston: Irwin McGraw-Hill. Read More