Mergers, Acquisitions, and International Strategies - Research Paper Example

Mergers, Acquisitions, and International Strategies Introduction This present research paper mainly focuses on the concept of merger, acquisition, and international strategies. The paper will research these concepts in relation to two publicly traded corporations in the United States. One corporation is selected on the merit that it has acquired another company in its years of operations and it operates in the international market; the company that was selected under this criterion is the McDonald’s Corporation, which has all the listed attributes. The second company is selected on the merit that it is a public corporation with no history of mergers and acquisition and it operates solely within the United States market; the company that was selected under this merit is the Buffalo Wild Wings. The researcher paper will evaluate the strategy that led to the mergers and acquisitions undertaken by McDonald’s Corporation and it will stipulate whether the mergers and acquisitions were wise choices. In addition, the research paper will evaluate McDonald Corporation’s international business-level strategy and corporate-level strategy and then provide recommendations for improvements. Secondly, the research paper will identify one company that would be a profitable candidate for Buffalo Wild Wings to merge with or acquire. Lastly, the paper will propose one business-level strategy and one corporate level strategy that can be effective and profitable for Buffalo Wild Wings. McDonald’s Corporation According to Warwick (2013), McDonald Corporation is largest public traded hamburger fast food restaurant chain in the world, which serves averagely 60 million customers in over 115 countries across the world on a daily basis. The McDonald brothers originally started the company in 1940 but it was fully acquired by Ray Kroc who joined the company as a franchise agent in 1955, and this marked the first experience of the company with mergers and acquisitions. Among the companies that the McDonald Corporation has acquired or merged with in its years of operations, include the Piles Café, Chiptole Mexican Grill, and Donatos Pizza but it has sold off the two latter subsidiaries (Warwick, 2013). The McDonald’s restaurants offer a wide menu to their customers, which consist of French fries, hamburgers, chicken, cheeseburgers, soft drinks, breakfast items, desserts, milkshakes, fruits, smoothies, wraps, salads, and fish. Presently, the company boosts of total assets worth over $32 billion and total revenue of over $27 billion and a net income of over $ 5 billion in the past financial year. Buffalo Wild Wings Warwick (2013) wrote that Scott Lowery and James Dishbrow, opened up the first Buffalo Wild Wings restaurant in 1982 at Columbus, Ohio. As of 2013, the Buffalo Wild Wings restaurant chain, which trades at the NASDAQ, had established its operations in approximately 910 locations mostly in North America and currently, there are ongoing talks about the expansion of the restaurant chain. The menu of Buffalo Wild Wings restaurants mainly consists of Buffalo wings and sauces. In the last financial year, the company generated $748 million in revenues from across its entire business operations. Strategy for McDonald’s mergers and acquisitions According to Warwick (2013), McDonald’s boosts of more than 34,000 locations worldwide and this has been facilitated by the franchising strategy that has so far enabled the corporation to have representation in many countries and further enabling it to become among the most popular brands in the world. Besides the franchising strategy, McDonald’s has been able to have a wide market presence because of acquisitions and mergers with other restaurant chains. Concerning this Warwick (2013) stated that McDonald’s undertook various mergers and acquisitions deals during the 1990’s which enabled it to significantly increase its market share, revenue level, and the net income. The main strategy applied by McDonald’s while making the mergers and acquisitions deals was the expansion strategy in relation to the market share and even widening the company’s portfolio or product offerings. For example, in order to venture into a particular market, McDonald’s under its expansion strategy would opt to merge with an already existing restaurant chain that operates in the desired market or acquire the restaurant chain in totality. Under the merger strategies, McDonald’s normally seeks to get the controlling stake by buying more than 50% of the total shareholding of the target company. In a scenario whereby, McDonald’s seeks to expand its portfolio or product offering, it would normally merge with a restaurant chain that offers different kind of products, for example, it acquired Piles Café in order to offer dishes that were different from the traditional fast foods. This strategy applied by McDonald’s is appropriate because the corporation has been able to increase successfully its market share and this has increased the total net income earned by the corporation over the past decades. Secondly, by merging or acquiring other companies with the sole purpose of widening the portfolio or increasing the company’s product offering, the corporation has been able to increase its customer base and even create risk mitigation measure in case a particular line of product fails in the market. McDonald’s international corporate-level strategy According to Analoui and Karami (2003), corporate-level strategy refers to the overall direction and scope of a company and the way business operations have been realigned in order to attain organizational goals. There are three different types of corporate-level strategies and they include the directional strategy, parenting strategy, and portfolio strategy. Based on the analysis of McDonald’s, it is evidently clear that it applies the directional strategy meaning that it applies the growth strategies, stability strategies, and retrenchment strategies. Concerning the growth strategies, it has been noted that McDonald’s undertakes mergers and acquisitions with an aim of increasing its market share and even the revenues generated. As for the stability strategies, it has also been noted that the corporation mainly seeks to expand its market share and product offering in order to become more stable. The corporation has applied the retrenchment strategies when selling off some of its subsidiaries such as the Chiptole Mexican Grill and Donatos Pizza. In order for McDonald’s to perfect on the directional strategy it needs to ensure that the growth strategy increases its brand market share and this will require the company to rebrand all newly acquired restaurants with the McDonald’s brand logo. According to Graham (2008), this strategy will be cheaper for McDonald’s since it will not incur huge cost associated with promoting a new brand. McDonald’s international business-level strategy According to Analoui and Karami (2003), business-level strategy enables an organization to increase value for customers and gain competitive advantage through the effective utilization of core competencies. Graham (2008) further stated that the key business-level strategies include the differentiation strategy and the cost leadership strategy. McDonald’s applies the cost-leadership strategy since it sells its dishes at low prices, which is enabled by the economies of scale that it enjoys. In addition, it applies the differentiation strategy as it sells dishes that have unique taste thus giving the restaurant chain an added advantage. McDonald’s can improve on its business-level strategies by developing a secret recipe that can further differentiate its products from those of other fast food restaurants. Potential target for Buffalo Wild Wings The potential target for Buffalo Wild Wings is the Cosi restaurant chain, which has 136 operational restaurants spread across the world and it specializes in salads and sandwiches. The Cosi restaurant chain is a potential target that can be fully acquired by Buffalo Wild Wings at a price of $48 million since that is the company’s current market capitalization. Buffalo Wild Wings can easily pay out this amount in cash because it was able to generate revenue amounting to $784 million in the past financial year (Warwick, 2013). The acquisition of Cosi restaurant chain will be profitable to Buffalo Wild Wings because it will increase its number of locations to nearly 150 because currently Buffalo Wild Wings has 910 branches while Cosi restaurant chain has approximately 136 branches. The increased number of locations will increase the revenue as well as the profit generated by Buffalo Wild Wings. Secondly, the Buffalo Wild Wings restaurant chain will be more profitable because of the increased product offering after it acquires the Cosi restaurant chain, which mainly offers salads and sandwiches. Lastly, Buffalo Wild Wings will be able to venture into the international market because Warwick (2013) stated that the Cosi restaurant chain has locations in 16 other states apart from the United States, and therefore, it acquisition will definitely propel the company into the international market. Buffalo Wild Wings’ business-level strategy Buffalo Wild Wings should apply the cost leadership strategy whereby it creates a competitive edge by selling its products at low prices as compared to other restaurant chains. This strategy will definitely attract more customers to Buffalo Wild Wings restaurants especially those seeking quality meals at bargain prices. According to Analoui and Karami (2003), Buffalo Wild Wings can implement this strategy by bargaining for low prices for its supplies and it has the advantage of stronger bargaining power because of its capacity to make bulk purchases. Buffalo Wild Wings’ corporate level strategy Buffalo Wild Wings should equally implement the directional business strategy, which will require the company to grow in terms of market share and revenue generated. Secondly, this strategy will require the company to ensure that it is stable and consistent in its business performance and that it sells off subsidiaries that are not performing well. References Analoui, F. and Karami, A. (2003). Strategic Management: In Small and Medium Enterprises. U.S: Cengage Learning EMEA Graham , T. (2008). Management Accounting Business Strategy. Netherlands: Elsevier Press Warwick, J. (2013). Where Chefs Eat: A Guide to Chefs’ Favorite Restaurants. London: Phaidon Press Read More