Merger, Acquisition, and International Strategies - Case Study Example

Merger, Acquisition, and International Strategies A. American Airlines and U.S Airways The merge The merging between two companies is referred to the ability of reach an agreement that would enable collaboration and transfer of resources as stated in the agreement deal. In an argument by Plunket (2008) the merger between two companies is mostly used as a strategy to increase profits, relevance or to save one corporation from bankruptcy. The entire process is governed by law to protect the resources of either of the merging entities. However, a merger may also be full acquisition of resources of one corporation but retain its leadership positions. The merger between American Airlines and U.S Airways created the American Airlines group. The corporation is located in Fort Worth, Texas (American Airlines, 2014). Before the merger the two companies were publicly traded. The corporation is airline holding company. Its creation was completed in 2013, after the merger between American Airlines and U.S Airways was completed (American Airlines, 2014). In this particular case, U.S airlines were provided with a merger deal. The deal would be inclusive of acquisition agreements. The airline would later agree to the deal as it lost its name but retained most of its managerial positions. However, the profit made by corporation after the merger was greater than profits and sales achieved before the merger was completed. The bid to the merger was launched by American Airlines. This is after U.S Airways cited their desire to merger with another airline company. Before the merger, U.S Airways was struggling in the market. Its profits had decreased significantly. For this reason, forecast could show future cases of bankruptcy. In addition, the consumer perception on the airline has decreased due to massive growth in competition. On the other hand, American Airways was placed relatively well in the airline market. The company did struggle to fight off competition from other airlines. In addition, the profits recorded were enough to sustain the business of the corporation and the merging cost. However, the acquisition of U.S airways would be much beneficial to the company. The merger would increase its daily flights to over 6,700 in 56 countries across the globe (American Airlines, 2014). Consequently, its operational revenue would reach $40 billion. The merger created the largest airline in the world. From this analysis, one would point out that the merger was a success. To the U.S Airways, the merger ensured that bankruptcy would not be a threat. In July, there was a court filing over the bankruptcy of the airline. For this reason, the airline was seeking a merger that would increase its value. From the result of the merger, this is achieved. Regardless of the merger, U.S Airways was able to retain its managerial positions. From these arguments one may conclude that the merger was the right choice to the U.S Airways. The growth of American Airlines was also achieved. Prior to the merger, the organization had a low operating revenue and number of flights. To acquire $40 billion operating revenue and over 6,700 daily flights would have taken a lot of time (American Airlines, 2014). The choice to merger also favored the company. Business and Corporate Level strategies The American Airline Group operates internationally. The success of the organization is based on is ability to develop effective corporate level and business level strategies. For instance, the airline decision to merger was the most effective corporate level strategy to embrace. The merger created the largest airline company in the world. This new status has increased the market performance of the company. The company embraces the Value-Creating corporate level strategy. This refers to strategies aimed at increasing the market share of the company (Plunket, 2008). The merge increased significantly its market share as well as its overall performance. For instance, the organization has gained a massive competitive advantage in the industry due to its disposal to many airplanes. This could be justified by citing its ability to make 6,700 daily flights. In addition, the merge also developed its business level strategies. For instance, the company can now easily satisfy the need of its consumer. The airline can now serve more customers at a greater quality. In addition, the company has an objective of captain the needs of different types of clients. This is enabled by the acquisition of over 600 new aircrafts that are comprised of a narrow-body and wide-body international aircrafts (American Airlines, 2014). This would increase its services delivery. Consequently, its level of competitiveness would be significantly impacted. These strategies have been the reason behind the steady growth of the company. However, the organization should consider some slight pricing adjustments be more competitive and market relevance. B. Arctic Cat Merger prospects Arctic Cat in a United States company that manufactures all-terrain vehicles and snowmobiles. It was created in 1960 in Minnesota (Arctic Cat, 2014). The organization designs, engineers, manufactures and markets all its products. Apart from vehicles, the company produces garments, accessories and vehicle related parts (Arctic Cat, 2014). The main advantage of the company is its ability to create cars that are rare in the market. Most of its cars are directed to one particular market group with preference on all-terrain vehicles. For this reason the company has experienced significant growth and recorded profits from its single target market. However, the growth of the market positive perception on all-terrain vehicles has increased its market performance. At the end of each financial year, the organization records increased profit margins. As of 2012, the company had operating revenue of $45.89 million. The total value of the company was $585.27 million (Arctic Cat, 2014). However, in 2012 the company recorded a decrease in its total assets and equity. Regardless of the decrease, the company still has a relatively high market significance and profit margin. Since its creation, the company has not been involved in any mergers or acquisitions. This has ensured it has retained its original operational framework and objectives. However, the fluctuating market may negatively influence future operations of the company. For this reason, the corporation should consider increasing its market base. This would ensure that the market may predict the certainty of the company. In addition, the organization should venture in the international market effectively to increase its market relevance and exposure. Conversely, one may point out that the local growth of the organization cannot secure its successful full trading in the international market. For this reason, the current local market of the organization provides the safest business environment. A merger or an acquisition would change the direction of the company. In this case, the organization should consider a merger with a large multinational company. The company should seek a merger that would increase its market productivity as well as its market relevance. In addition, the merger should secure an international trading ability of the organization. In an argument by Besley & Brigham (2008) for local with little knowledge of the international market, they should seek a merger that would ensure that trading in the market would be less risky. The authors further point out that the merger should be inclusive of a ready international market to minimize the financial risk that may occur (Besley & Brigham, 2008). For Arctic Cat, the most probable company to merge with would be Toyota. However, the organization should retain its original production technique. Toyota would increase the level of acceptance of the company in the market. This is based on that Toyota is an established and a well-known company. In addition, a merge with Toyota may increase its publicity. Toyota may also provide a well-established international market. Considering its global dominance in the motor vehicle industry, Toyota would provide a ready market for international sales. From the merger, the company may lose its identity but may record massive sales and profits. Business and corporate level strategies For the Arctic Cat, a more competitive value- creating strategy should be embraced as a corporate level strategy. This would increase both the operational and corporate revenue of the organization. In 2012, the value of the organizations assets and equity recorded a decrease. This may cause and decrease in the level of production if the decline in assets and equity continue. Besley & Brigham (2008)are of the assumption that the value of an organization determines its ability to perform exemplarily in the market. The authors further point out that a high value enables an organization to consider more investment ventures (Besley & Brigham, 2008). In this case, a merger with a large corporation would a good corporate level strategy. This would increase its value and market relevance. Consequently, changes in the consumer chart would favor the company. Arctic Cat currently uses the Value-Neutral Strategy. This ensures that the organization retain its current market position and remain stable in the market (Plunket, 2008). Regardless of the success of the system, it limits the growth of the company. In addition, the organization should consider venturing fully in the international market. In regards to business level strategies, Arctic Cat has developed a wide range of products that satisfy its market. The strategy has been successful as the organization has been successful in retaining its customers and recording increasing profit margins. This has also increased its competitive advantage in the production of all-terrain vehicles. References American Airlines. (2014). Retrieved from https://www.aa.com/i18n/amrcorp/newsroom/corporate-information.jsp Arctic Cat. (2014). Retrieved from http://www.arcticcat.com/ Besley, S. & Brigham, E. (2008).Principles of Finance. New York: Cengage Learning. Plunket, W. (2008).Management: Meeting and Exceeding Customer Expectations. New York: Cengage Publishers. Read More