Cross Borders Mergers and Acquisitions on Management Activities in Market Economies - Research Paper Example

Part Research Proposal: Causes and Consequences of Cross borders mergers and acquisitions on management activities in market economies Institution: Facilitator: Date: Introduction Cross-border mergers have increased in the recent past with a huge expansion witnessed on international trade and relations as a result. Many people associate this trend with the increase in global technology and trade (Zhang, 2014, p.140). However, the increase in international relation policies also plays a major role in this trend. Nonetheless, there is need to investigate the trend with the view of understanding the causes and consequences of the mergers. Purpose of the Study The increasing mergers and air travels has alarmed the world especially in the recent years with an acute focus on business deals and business relations. Many mergers are established because of personal and cooperation needs of the owners. However, the scope of the mergers has challenged the narrative that the mergers are only established for local purposes (Subeniotis et al, 2011, p.30). This research paper analyzes the causes and consequences of Cross borders mergers and acquisitions on management activities in market economies. Statement of the problem The challenge of understanding complex mergers in the international market is farfetched (Vu, Shi & Hanby, 2009, p.29). Airway services have increased due to the transactions in the international market and the need for people to cooperate and interact with other businesses at the international level. International mergers are increasing. However, the major problem arises from the rate of increase as it raises curiosity on the causes of such mergers and the effects they would have on the local businesses in their areas of establishment. There is also increased concern over the global dynamics that could arise from these businesses. Assumptions in the study 1. The research will assume that the technology used across all multinational merger companies is similar in some aspects. 2. The research will assume that all the owners and operators of businesses are willing to adopt new technology to expand to new markets. 3. The research will assume that all the businesses involved in the international mergers clearly understand the purposes for which they undertake such engagements and their accompanying effects. Justification of the study The increasing mergers involving cross-border trade motivate the research to look into this trend. At the same time, most of the businesses have low technological advancement rates hence a suggestion that technology is the cause of mergers especially in developing countries. This problem is worthy investigation because of a number of reasons. First, the wave of change could threaten businesses in some of the countries. This means that a decision to merge businesses and technologies would be a valid solution to the firms in the deal, but a threatening one for the local businesses. Secondly, technology has extra benefit in terms of saving on costs hence; the merger market will be interested in the technology as a way of lowering their costs. However, the major problem arises from the rate of increase as it raises curiosity on the causes of such mergers and the effects they would have on the local businesses in their areas of establishment. There is also increased concern over the global dynamics that could arise from these businesses. The hypothesis of the study revolves around a scenario where cross-border mergers are constantly increasing and the technology is not changing as well. The null hypothesis is to study the trend with no changes being made while the alternative hypothesis is limiting the research to effects with a different trend. The independent variable is the cross-border mergers while the dependent variables are the technological factors and local economic factors affecting the mergers. Objectives of the study 1. To explore how low technological levels contribute to the cross-border mergers 2. To analyze how advances in technology can help reduce the cross-border mergers. 3. To evaluate how the latest economic factors and policies can help in understanding the effects of the mergers 4. To analyze the consequences for entering cross-border mergers and the causes that could drive a change of attitude in the mergers. Research questions 1. How do low technological levels contribute to the cross-border mergers? 2. How can advances in technology help to reduce the cross-border mergers? 3. How will the latest economic factors and policies can help in understanding the effects of the mergers? 4. What are the consequences for entering cross-border mergers and the causes that could drive a change of attitude in the mergers? Limitations to the study 1. Financial limitation The researchers will be faced with many financial constraints, as the money needed to carry out the research is likely to spill over the financial capability of the researchers. 2. Sampling challenge There are very many sampling strategies capable of application in the case of the aircraft industry and their selection will be a major challenge to the researchers 3. Scope The scope of application of the firms and the technical applications is very big and only the appropriate sampling strategy will help to solve the problem. Definition of terms Technology- Technology is usage, modification, and implementation of new tools and systems to solve a phenomenon. Merger-A business formed through economic and strategic coordination, collaboration, and combination of two or more businesses. Part 2 Literature review Several studies have been undertaken to examine how the cross-border mergers can be lowered. In the first study, the cause of the cross-border mergers is the main issue (Ryapolov, 2011, p.435). The local and national business security is a major concern for the people who trade within such boundaries hence the people must take care of it fully. Business stability in such an economy is important in a number of ways. First, it will restore the confidence of investors, as well as making the capacity of the business larger than it is now (Chelikani & DSouza, 2011, p.80). More so, improving the strength of local business helps in developing healthy transport systems, free of hazards like takeovers and business failure hence the dire need to develop stronger business systems. Mergers can be made between best performing enterprises in a given sector, in a particular region. Merging the two firms affects the competitive environment in the particular market environment, in the most impactful way than any single dynamic (operation) can influence a sector. From the sharing of the information and the competitive edges of the top performers that merge to become one, there is the combination of market share and reach, and the most affected are smaller firms. This is the case, as many are likely to be drawn out of the market due to their inability to cope to the change in the competitive plane (Filho, 2014, p.72). The evaluation of cross-border firm merging during the last decade shows that the arrangements adversely affect the competitiveness of local businesses (Hullur & Hyderabad, 2014, p.1420). The impacts of such merger arrangements includes that they give rise to various challenges, for the businesses that are supposed to compete in the same market. There is also the competitive factor used for the assessment of merging enterprises is the strength of the merged enterprise within the given market environment. After the merged firm is in control of a larger proportion of the market, it enjoys the freedom of altering the pricing of products, and the effects include that other competitors are compelled to follow suit (Diepold, 2005, p.111). For example, cross-border merged firms offer the new enterprise the opportunity to counter the dominance of the price leaders that influenced the market before. During the cases where production costs are a major source of pressure, the merging firms may decline the reduction of pricing, due to the competitive advantage affecting the per-unit factoring of production or choice for supplying in bulk. The merging of firms increases the levels to which they enjoy the economies that arise from operating and producing in large-scale. This is because the number of customers and market coverage is widening, especially in the areas where firms trade in bulk supplies, which limits the costs of operation. For the competitors operating in the market, the trend affects their business adversely, as the reduction in the cost-per-unit sales increases relatively (Antila & Kakkonen, 2008, p.285). Another context would be reported if the merger leads to the reduction of the prices of products due to the internal dynamics of enterprises. The reasons behind the cuttings of product prices are many, and may range from the need to freeze competitors’ operations, in order to drive them from the market. However, in many cases it becomes difficult for other firms to follow suit, despite that they lose a particular market share, as the change may become very expensive to maintain. The cost variations that result from a merger are the factors that change the competitive plane in the wider economy and the sector in question, particularly during the time of formation and after the influence of the market player becomes stabile (Steynberg, & Veldsman, 2011, p.11). It is particularly impactful, as it changes a number of cost variables, which affects the pricing models and strategies of the merged firms, as well as those of competitors. Following the effects on the pricing, the demand levels reduce, leading to the reduction of profitability levels, which can only be countered using the increment of prices (Prasad & Reddy, 2010, p.170). The cyclic changes are not favorable for the customer as well, as it may lead to the increment of prices, and to a level where the only way for market players to recover is through sales. The shift implies that the supplies needed for production will be more costly for competing firms. For the firm that has monopolized the major part of the market, the trend is enjoyable and beneficial, as it calls for the analysis of the prices that are affected (Cefis et al, 2009, p.20). The merger of dominant firms significantly increases the costs of startups. In the case that the merger was that of dominant competitors in the given sector, the different groups with interests in the given sector will have to worry, as the most rudimentary effects of such a change may include that entry thresholds change in various ways, including financially (Sanfilippo et al, 2008, p.235). The capital-base that the firms that merge amass is large, and considering that the systems they institute are complex and sophisticated, new entrants may not counter. The effect is that the changes make the costs of entering the market, in terms of market demands, increase considerably. Part 3 Procedures Research design The causal design of study will be used by the researchers. The model of study is non-experimental, as it will entail the exploration of the relationship that exists between the study’s variables. The study seeks to establish the causes and the reasons that lead to the phenomenon under research. This type of design is chosen to enable the researchers to contrast various groups, without the need to alter independent variables, yet point out the variables that warrant the study (Kaur, 2014, p.910). A longitudinal study outlook will also be used to check the changes in the phenomenon in question, over a given period and through the repetition of the exploration over an extended time span. The investigators will employ inductive and deductive thinking models, towards reporting the change of independent variables, estimating the course to be used to realize the generalizations and objectiveness of study. Sampling model and procedural outlook The study sample will cover 100 firms (companies) that have entered into mergers, and based in different countries. The companies that have expressed the interest or attempted to enter into mergers will also be considered, in addition to those that are affected by the formation of cross-border mergers. The investigators will employ stratified random model of sampling. The population under study will be split into clusters (strata) and then the sample of study will be selected from the clusters using the probabilistic method of sampling (Gelves, 2009, p.19). The firms that are enumerated for the study will be split into ten classifications, which will yield the 10 strata for the study. Due to the distinctiveness of the elements of the different categories of study, the investigators will regard the proportional model of selecting items, in a fashion where all elements have an equal chance of selection, depending on the proportion. Out of the 10 clusters, considering that the investigators require a sample size of 10 firms, all items will have the equal opportunity of being selected. The items will be chosen after the consideration of the entire cluster, which will build on the consideration that the researcher developed the grouping rule aimed at ensuring that there is no biased selection in any group, in relation to national representation. The investigator will employ a systematic random sampling outlook for the strata, after determining the number of items to be chosen from the different categories (Adomako et al, 2013, p.29). The ‘nth’ item in the various clusters, where the identified elements are available will be selected. The random point of beginning the selection will be computed using the formulation: Skip Interval = Size of cluster ÷ expected size of sample per cluster The combined sample size for study will be explored to reduce errors of sampling and any systematic biases. However, the limited nature of procedures and sampling style is that important elements may not cut across the items, which indicates that errors may still be reported. Research Instruments Data Collection Both primary and secondary data collection methods will be used to collect information for this study. The researcher will schedule interviews with the management of the sampled companies and prepare questionnaires based on the research questions to be filled by the staff in the firms. To ensure diversity and reliability of the primary information, on-site observations from the companies’ websites might be necessary. Further information will be researched from the internet, relevant journals, newspapers and archive records for back up and clarity of the information obtained from the primary sources. Primary Data In order to obtain reliable and firsthand data related to the running of the firms, arrangements will be made to schedule interviews with the managements of the sampled firms. During the interviews, the researcher will use a similar guide for all interviews to ensure that the information obtained from different interviewees matched with relevant research interests. The answers provided for interview questions might also clarify or dispute some basic assumptions concerning the industry. Secondary Sources of Data Secondary information enable researchers to compare and contrast the conditions of the research at hand with other conducted in the past. In this particular study, it is important to understand the organization of general aircraft market and the relation with the current organization, planning and implementation of undertakings by companies in the industry. Related archive records from company and public libraries, news paper reports, journals and the internet are, in the view of this researcher, excellent sources of secondary information for this particular study. Reliability and Validity Data Reliability Data obtained from research must be reliable. This is because the researcher works to eliminate some of the causes of unreliability, mainly the random error like: i. Fatigue – the researcher will ensure that the interview is kept short and precise by asking fewer and relevant questions to avoid tiring the respondent. ii. Bias – by selecting companies from different categories, the researcher will ensure that the respondents do not give answers to suit situations, but give genuine and honest responses. iii. Inaccurate Coding – through repeated data inspection, the researcher will ensure that data given is recorded accurately. Data Validity The researcher validates information gained from the research using the following major ways: i. Test-retest technique By administering the same instructions to different sample companies, the researcher will evaluate consistency of the responses and this helps in testing validity (Bris & Cabolis, 2005, p.45). Keeping track of how much one response deviates from another on the same question helps to determine how valid the data is. ii. Internal Consistency Form The researcher considers people in the same or related ranks in the sample companies. By doing this the quality of information gathered is likely to be equal or within range (Merikas et al, 2011, p.11). In view of the above, information gathered from the research is of high level of reliability and validity. Data Interpretation and Analysis Data analysis for this study will take a quantitative approach such as frequency distribution in order to obtain a clear representation of the information collected. It will be therefore necessary to sort the data into groups so that separate groups of information such as bio-data of participants, technology reports, and economic reports from management would be interpreted independently to give a clear picture of the study results. Analysis of Questionnaires Questionnaires will be classified according to the different groups of the respondents. i. Respondents from senior management departments are likely to give the same class of information though different from what those in junior positions might have. ii. Responses that differ from other considerably will be tested against the independent variables in each of the firms to determine the causes of deviation. iii. In case of suspicion of bias, information from a particular respondent will be analyzed more critically. Interviews Analysis Recorded interview will be analyzed according to the responses of the participants to the interview questions. However, certain precautions will be observed in order to obtain accuracy and objectivity in the interpretation of the data. The precautions include; i) responses with outright prejudice, and/or bias will be avoided ii) Unsubstantiated claims will not be considered appropriate for use iii) All interviews sessions will be awarded equal amounts of time and interviewees will receive equal treatments. Secondary Data Analysis Data from secondary sources will be subjected to validity checks before interpretation. Suspicious data will be excluded as well as data regarded by the researcher inconsistent with the objectives of this particular study. Suspicion of creative accounting, Personal records of individuals, “confidential” or “classified” information will be disqualified from use. Research Ethics In gathering information for the research, the researcher will maintain the following ethics in respect to the participants and fellow team members: 1. Ethical Treatment of participants – the researcher will conduct interviews and receive responses through questionnaires in a manner that the respondents do not suffer any embarrassment or loss of privacy. The researcher will do this through the following guidelines: a. Respondent’s Consent – the researcher will first start by explaining the purpose of the survey clearly to the respondents (Behr & Heid, 2008, p.14). He or she will also disclose to the respondents all the procedures that will be involved in the interview. After ensuring that the respondents have well understood what is required of them and the need for them to provide honest responses to the questions asked, the researcher will seek the consent of the respondents to continue with the interview. b. Benefits – Where appropriate, the researcher might discuss with the respondents the likely benefits of the survey, but with absolute care to avoid misleading by overstatement or understatement, (Indanon, 2007, p.26). Discussing the benefits with the respondents will help them to be at ease and will motivate the respondents to answer the questions truthfully. In the case of an interview, the researcher will begin by introducing himself or herself by name, a brief statement citing his intentions and the benefits likely to be realized from the success of the study. c. Rights to privacy – the researcher will respect the respondents’ rights to privacy. This is mainly to retain the validity of the research and to protect the respondents (Malik et al, 2014, p.530). The researcher will protect the respondents’ confidentiality through: Obtaining signed nondisclosure documents Respondent’s information can only be obtained through a written request approved by the respondent Nondisclosure of data subsets a) Research and Team Members – the researcher will also have unethical responsibility of the team’s protection. b) Safety – the researcher will design a project to ensure safety of all the team members including the interviewers and observers. They will ensure that the team members are accompanied for safety purposes whenever they enter an environment where they feel physically threatened (Reddy, 2014, p.960). c) Ethical behavior of assistants – the team members will also comply with research ethics. Assistants will be expected to carry out the sampling plan, interview and observe respondents without bias and to accurately record all the necessary data. All research assistants will be well trained and supervised. The behavior of the assistants will be under the direct control of the responsible researcher (Knibb, 2010, p.9). d) Protection of anonymity – the researchers and assistants will protect the confidentiality of the respondents’ information and the anonymity of the respondents. Each researcher handling data will be required to sign a confidentiality and nondisclosure statement. Conclusion Cross-border mergers have increased in the recent past due to the huge expansion witnessed in international and relations. This research paper analyzes the causes and consequences of Cross borders mergers and acquisitions on management activities in market economies. However, the major problem arises from the rate of increase as it raises curiosity on the causes of such mergers and the effects they would have on the local businesses in their areas of establishment. The increasing mergers involving cross-border trade motivated the research to look into this field further. At the same time, most of the businesses sampled have low technological advancement rates hence a suggestion that technology is the cause of mergers especially in developing countries Reference List Adomako, S., Gasor, G.K. & Danso, A., 2013. Examining Human Resource Managers Involvement in Mergers and Acquisitions (M&As) Process in Ghana. Journal of Management Policy and Practice. pp. 25-36. Antila, E.M. & Kakkonen, A., 2008. Factors affecting the role of HR managers in international mergers and acquisitions. Personnel Review, pp. 280-299. Behr, A. & Heid, F., 2008, The Success of Bank Mergers Revisited - An Assessment Based on a Matching Strategy. Social Science Research Network: Rochester. Bris, A. & Cabolis, C., 2005.The Value of Investor Protection: Firm Evidence from Cross-Border Mergers. Social Science Research Network: Rochester. Cefis, E., Marsili, O. & Schenk, H., 2009. The effects of mergers and acquisitions on the firm size distribution. Journal of Evolutionary Economics, pp. 1-20. Chelikani, S. & DSouza, F., 2011. The impact of sarbanes-oxley on market efficiency: evidence from mergers and acquisitions activity. The International Journal of Business and Finance Research, pp. 75-88. Diepold, B.D., 2005.The effects of cross-border mergers and acquisitions in the European Union. The American University. Filho, W.P., 2014. Mergers and Acquisition in Hospital Sector: A Strategic Analysis of the Brazilian Market. International Management Review 72, pp. 5-12 Gelves, J.A. 2009. Three essays on mergers and free riding. The University of Wisconsin: Milwaukee. Hullur, J.& Hyderabad, R.L., 2014. Analysis of motives of mergers in India: a comparative study on manufacturing and service sector firms. International Journal Of Applied Financial Management Perspectives, pp. 1411-1421. Indanon, C., 2007. Mergers and performance: A case study from telecommunications. Nova: Southeastern University. Kaur, T., 2014. Value creation through mergers and acquisitions: evidence from existing empirical literature. International Journal of Trade & Global Business Perspectives. pp. 907-917. Knibb, D., 2010. Rocky road for mergers. Airline Business, 26(10), pp. 9. Malik, M.F., Anuar, M.A., Khan, S. & Khan, F. 2014. Mergers and Acquisitions: A Conceptual Review. International Journal of Accounting and Financial Reporting, pp. 520-533. Merikas, A.G., Polemis, D. & Triantafyllou, A., 2011. Mergers and Acquisitions in the Shipping Industry. Journal of Applied Business Research, pp. 9-22. Prasad, D.S. & Reddy, D.R., 2010. Mergers, Acquisitions and Corporate Restructuring. South Asian Journal of Management, pp. 169-171. Reddy, C.P. 2014. A study on mergers and acquisitions in India. International Journal of Trade & Global Business Perspectives, pp. 960-968. Ryapolov, A.Y., 2011. 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Zhang, W., 2014. Diversification, Monitoring Effects and Banking Mergers. International Journal of Economics and Finance, Pp. 133-149. APPENDICES APPENDIX I (QUESTIONNAIRE) Questionnaires for the Sampled Companies participating in the Research Questionnaire number ……………………………………………………………… Category of the company ……………………………………………………………. Respondent Company ………………………………………………………………… Position of the Respondent in the company ………………………………… Location of the company ……………………………………………………………. Instructions Tick where applicable SECTION A: COMPANY’S BACKGROUND 1. How many years has the company been in operation? a. 1-5 [ ] b. 6-10 [ ] c. 11-20 [ ] d. Others(specify) [ ] 2. Which period was the company listed in the merger? a. 1951-1970 [ ] b. 1971-1990 [ ] c. 1991-to date [ ] 3. How many directors are there in the company? (Indicate Number) __________ 4. What are the major sources of capital to the company? a. Shares [ ] b. Debentures [ ] c. Bonds [ ] d. Loans [ ] e. Combination of the above (Indicate them) ______________________ SECTION B: COMPANY’S PERFORMANCE 1. What has been the trend of the share price index in the last one month a. Increasing [ ] b. Decreasing [ ] c. Constant [ ] 2. What is the current share price index of the company (Indicate value) ____________ 3. How many employees are there in the company (indicate value of skilled and unskilled) __________ 4. How can you term the employees turnover of the company? a. High [ ] b. Moderate [ ] c. Low [ ] 5. What is the behavior of the net profit margin in the last quarter of the year? a. Increasing [ ] b. Static [ ] c. Decreasing [ ] SECTION C: MARKET RELATED 1. How do you are the performance of the market as a whole? a. Excellent [ ] b. Good [ ] c. Fair [ ] d. Poor [ ] 2. How do you rate the performance of your company in the market since formation of the merger? a. Excellent [ ] b. Good [ ] c. Fair [ ] d. Poor [ ] 3. What is the performance of the whole industry with the mergers incorporated? a. Excellent [ ] b. Good [ ] c. Fair [ ] d. Poor [ ] 4. Is there any other relevant information? SECTION D: RECOMMENDATIONS …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….…………………………………………………………………………………………………………………………………………… Name of respondent…………………………………………………………………………… sign……………………………………… APPENDIX (II) TIME SCHEDULE ACTTIVITY TIME IN WEEKS 1 2 3 4 5 6 7 8 Pilot testing Data collection Data analysis Report writing Submission Read More