Merger, Acquisition, and International Strategies - Essay Example

Merger, Acquisition, and International Strategies

Introduction

An appropriate indicator towards the failure or the success of a corporation is in their ability to be merged/acquired or to merge/acquire. Through this process, organizations have been able to increase their profits via acquiring or merging with other companies within their industry of operation, which has several advantages that go beyond the cents and dollars. Organizations that can merge or acquire other corporations can efficiently expand upon their ability to create partnerships with diverse leaders of these corporations. Their services are expanded internationally to capture more profits while extending their brands to desired consumers.

Companies like McDonald’s Corporation have extensively benefited from merging and acquiring other corporations whereas other corporations like the Sonic Corporation have not (McDonald's Corporation, 2014). The paper evaluates the strategies that were used by McDonald to acquire the Boston Market, the impact from such action as well as the corporate-level and international business level strategies. It will also examine the corporate levels and business level strategies that Sonic Corporation could develop and implement to increase their revenues through the concept of mergers and acquisition while recommend the best food company Sonic can acquire.

As one of the biggest food-service retailing, McDonald Corporation enjoys the greatest success with over 35,000 restaurants employing approximately 1.7 million workers all over the world. It has its operation in more than 110 countries in the six continents. The corporation was established in 1948 at San Bernardino, CA and ever since it has undergone a series of evolutions from being a small burger joint that made and sold hamburgers at 15 cents to Business Empire having sales all over its system climbing to approximately $42 billion. The quick expansion of the corporation was experienced with its sales increasing between the 1990s and the 2000s and used the advantage to acquiring other food retailing businesses such as the Chipotle Mexican Grille Chain and Donatos Pizzeria to generate more profits for the corporation (McDonald's Corporation, 2014).

Strategies that led to the Merger

McDonald’s Corporation has sought its expansion to success through capitalizing its acquisition of Boston Market Corporation in the year 2000 (McDonald's Corporation, 2014). The Boston Market Corporation had to file for bankruptcy in 1998 and was struggling to recover from the slowed down sales arising from the sale of Boston Market home Style Meals in its grocery stores all over the US. These problems presented an opportunity to McDonald, which moved swiftly to use their resources in acquiring Boston Market brand. During the period of acquisition, the Boston Market had to retain its 850 outlets resulting in revenue generation of approximately $670 million making it a wise acquisition for the Corporation at the time. Despite McDonald’s experiencing greater revenues and success with the acquisition of Boston Market Corporation, it was not able to capture the anticipated profits.

McDonald created a system referred to as “made for you,” which gave customers with specialized sandwiches an increased food quality that had to be served. It however, had to increase the service delivery time and thus became labor intensive (McDonald's Corporation, 2014). This made the sales decrease. Besides, McDonald incurred extra problems when it realized that the corporation had been adding extracts of beef to oil used in cooking fries, despite the constant advertisements that were made by McDonald on using 100% vegetable oil. With increased litigation coming from such deceptions, McDonald experienced business amounting from the pegged theory as to being unhealthy restaurant. Such litigations made them restructure their menu and made it reflect a more health cognizant consumer standards. The corporation had to incur a bitter truth of downsizing Donatos Pizzeria and Mexican Grille with the aim of focusing its efforts on securing success internationally for the restaurant (McDonald's Corporation, 2014).

The total assets for Boston Market by the year 2007, was approximate $180 million, and the liabilities were totaling at $89.1 million (Gutierrez, 2007). It was more advantageous at this period for Sun Capital Partners to buy Boston Market Corporation from the McDonald’s. After the Boston Market Corporation had been sold, the McDonald Corporation and its acquisition was able to regain its profits and get back to its position as the biggest food outlets in the six continents via a rejuvenated concentration of brand perfection, instead of expanding their services blindly (Gutierrez, 2007).

Despite the decision to acquire Boston Market Corporation by McDonald seemed a wise decision, the idea proved to be a costly activity and less advantageous to the corporation’s growth since they had to undergo several issues as compared to the success that would have been achieved from the acquisition process. The biggest challenge for the corporation was the transition period between which employees had to adjust into the new policies and leadership. The problems that immediately emerged from the Boston Market Corporation acquisition did not provide an opportunity for McDonald to succeed, proving a bad business venture. Considering the struggles encountered after acquiring the corporation by McDonald for increased profit quest, it is possible to understand the strategies that Sonic Corporation, which operates solely in the US, should implement if it is considering to acquire some corporations in the future (McDonald's Corporation, 2014).

Appropriate Merger for a Corporation operating solely

Sonic Corporation started as a beer stand, originally identified as the Top Hat restaurant founded by Troy Smith in the year 1953 (Sonic Corp., 2016). Since its commencement, the corporation has created sales that amount to approximately $606.89 million and is ranked top ten among the top 50 fast casual and quick service restaurants in the United States. The corporation has enjoyed several years of success due to its focus on their determination to minimize turnover rates through the creation of “worker valued environment.” The practical example is allowing managers within its different localities become minority partners, instead of having them simply as leaders for these locations. This allows them to create a schedule best suited at ensuring that they perform maximally. In the recent years, the corporation has developed the repurchasing program resulting from its struggles, allowing the investors to repurchase shares within the company (Sonic Corp., 2016).

Despite experiencing great success within over 27 states with over 3,526 outlets, the company has an opportunity for growth in generating increased profits. This is via the merging or acquisition of a company that matches its mission and objectives of providing quality drive-in food types and services that are unique to its touch of loyal customers. Considering the outcomes and the struggles McDonald underwent after acquiring Boston Market Corporation among other restaurant chains, Sonic Corporation would be in an advantageous position if it merged with Ruby Tuesday. Ruby Tuesday provides similar food quality and service to its customers in the form of home-styled food. The company has over 850 locations all over the world including the United States, generating close to 1.3 billion annual revenue. This serves as an advantage to Sonic Corporation which has enabled it to extend its services outside the United States (Sonic Corp., 2016). Considering the merger effect, it would provide an avenue for Sonic Corporation to gain great partners who would encourage its growth, hence guarantying the corporation increasing its revenues for the next coming years.

International Business-level and International Corporate-level Strategies

McDonald has maintained success in the international markets through utilizing corporate level and business level strategies. It focuses on catering its services and products that are in tandem with the culture of its customers. The major business level strategy McDonald has utilized is product differentiation in their products in the different States. Product differentiation ensures that customer needs are satisfied despite the difference in tastes and preferences. In Germany, McDonald sells McRib sandwiches all the year around as compared to the United States where it serves its McRib sandwich seasonally. However, in India, the corporation does not serve beef due to religious and cultural reasons. It had to apologize publicly upon discovering that it added beef extract to its vegetable oil used in cooking fries (McDonald's Corporation, 2014). Unlike in the traditional apple pie served in the US, the Corporation provides banana pies in their dessert.

The corporate level strategies applied by McDonald in gaining international success is through increased food quality that it serves in different nations. The strategy the corporation has employed to ensure it achieves this is by buying shares in the companies made up of its suppliers. An example is the purchase of shares in the Pret A Manger that has been serving the corporation with organic meat, based in the United Kingdom. Despite the exercise making McDonald lose some of the corporations it had obtained outside the hamburger industry, the move increased the corporation’s profitability internationally, providing an opportunity to offer quality food in different regions (Gutierrez, 2007).

Recommended International Business-level and International Corporate-level Strategies

Sonic Corporation can utilize some corporate level and business level strategies when observing the success that McDonald has enjoyed. The sonic company has successfully capitalized on creating a specialized environment for its clients by providing drive-ins with waiters skating and waitresses offering quality and good food products. Such uniqueness will allow the corporation to gain international branding and success.

The best business level strategy that could be applied by the Sonic Corporation is employing cost leadership strategy that employs the setting of prices, which are low for customers to afford. The technique is evident in the US through its Happy Hour, where customers do buy drinks at its half price during some daytime hours (Sonic Corp., 2016). The strategy captures the attention of many consumers internationally who would ideally become Sonic customers, especially those fond of buying sparkling water with ice expensively. Providing drinks at lower prices in different nations will give consumers opportunities to discover the quality of drinks the corporation has at lower prices, hence making customers get attracted to its products.

Sonic Corporation can also apply the corporate strategy of expanding its services to other nations via upholding the low turnaround rates. The Corporation considers its managers all over its locations as minority shareholders allowing them to set their schedules categorically in the form that enhance greater productivity amongst its workers and managers. Nonetheless, the strategy will ensure company’s success in other countries as managers will keep be aware of their success to be beneficial to the restaurant and the management (Sonic Corp., 2016). These leaders will embrace the teamwork and consultation from workers who will offer innovative insights in providing a unique product to its customers.

Conclusion

Mergers and acquisition enhance growth and increased profits in the business. It opens different opportunities that could be exploited in different places of the world. Successful acquisitions and failures by McDonald Corporation provides the best experience for corporations such as Sonic to learn from towards its success as it grows. When appropriate corporate level and business level strategies are utilized, companies can successfully increase their opportunities and success for growth. Evaluation of McDonald strategies helps to shade light on Sonic Corporation to be able to merge with Ruby Tuesday Inc. by employing the best strategies, hence expanding its growth to other nations.