Merger, Acquisitions, and International Strategies:

One of the greatest indicators of the success or failure of a corporation is their ability to acquire/merge or to be acquired/merged. Companies have been able to maximize their profits by merging or acquiring other businesses within their industry, which has many benefits that extend past dollars and cents. Corporations who are able to acquire or merge with other companies are able to expand upon their ability to forge partnerships with other corporate leaders. They are often able to expand their services internationally to gain more profits and extend their brand. Corporations, such as McDonald's Corporation, have been able to benefit from acquisitions in ways that corporations, such as Sonic Corporation, have not. Through the evaluation of the strategies that were utilized by McDonald's Corporation to acquire Boston Market, its impact on the corporation, and its international business-level and corporate-level strategies, one can better understand strategies that Sonic Corporation could develop to increase their profits through acquisitions and mergers, as well as business-level and corporate-level strategies they can develop to expand their services internationally. McDonald's Corporation has enjoyed great success as one of the largest food-service retailing chains in the world, with 30,000 restaurants that “operate in more than 100 countries on six continents (Funding Universe, 2012).” Founded in San Bernardino, CA in 1948, McDonald's Corporation has evolved from a small burger joint making hamburgers that sold for 15 cents to a restaurant empire with system-wide sales that has climbed to $40 billion (Funding Universe, 2012). The corporation had experienced a quick expansion in their sales from the 90's to 2000, and used other acquisitions, such as Donatos Pizzeria and Chipotle Mexican Grille Chain to increase their resource and generate larger profits for the corporation (Funding Universe, 2012). McDonald's sought to continue its success by capitalizing upon this with the acquisition of Boston Market Corporation in 2000 (QSR, 2000). Boston Market Corporation filed for Chapter 11 Bankruptcy in 1998, and was slowly recovering from the lack of sales through the sale of Boston Market Home Style Meals in grocery stores across the United States (Boston Market Corporation, 2012). McDonald's saw an opportunity to use their resources to increase their profits as well as the success of the Boston Market brand (QSR, 2000). At the time of acquisition, Boston Market still retained 850 outlets and the corporation generated a revenue of $670 million, proving to be a wise acquisition for McDonald's at the time (Funding Universe, 2012). Though McDonald's experienced success with Boston Market Corporation as an acquisition, McDonald's was unable to make the profits that they anticipated (Funding Universe, 2012). McDonald's Made for You system, which provided customers with customized sandwiches, increased the quality of the food that was served, however it also increased the service time and became labor intensive (Funding Universe, 2012). This helped to decrease sales, and McDonald's experienced more problems when it was discovered that the corporation was adding beef extract to the vegetable oil used to cook the fries, despite the fact that it had been advertised that McDonald's used 100% vegetable oil (Funding Universe, 2012). With litigation mounting from the deception, McDonald's lost more business because they became pegged as an unhealthy restaurant, which caused them to restructure their menu to reflect a more health-conscious consumer population (Funding Universe, 2012; Wyatt, 2012). McDonald's was forced to downsize Chipotle Mexican Grille and Donatos Pizzeria in an effort to focus their efforts on securing the international success of the restaurant (Funding Universe, 2012). By 2007, Boston Market had $180 million in total assets and $89.1 million in liabilities (Gutierrez, 2007). It became more advantageous at this time for McDonald's to sell Boston Market Corporation to Sun Capital Partners (Gutierrez, 2007). It was after the sale of Boston Market Corporation and McDonald's other acquisitions that the corporation was able to regain profits to retain their position as the largest food-service retail chain in the world through a rejuvenated focus on perfecting their brand, rather than expanding their services (Funding Universe, 2012). Though it seemed to be a wise decision for McDonald's Corporation to acquire Boston Market Corporation, the decision proved to be less advantageous to its success because they experienced too many issues to hold onto to the success that could have been obtained from the acquisition. For a company as large as McDonald's, the biggest challenge for the corporation should have been the transition period when employees adjust to new leadership and policies. The issues that occurred after McDonald's acquired Boston Market Corporation did not give the corporation the opportunity to succeed, and proved to be a bad venture. Taking note of the struggles that McDonald's had after acquiring corporations for increased profit, one can better understand the strategies that should be employed by Sonic Corporation, who currently operates solely in the United States and have not acquired other companies. Sonic Corporation, which originated as a root beer stand called Top Hat restaurant, was founded in 1953 by Troy Smith (Funding Universe, 2012). Since its origins, Sonic Corporation has amassed $257.61 million in sales and is known as the fifth largest hamburger chain (Funding Universe, 2012). The company has been able to enjoy many years of success because they have focused their efforts on reducing turnover rates through creating environments where workers feel valued. For example, Sonic Corporation allows managers within their various locations become minority partners, rather than platoon leaders for their various locations, which allows managers to create a schedule that is best suited for them and perform better. Recent years has brought about struggles that have caused the corporation to develop the Repurchasing Program, which would allow investors to repurchase stocks in the corporation (Sonic Corporation, 2012). Though they have experienced great success with the 2,172 restaurants in 27 states, there is a great opportunity for the company to generate more profits through the acquisition of a company that matches their goals to provide quality drive-in food service with a unique 1950's feel for their loyal customers. Noting the struggles that McDonald's endured after acquiring several restaurant chains; it would be advantageous for Sonic Corporation to merge with Ruby Tuesday, who offers the same quality of service to customers in the form of home-style meals (Ruby Tuesday, Inc., 2011). Ruby Tuesday currently has 850 locations in the United States and around the world, and has been able to generate $1.3 billion, which could serve as an advantage for Sonic Corporation, who has not expanded their services internationally (Ruby Tuesday, Inc., 2011). The merger would allow Sonic Corporation to gain meaningful partners who could facilitate their expansion, which would guarantee the company would increase their profits over the next few years. McDonald's has been able to maintain success in the international markets utilizing both business-level and corporate-level strategies that focus on catering their products and services to the cultures of the customers (Funding Universe, 2012). One of the primary business-level strategies that McDonald's Corporation utilizes differentiation of their products in different nations to ensure that the needs of the customers are met despite the difference in cultures (Funding Universe, 2012). For example, Germany sells McRib sandwiches year-round, in contrast to the United States, who serves the McRib sandwich as a seasonal item (Funding Universe, 2012). McDonald's in India does not serve beef, which made it important for McDonald's Corporation to apologize to the Hindi population when it was discovered that the corporation added beef extract to the vegetable oil that cooked the fries (Funding Universe, 2012). Contrary to the traditional apple pie that are served in the United States, the McDonald's in Brazil offers banana pies for their dessert (James, 2009). One of the corporate-level strategies that McDonald's employs to garner international success has been to increase the quality of food that is served in other nations (Funding Universe, 2012). One method that they have employed to ensure that this is accomplished is to purchase stock from Pret A Manger, a company based in the United Kingdom who is dedicated to serving organic meats to their customers (Funding Universe, 2012). While this focus caused McDonald's Corporation to sell the corporations they acquired outside the hamburger industry, it has increased their profitability internationally, and allowed them to increase the quality of their food in these areas (Funding Universe, 2012). Noting the success that McDonald's Corporation has maintained over the years with international business, there are business-level and corporate-level strategies that Sonic Corporation could utilize in order to guarantee their success upon expanding their business. Sonic Corporation has been able to capitalize on creating a unique environment for customers through offering drive-ins with roller-skating waiters and waitresses who offer good, quality food. This uniqueness will allow them to succeed internationally. One business-level strategy that can be employed by Sonic Corporation is cost leadership, which entails creating prices that are low enough for customers to enjoy. Sonic Corporation has already employed this technique in the United States through offering Happy Hour, where customers can purchase drinks at half-price during certain times of the day (Funding Universe, 2012). This strategy would capture the attention of many international customers, who are accustomed to purchasing sparkling water with ice at relatively high prices. By offering the drinks at a reduced price in the nations, customers will be given the opportunity to discover the true quality of the drinks while the prices are low enough to enjoy. This allows the customers to become attracted to the product, which will cause them to purchase the items regardless of the time of the day. One corporate-level strategy that Sonic Corporation could utilize when expanding their services internationally is their policy of maintaining low turnaround rates. Sonic Corporation regards many of their managers in their restaurant locations as minority partners, which allows the workers to gain more flexible schedules and subsequently facilitates a higher productivity from the managers and their employees. When this policy is employed internationally, the company has the opportunity to increase their profits because the people who are managing the restaurant locations in the various nations will feel as if they are vested in the success or failure of the company. The leaders are more likely to take advice from the workers who will be able to provide methods that innovate the service that will be offered by the restaurant. The customers will receive service that is unique to the nation and location in which they live. In conclusion, acquisitions and mergers typically help corporations increase their profits and business opportunities in other locations around the world. Though the experience that McDonald's Corporation was unique, there are many lessons that can be learned when it comes to successfully acquiring and merging two corporations together. When the correct business-level and corporate-level strategies are utilized, corporations can successfully increase their success and opportunities for growth. Through the evaluation of the strategies used to acquire Boston Market Corporation as well as the impact that McDonald's Corporation's acquisition of Boston Market Corporation had in their profits and success, one can better understand how Sonic Corporation could learn from this experience to success acquire and merge with Ruby Tuesday, Inc. and expand their services internationally.

REFERENCES

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