...RUNNING HEAD: EXPANSION AND MERGER Expansion and Merger ECO 550 – Managerial Economics and Globalization Xiaodong Wu Ph.D., Instructor August 26, 2012 Expansion and Merger The essence of retail marketing is developing merchandise and services that satisfy specific needs of customers, and supplying them at prices that will yield profits. Competition in the today's business marketplace often demands that organizations merge with each other to remain competitive and increase revenue, profits and market share. Others may be looking to consolidate their operations to achieve economies of scale and standardization of processes. Mergers and acquisitions occur when a company buys, sells, or combines with another company within the same country or across borders (Luthans & Doh, 2009). Government regulation is constantly present in our lives. This paper is a continuation from assignment two and will look at how government regulations affect expansion and merger in the retail industry. “Mergers can be competitive strategies, or they can be attempts to create firms large enough to exercise market power” (Michaels, 2011). Successful mergers are a combination of four critical components: culture, business practices, technology, and time. Bringing...
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...EXPANSION AND MERGER 1 1. Explain why government regulation is needed, citing the major reasons for government involvement in a market economy. The consolidation of U.S. industry into increasingly powerful corporations spurred government intervention to protect small businesses and consumers. In 1890, Congress enacted the Sherman Antitrust Act, a law designed to restore competition and free enterprise by breaking up monopolies. In 1906, it passed laws to ensure that food and drugs were correctly labeled and that meat was inspected before being sold. In 1913, the government established a new federal banking system, the Federal Reserve, to regulate the nation's money supply and to place some controls on banking activities. The largest changes in the government's role occurred during the "New Deal," President Franklin D. Roosevelt's response to the Great Depression. During this period in the 1930s, the United States endured the worst business crisis and the highest rate of unemployment in its history. Many Americans concluded that unfettered capitalism had failed. So they looked to government to ease hardships and reduce what appeared to be self-destructive competition. Roosevelt and the Congress enacted a host of new laws that gave government the power to intervene in the economy. Among other things, these laws regulated sales of stock, recognized the right of workers to form unions, set rules for wages and hours, provided cash benefits to the unemployed and retirement...
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... Virtual Organization Strategy Berry’s Bug Blasters is a privately held business and wants to expand its operations. The business is considering three options for moving forward with the expansion plan. The first option is going public with an IPO, or Initial Public Offering. The second option is to acquire another similar business within the industry, and finally the third option is merging with another organization. All three of these options are viable choices and this paper analyzes each options for its viability and suitability to needs of the business. The paper identifies the strengths and weaknesses of the each approach, and well as the opportunities and threats posed by each option. The analysis begins with the strengths of the IPO, merger, and acquisition. Strengths of an IPO, Merger, or Acquisition Berry’s Bug Blasters could effectively expand its organization very rapidly through an initial public offering (IPO). An IPO would position the organization, after an underwriting process, to go from a privately owned company with modest annual revenues of $3.2 million to a public company that could put Berry’s on the Bug map. The strength of an IPO for Berry’s Bug Blasters would be in the cash generated...
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... The purpose of this paper is to review a hypothetical organization and outline the options the organization may be faced with when debating the idea of expansion. The organization in question is Huffman Trucking, which is a trucking firm based in Ohio that has established a presence by acquiring five Eastern regional carriers. The company is privately held. The analysis of this organization includes expansion options of an Initial Public Offering, acquiring an organization in the same industry, and merging with another organization. The positive and negative aspects of each option above are reviewed and a conclusion will be drawn as to the next step for that business to take. Virtual Organization Strategy Paper The concept of business expansion offers both promise and peril. The desire of growth for a business must be tempered with the fact of additional uncertainty and risk. Business under normal operating circumstances is perilous. The additional layering of risk in any type of expansion or capital generation cannot only serve to fail in its objective, but also has the possibility to bring the organization to financial ruin. An effective executive must weigh the chance of success with the absolute possibility of failure. Going Public through an IPO An option for Huffman Trucking to consider for expansion of its operations is going public through an initial public offering, or IPO. Offering a distribution of Huffman’s shares to the public will help the company...
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...Southwest Airlines Case Study Objective of this assignment: This activity serves as a final assessment for the course. It provides you the opportunity to demonstrate how well you have achieved the learning outcomes of the course. You are to provide your knowledge of the strategic and administrative function of Human Resources by thinking about the situation of Southwest Airlines recent merger and their expansion. Deliverable: • Read and reflect on the case study below • Prepare a response paper of not less than Six pages (excluding title and reference pages) with appropriate in text citations. • Demonstrate your research and analytical skills in developing your comprehensive paper by using the organizations website and outside articles written about the organization to supplement the information provided in the case study. • However, the case study is unique in that it is focused on the HR ramifications and most of the outside reports you will locate articulate the business side of the merger or expansion possibilities. Tailor your paper to the HR ramifications of the merger and expansion. • Keep in mind that the purpose of this final assessment is for you to demonstrate your knowledge of the strategic and administrative function of Human Resources. While the business side of the situation is the foundation, it is the command of the needed tasks and role for the Human Resource function that you are to focus most of your attention. Key Components The key components...
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...expectations. Presently the Walmart organization has considered expanding the company operations; however, the company has three options to consider before the expansion takes place. These options include selling more stock, bonds, and merging with another organization. Without growth, success cannot be achieved. Growth is the ultimate goal of organizations. Growth benefits organizations in that it; funds new projects, increases market share and consumer awareness, attracts bright new minds, enhances the ability to develop new ideas and ultimately leads to financial success. Growth in an organization can occur naturally, but most often is created. The Wal-Mart Corporation must compare and contrast and make a recommendation about which strategy the organization must choose in making the best decisions. By doing this the organization must consider the following strengths and weaknesses, opportunities, threats, and effects of globalization. The Merger Option In contrast to selling stock or issuing bonds to raise capital, merging with another company enables firms to acquire less debt, and retain more equity. Investopedia (2012) explains merger as “The combining of two companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for surrender of their stock” (Para. A merger action can benefit both firms as one may be in a negative financial position, and the other is working with positive financial data to support the effort...
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...keep the facility running. However, there are some decisions that need to be made. The hospital could have an IPO or could merge or be acquired by another hospital. To decide which option is best, Team B will weight the pros and cons of each option by showing the strengths, weaknesses, opportunities, and threats created with each option. Strengths of an IPO, Acquisition and Merger The strengths of an IPO in a hospital would be to raise more capital for PFCH to use for their various corporate purposes such as working capital, acquisitions, and marketing, to name a few. With PFCH taking advantage of an IPO we can take advantage of new larger opportunities that can start building toward incorporation and statewide expansion. IPOs also allow the company to access their capital more rapidly, and are relatively low risk for health care facilities, which will have the potential for increased gains and for bigger opportunities (IPO Benefits, 2011). Mergers or acquisitions are a corporate strategy that may be initiated by a given health care entity in a community or by a corporation. In a healthcare, mergers may take place to strengthen the financial and service position of hospitals as...
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...Running head: VIRTUAL ORGANIZATION STRATEGY PAPER Virtual Organization Strategy Paper The competitive nature of businesses is a direct reflection of a strong management team. In order for a company to remain competitive the management team must remain innovative, knowledgeable of the market, and open to new ideas. Expanding operations may be one way that the management team decides to stay ahead of the competition. Expansion may not only create growth, but it may create value, wealth, and fresh ideas for the future. This project is designed to analyze a possible operation expansion for Riordan Manufacturing, an industry leader in the field of plastic injection molding (Riordan Manufacturing, 2006). The researchers of this project will analyze three possible expansion approaches including an initial public offering (IPO), a merger, and an acquisition. It will then be determined which approach would lead the Riordan Manufacturing team ahead of the competition and ultimate greater success for the company. Strengths of Each Approach Riordan Manufacturing has three options to expand its operations, go public through an IPO, acquire another company in the same industry, or merge with another organization. The benefits or strengths of doing each of these are addressed below. If the choice is to go public through an IPO then the benefits to Riordan, according to Inc. (n.d.) are: • “A publicly traded company may tap a broader universe of investors as well as a...
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...financing, namely debt and equity. Debt comes in various forms such as bond and long term notes payable and equity can be either common stocks or preferred stock. Both methods of financing have their advantages and disadvantages. It is the responsibility of management to ensure that they choose the right mix of debt and or equity so that there is a balance between the risks and reward. In finding the perfect capital structure in terms of risk/rewards management has to take into consideration interest payment, the company’s cash flows, dividends payment, the expected return on investment and so on. ("Capital structure decision," 2010) Competition Bikes Inc. has several alternatives for its capital structure mix in financing the Canadian expansion. Below is the data for the capital structure mix. Based on the capital structure analysis we see that Competition Bikes Inc has five different alternatives namely: 1. A capital structure consisting of only 9% bonds. 2. A capital structure consisting of only stocks, 50% preferred and 50% common stock. 3. There is a mix of 20% bond and 80% common stock 4. There is also a mix of 40% bond and 60% common stock. 5. The final mix is 60% bond and 40% common stock. The earnings per share (EPS) is the portion of the company’s profit that is allocated to each share of common stock as defined by the investopedia dictionary. This figure is very important to shareholders as it is used in determining the price per share. In our...
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...industrial activity and marketing, which allows it to safeguard against volatilities in an individual market. Further, by engaging in marketing, the company is able to adapt more effectively to adverse conditions. Glencore has demonstrated value creation in its acquisitions, with notable acquisitions including Kazzinc and Viterra. The company’s size also now allows it to negotiate big contracts, as it did with Rusal. Glencore was fast tracked into the London FTSE stock exchange during its initial public offering (IPO) in May 2011, the first company to do so in 25 years. Xstrata is a mining company which profited from Glencore spinning off its thermal coal assets, and has grown to incorporate many metals, with a decentralized strategy with expansion through acquisitions. The company has also focused on organic growth...
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...Expansion and Merger Introduction In this paper I will discuss why government regulations are needed and the reason why they are need with a market economy. I will discuss the rationale for the intervention of government in the market process within the United States. How will the industry faces some threats and how they decide to handle it. I will discuss why mergers face threats and describe the additional complexities that would arise under different circumstances. I will analyze how different forces will come together to create a convergence between interest of stockholders and managers. Also explain the difference between shareholders and managers as principals and agent and last but not least; how do we create increased value for shareholders. In conclusion of this report I will decide on whether or not I would merge my company or not. If I decide to merge I will name the company and the reasons why. Explain why government regulation is needed, citing the major reasons for government involvement in a market economy There was no intention for the government to have a hand in business. The government wanted businesses to act on their own best interests without any involvement from the government. The basic role of government in business would be just to referee only. The following roles of government are: protecting business property and enforcing business contracts, setting and collecting taxes. The government would provide...
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...CONSIDERATION (SWOT analysis) Strengths | Weakneses | Opportunities | Threats | Achievement of $50M deposit by the end of 1981 | High turnover of employees | Can increase presence in neighboring town and throughout USA (20% of current deposits) | Nearest competitor is 300 feet away | Moderate success in asset expansion and deposit growth. | Unutilized deposits of more or less 60% of the total | Member of FDIC | Increasing trend toward mergers and bank holding companies | Providing full range of services to meet competition with other banks | | | Steep competition in the banking industry with sophisticated level of banking services provided by competitors | Competent and seasoned top management | | | | Use of variety of media to promote products/services | | | | Clear and defined objectives | | | | 8 of the 17 owners are profit motivated | | | | Location is easily accessible, strategic and secured | | | | All branches have ATM | | | | | | | | IV. ASSUMPTIONS 1. No assumptions V. ALTERNATIVE COURSES OF ACTION ACA No. | | 1 | Push for merger or join holding companies (acquiree) | 2 | Go for expansion | VI. ANALYSIS ACA No. | ADVANTAGE(S) | DISADVANTAGE(S) | 1 | -Immediate ROI | -Lose of control/ownership-Difficult to implement | 2 | -Retain ownership/control-Enough deposits to expand/invest -Resources in place-Will increase presence in neighboring...
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...TOPIC : MERGERS AND ACQUISITIONS ARTICLE REVIEWED: Determinants of Cross-Border Merger & Acquisition Performance of Chinese Enterprises AUTHORS: Wu Changqi Professor, Peking University Xie Ningling Assistant Analyst, Sun Hung Kai Properties Ltd JOURNAL: Procedia Social and Behavioural Sciences 2 pg 6896-6905 PUBLISHED YEAR: 2010 INTRODUCTION The rapid economic growth of China since the past thirty years as enabled large numbers of Chinese enterprises to grow and gain competiveness. One of their sources of growth is through international expansion which is achieve by acquiring existing businesses abroad which is known as cross-border mergers and acquisitions (M&A). Cross –border mergers and acquisitions by Chinese firms has increased steadily up to US$ 8.139 billion between 1988 to 2003 with $216 million averagely each year, most of which occurred after 1997. Some of the Chinese enterprises that involve in cross- border M&A are Shanghai Electric Group which purchased Japanese printing machine manufacturer in 2002, TCL acquiring Schneider in Germany in 2003 and Lenovo purchased PC business of IBM in 2004. KEY WORDS Cross- border – is an activity that took place between country to country Mergers and Acquisitions (M&A) - is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing...
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...Introduction Currently, Mergers and Acquisition strategy has been significant growth in term of amount and size of organization (Hitt, Harrison, and Ireland, 2001). Since 1980s, the total value of M&A is approximately 1.3 million million dollar and has a huge of increasing amount more than 11 million million dollar in 1990s. The important reason most of companies do merger and acquisition is to empower in market, more opportunities to access not enough/less own resource of company, more powerful in negotiate with supplier and customer, expand distribution channel, also reducing cost of production risk or new service that company has not enough capability to generate. Moreover, Mergers and Acquisition could limit ability of competitor and hurdle competitor to do business as well as reducing cost of operation because Mergers and acquisition make company expansion. As a result, it could possible to advantage in scale and scope (B.Elango 2006). For acquired companys, they would gain the advantage in term of financial condition because they usually gain capital meaning stronger in company financial. However, there are some considering factors about the problem of internal management after acquiring or merging such as organizational culture, the risk or failure with wrong set objective. These might be effected to operate business in the future. Mergers and Acquisition could be influenced in different groups both company and acquirer. Thus, it is necessary to consider...
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...challenge major chains, but to compliment them. Cineplex did well primarily because of their concept for carefully planned use of shared facilities. With this success they began to expand across Canada with a very rapid rate of expansion. During this expansion however they amassed a 21 million-dollar debt. Also, distributors became reluctant to supply Cineplex for fear of alienating the two largest Canadian chains. In 1983 to avoid bankruptcy, Cineplex reduced its debt by selling off some of its recently purchased assets. Darbinsky also took legal action to win back access to major releases. Son after this time he also purchased the Odeon chain so that he would be able to bid for early runs of movies. This gave Cineplex a major position in the industry. Through Darthbinsky’s relentless tactics Cineplex Odeon was the second largest motion picture chain with 1,800 screens in over 500 locations. Now that Darthinsky owned one of North America’s major theater chains he sought to change the movie going experience by changing the layout and atmosphere of the theaters to attract even more moviegoers. Drabinsky endeavored to use the size of his chain to obtain added clout with film studious and distributors. Drabinsky had no plans to slow his companies’ rapid pace of expansion and he extended Cineplex Odeon’s production activities through other branches of the entertainment industry. His unrelenting drive for growth placed tremendous pressure on the company’s finances. As doubt grew about the...
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