Workshop 4 Problems

Kevin Rock

MBA 465
Strategic Management
BSA 555

November 1, 2011

David R. Gray, Ph.D

1. Why are acquisition strategies popular in many firms competing in the global economy?
Because of globalization; deregulation of multiple industries in many different economies and favorable legislation; the number and size of domestic and cross-border acquisitions continues to increase; especially from emerging economies

2. What reasons account for firms’ decisions to use acquisition strategies as a means to achieving strategic competitiveness?
To increase market power; overcome entry barriers to new markets or regions; avoid costs of developing new products and increase the speed of new market entries; reduce the risk of entering a new business; become more diversified; reshape their competitive scope with different portfolio of businesses; and enhance their learning.

3. What are the seven primary problems that affect a firm’s efforts to successfully use an acquisition strategy?
Difficulty of effectively integrating the firms involved; incorrectly evaluating the target firm’s value; creating debt loads that preclude adequate long-term investment; overestimating the potential for synergy; creating a firm that is too diversified; creating an internal environment in which managers devote increasing amounts of their time and energy to analyzing and completing the acquisition; developing a combined firm that is too large (thereby necessitating extensive use of bureaucratic, rather than strategic, controls)

4. What are the attributes associated with a successful acquisition strategy?
Acquiring and target firms have complementary resources that can be the basis of core competencies in the newly created firm; acquisition is friendly, thereby facilitating integration of the two firms’ resources; the target firm is selected and purchased