Mergers and acquisitions are strategic decisions leading to the maximization of a company’s growth by enhancing its production and marketing operations. They have become popular in the recent times because of the enhanced competition, breaking of trade barriers, free flow of capital across countries and globalization of business as a number of economies are being deregulated and integrated with other economies. A number of motives are attributed for the occurrence of mergers and acquisitions. In this section, we consider a number of different motives for mergers and acquisitions. 1. Synergies through Consolidation Synergy implies a situation where the combined firm is more valuable than the sum of the individual combining firms. It is defined as ‘two plus two equal to five’ (2+2=5) phenomenon. Synergy refers to benefits other than those related to economies of scale. Operating economies are one form of synergy benefits. But apart from operating economies, synergy may Continue reading
Strategic Management
Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It involves the systematic identification of specifying the firm’s objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm’s objectives. Strategic management, therefore, integrates the activities of the various functional sectors of a business, such as marketing, sales, production etc. , to achieve organizational goals. It is generally the highest level of managerial activity, usually initiate by the board of directors and executed by the firm’s Chief Executive Officer (CEO) and executive team.
Merger Through Board for Industrial and Financial Reconstruction (BIFR)
The companies (Amendment) Act, 2001 has repealed the Sick Industrial Companies Act (SICA) 1985, in order to bring sick industrial companies within the purview of companies Act 1956 from the jurisdiction of SICA, 1985. The Act has introduced new provisions for the constitution of a tribunal known as the National Company Law Tribunal with regional benches which are empowered with the powers earlier vested with the Board for Industrial and Financial reconstruction (BIFR). (Note: Board for Industrial and Financial Reconstruction (BIFR) was established by central government under SICA, 1985 for detection of sick and potentially sick industrial units and speedy determination pf their remedial measures and to exercise the jurisdiction and powers and discharge the functioning and duties imposed on the Board by or under the Act.) Before the evolution of SICA, the power to sanction the scheme of amalgamation was vested only with the high court. However, sec.18 of Continue reading
Managing Collaborative Relationships with Stakeholders in Organizations
Understanding the principles of effective collaboration with other organizations is important in an organization as the current stakeholders have an active interest, the interests could be financial, environmental or charitably within the organizations. Within an organization, building relationships with stakeholders can prove to help your business by using their expertise’s and knowledge. There can be both moral and business reasons to collaborate with stakeholders. By working with stakeholders that have current interests allows you to have a common ground and want the best outcomes for your organization, it allows you to create outcomes together, improve current systems and work on these together to create a better functioning organization. Collaborating with stakeholders allows new ideas and helps towards problem solving. Looking at the stakeholders allows you to gain experience and feedback to create a better working business, it also allows you to build relationships which can help towards future cost, flexibility Continue reading
The Impact of Innovative Culture on Organizations
Growth creates a need for structure and discipline, organisation changes which can strain the culture of creativity that is so vital to future success. To sustain competitive advantage, companies need to institutionalize the innovation process; they need to create an internal environment where creative thinking is central to their values, assumptions and actions. Management changes and management generally is about implementation. When the managers of an enterprise feel pressured, the fear-driven response is generally to implement better and which generally results doing more of the same only quicker or cheaper. While this is great for doing more of the same, it is still the same and meanwhile everything else is changing — customer’s needs, technology, society, macroeconomics and geopolitics are all changing. Innovation is the engine of growth. It is also a mindset — meaning it is influenced by beliefs, values, and behavior. Company culture therefore has a huge influence Continue reading
Judo Strategy in Business
Judo Strategy, a term coined by David Yoffie of Harvard Business School in his book ” Judo Strategy: Turning Your Competitors’ Strength to Your Advantage”. “In the martial art of judo, a combatant uses the weight and the strength of his opponent to his own advantage rather than opposing blow directly to blow. Similarly smart companies aim to turn their opponent’s resources, strength and size against them.” Judo strategy in business scenario effectively means avoiding direct confrontation and leveraging the strength of the opponent to create space. Judo strategy can help small companies to enter new markets and defeat stronger rivals. Through movement, flexibility, and leverage, new players can occupy uncontested ground and turn the strengths of dominant players against them. Movement: In this step one needs to maintain a low profile so that while his business is under growing stage he can avoid attacks from well established players. At Continue reading
Institution-Based View of Business Strategy
An industry-based view, illustrated by Porter (1980), decides firm strategy and performance. Sustainable competitive advantages can be discovered by industry analysis and by selecting from the generic strategies. The competitive strength and the firm’s ability can maintain positional advantages through the efficient and effective implementation of competitive strategy. Secondly, a resource-based view (RBV), was demonstrated by Barney (1991), advocates that firm-specific differences determine strategy and performance. RBV emphases internal resources and capabilities of organisations. RBV portraits companies as idiosyncratic bundles of resources and capabilities that are available for distribution by the organization’s business units. Heterogeneity in the resources and capabilities is the reason of variations in organization performance. Sustainable competitive advantage is not the result of correct position in the external environment but is derived from the organization’s internal resources, which are valuable, inimitable, rare, and nonsubstitutable. Industry-based view and resource-based view are complementary because they settle the relationship between Continue reading