A window is time horizon during which opportunities exist before something else happens to eliminate them. A unique opportunity, once shown to produce wealth, will attract competitors, and if the business is easy to enter, the industry will become rapidly saturated. Bicycles did not become viable commercial products until people needed them as transportation. When that need occurred, hundreds of bicycle manufactures rushed to take advantage of the “window of opportunity.” Literally every successful product and service has had an optimal period of time for commercialization. Those introduced too early have usually failed, and those introduced too suffered from crowded markets. A brief period of opportunity opened for electronic spreadsheets when micro-computer hit the fast growth curve. Several entrepreneurs entered the market with good spreadsheet products. The first, VisiCalc was designed for the Apple PC. VisiCalc was quite successful, and later versions for Ms-Dos systems were even more successful. But Continue reading
Corporate Strategies
Case Study: America Online (AOL) Merger with Time Warner (TWX)
A merger between America Online (AOL) and Time Warner (TWX) was announced on January 10, 2000. A new company named AOL Time Warner Incorporated was planned outcome of the merger. AOL shareholders would receive 1 new share for each AOL share, and TWX shareholders would receive 1.5 new shares for each TWX share. The merger captured the imagination of the public. AOL agreed to pay stock worth about $165 billion for Time Warner, a 70% premium. At the announcement, it was estimated that the market value of the combined companies would be $350 billion. As important as the large value of the deal was the combination of “new economy” and “old economy” companies. AOL’s stock prices boomed in the late 1990s as a hot Internet stock. Investors saw its potential for the significant future earnings growth based on its implementation of technology. Meanwhile, Time Warner (TWX) was a leader of Continue reading
Downsizing – A Corporate Restructuring Strategy
Downsizing or layoff is a widespread strategic decision and change practice since 1970’s and during the economic downturn in the year 2016 it became a more common phenomenon. Changing patterns in reasons cited for job loss support this impression of the rising importance of restructurings. Differences in factors such as the state of the economy and the signal sent by job loss could make the process of downsizing and the effects of job loss differ between restructurings of healthy organizations and downsizing due to financial distress. Downsizing Approaches There are many kind of approaches in downsizing. The reasons for the firm to undertake such approaches also varies. They include restructuring, closing or selling of a business unit, cost reduction, cost savings, increased productivity through greater efficiency and effectiveness and coping with external pressure including recessions and economic downturn, economical change, increased competitive pressures through greater globalization of business and technological Continue reading
Significance of Blue Ocean Strategy in Current Business Scenario
Blue ocean strategy makes companies to come out of ocean of bloody competition by creating market space which is uncontested and that makes the completion irrelevant. Since, dividing up existing demand and benchmarking the competitors, Blue Ocean strategy is regarding grow demand and break away from the competition. The business universe can be thought as a composition of two kinds of oceans the first is the red ocean and second one is the blue ocean. Red ocean includes all the industries which exist today and it is about the known market space. But on the other side Blue Ocean can be considered as industries which are not in existing today and it is called unknown market space. The industries boundaries are defined and well accepted in the red oceans. In the red oceans the rules of competitive games are well defined. The companies try to take away the greater share Continue reading
Equity Carve-Out (ECO)
An Equity Carve-Out (ECO) is a partial public offering of a wholly owned subsidiary. Unlike spin-offs, ECOs generate a capital infusion because the parent offers shares in the subsidiary to the public through an Initial Public Offering (IPO), although it usually retains a controlling interest in the subsidiary. Like spin-offs, ECOs have become increasingly popular in the last several years. An equity carve-out involves conversion of an existing division or unit into a wholly owned subsidiary. A part of the stake in this subsidiary is sold to outsiders. The parent company may or may not retain controlling stake in the new entity. The shares of the subsidiary are listed and traded separately on the stock exchange. Equity carve-outs result in a positive cash flow to the parent company. An equity carve-out is different from a spin-off because of the induction of outsiders as new shareholders in the firm. Secondly equity Continue reading
Merger Procedure under Companies Act 1956
A merger is a complicated transaction, involving fairly complex legal considerations. While evaluating a merger proposal, one should bear in mind the following legal provisions. Sections 391 to 394 of the Companies Act, 1956 contain the provisions for amalgamations. The procedure for merger or amalgamation normally involves the following steps: Examination of object Clauses: The memorandum of association of both the companies should be examined to check if the power to amalgamate is available. Further, the object clause of the amalgamated company (transferee company) should permit it to carry on the business of the amalgamating company (transferor company). If such clauses do not exists, necessary approvals of the shareholders, boards of directors and Company Law Board are required. Intimation to stock Exchanges: The stock exchanges where the amalgamated and amalgamating companies are listed should be informed about the amalgamation proposal. From time to time, copies of all notices, resolutions, and Continue reading