WEEK 16

1.     1.

·      Organic growth: it is a growth strategy that encourages and helps in strengthening of a firm through the usage of its own energy sources as well as the resources needed. It is a much slower approach compared to others but it consists of lower up-front costs. It is the most popular approach for small businesses that wants to expand the company but lack huge sums of liquid capital.

This is more like a ‘Do It Yourself’ kind of strategy in which maximum firms fabricate their own capabilities. (S. Mack, 2013)

·         Merger and Acquisition:  it is another strategy of growth and it involves two different firms coming together to create a new firm where they acquire corporations. Acquisition refers to the process of taking over or gaining the full control of a firm. (Ibrahim AKGÖBEK, 2013)

·         Strategic alliance: when a set of predetermined goals is pursued by two or more companies combined together sharing resources for the same project for a temporary cause, it refers to strategic alliance.

2. 

The examples of companies that have grown through the following are listed below:

•  Organic growth: Lego Toy Brand is made from the innovation and creativity and has developed itself successful.
•  Merger or Acquisition: One of the best examples for mergers and acquisition would be Sony Ericsson since Sony Corporation merged with Ericsson in 2001 and turned into an acquisition of shares of Ericsson by Sony Corporations becoming a Sony Mobile Communications in 2012.
• Strategic alliance: Nokia and Microsoft would be the best example of a recent alliance.

 3.

Case study answers

Positives:

• Since the merger, the newly formed company has 37% shares of AG Barr and 63% shares of Britvic with a loyal customer base for each product. Now that they are combined, the loyal customer base is combined as well so they have larger market.
• The risk is diversified and the huge cash flow helps in covering the debts.
•  Both belong to the same industry, so they can share their resources and technology.
•  Combined together, they can aim to compete in much intense markets.
•  Both the companies can take the advantage of scale production.

Negatives/risks:

•  Redundancy due to merger can cause loss of jobs for people.
• Authority issues in top management are a common problem for the mergers.
• Britvic’s debt of £600 will be shared by Barr causing the profitability of Barr to be lesser
• Any negative experience of a customer of any of these two brands might cause the firm loose its customer due to the experience; they might want to shift to another product
•  In case of bankruptcy of one firm, another firm will also be affected.
• Shifting from one product to another might be very tricky and may act as a disaster in some cases.

The suggestions to the new board would be:

•          The unnecessary expenses should be cut off.
•          There should be inflow of more cash or capital to gain larger market share.
•          They can set participative goals to increase level of comfort and trust.
•          Motivation through good and meaningful communication.
•          Effective communication with the customers as well.
•          Take proper feedback about the product and work to improvise.
•         Proper advertising should be done to show an actual emotional bond between both the companies       to lure in loyal customers.

  

References

S. Mack, http://smallbusiness.chron.com/organic-growth-strategy-57130.html, accessed on November 2013

Ibrahim AKGÖBEK, http://psrcentre.org/images/extraimages/412031.pdf, accessed on November 2013

Johnson, Whittington and Scholes (2011) exploring Strategy, 9th Edition, Pearson Education, Chapter 10

Johnson, Whittington ans Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 6

http://www.investopedia.com/terms/m/mergersandacquisitions.asp#axzz2NWzqzjWR,, accessed on November 2013

Riley, J., http://www.tutor2u.net/blog/index.php/business-studies/comments/an-organic-growth-strategy-based-on-innovation-lego-powers-ahead., accessed on November 2013