International Business: Strategies in Mergers and Acquisitions Report

This report on international business provides an in-depth analysis of mergers and acquisitions, crucial strategies for corporate restructuring. It explores the concepts of mergers and acquisitions, differentiating between the two and discussing their significance in sectors like pharmaceuticals and finance. The report highlights the importance of a company's vision statement, emphasizing its role in defining purpose, communicating with stakeholders, and guiding strategic development. It then delves into the advantages and disadvantages of mergers and acquisitions, considering factors like market control, synergy, economies of scale, tax benefits, and the potential for employee losses, duplication, and increased costs. The report further examines how the rationales behind mergers have evolved, from focusing on undervalued assets to acquiring customer bases and distribution channels. Finally, it discusses strategic and adaptation strategies, global headquarters and local market understanding, and the importance of clear targets and metrics for successful acquisitions. The report offers a comprehensive overview of mergers and acquisitions, providing valuable insights into their complexities and implications in the international business landscape.

Running head: INTERNATIONAL BUSINESS
International Business
Name of the Student
Name of the University
Author Note

1INTERNATIONAL BUSINESS
Answer to question 4:
Introduction
The mergers and acquisitions play an important part in restructuring the corporate sector.
The primary concept behind this strategy is that two companies combine together so that they
can be more valuable in the market, as being single entities cannot give them the values that they
want in the market. Therefore it can be said that the consolidation between two companies can be
called as mergers and acquisitions. Business sectors such as pharmaceuticals,
telecommunications and finance are some of the industries where mergers and acquisitions can
be seen many times (Zheng et al., 2016).
Merger is a strategy that involves the two businesses to join together so that they can
form a single company with a new name. This is due to the fact that the merger between both the
companies happens when they are of equal size so that there stature remains the same by
cooperating with each other. Therefore it can be stated that mergers are basically a marriage
between the two companies (Duchin & Schmidt, 2013).
Acquisitions on the other hand refer to a situation where a firm tries to acquire another
and the latter is deemed of its existence. It is basically where one of the companies tries to take
over another smaller company so that the latter company can continue its operation by being a
subsidiary of the parent company (Azagaiah & Sathishkumar, 2014).
When a company tries to merge with another company, it is basically known as acquiring
the firm whereas the company that is being acquired by the parent company is known as Target
Company.

2INTERNATIONAL BUSINESS
According to Tripathi and Lamba (2015), the vision that is set by the companies helps
them in defining the purpose for which the organization has been built. The vision of the
company helps the organization in defining the products and services for which they are serving
in the market. It also helps in communicating with the major stakeholders so that they can
understand the value of the organization and the work that they would be providing in the
society. The main purpose of the vision statement in the company is that it will help in providing
information regarding the development of the strategies and the measurement of the rate of
success by using the strategies that are taken up by the organization.
Aik et al., (2015) opined that the vision statement helps in communicating the values and
purpose of the organization to the stakeholders along with the key parties so that it can help them
in influencing the organization in the near future. The vision of the company also helps in the
development of the strategy so that the goals and objectives can be achieved in a proper manner.
The vision for the company also acts as a guide for the firm so that it can help them in reaching
towards their goals and objectives.
Discussion
The advantages and disadvantages of the strategy of merger and acquisition solely
depend on the formation of the new company for a short or a long period of time. The factors
present in the marketing environment needs to be considered so that it can help the business to
prosper. The difference in the culture of business along with the changes in the cost of
acquisitions also needs to be kept in mind (Long, 2015).
The advantages of mergers and acquisitions are that it helps in gaining control and power
over the markets so that the company can get a competitive advantage. Another major advantage

3INTERNATIONAL BUSINESS
is that it helps the new company to synergize the efforts of both the companies so that the value
of efficiencies increases, which will help in giving better returns on the investment and save the
cost at the same time. The economies of scale also take place, as the resources of the company
are shared by the two parent companies along with the efficient services as well. This results in
giving the new company a competitive advantage, which will help in increasing the purchasing
capacity of the customers (Cartwright & Cooper, 2014). The merging of the companies help
them in sharing the technologies that is available with them so that it can help in increasing the
level of production for the new company. This will also help the new company in gaining
competitive advantage in the market, as better rate of productivity levels will help in
manufacturing the products at a lower cost. One of the biggest advantages is that the companies
would get the benefit of tax subsidies. The new company that will be formed will help in
decreasing the rate of tax and increase the leverage of monetary benefits along with the other
benefits that are present in the structure of tax (Risberg, 2013).
The disadvantages of this strategy are that there will losses of workers who are
experienced along with the employees who used to be leaders. This loss will hamper the standard
of the business, as the value of the company may get decreased. Another disadvantage is that the
employees of the new company may be requiring re-skilling in an exhaustive manner. The new
company will also be facing certain difficulties, which may take place due to the competition that
is present internally due to the unification of two companies (Maksimovic, Phillips & Yang,
2013). It may result in having a surplus of employees in most of the departments. The merger of
two companies will result in the duplication of products, which may lead to the increasing the
capabilities of retrenchments within the company. The rise in the level of costs may take place if

4INTERNATIONAL BUSINESS
there is a modification of the management, which may lead to the delay in the deal of acquisition
(Sarala et al., 2016).
The mergers that used to happen in the past decades were done mainly through the
financial transactions and the primary aim was to control the assets that are undervalued. It also
targeted the businesses that were different that the core business of the parent companies. The
flow of cash was used merely to repay the debts from which the company was suffering. The
acquisitions that are taking place in the recent times are not limited to the purchasing of the
undervalued assets but it also involves the purchasing of the customer bases that the company
has along with the channels of distribution so that the geographical boundaries can be increased
(Larsson & Finkelstein, 2013). These factors help in giving the new companies a better
opportunity with respect to the strategies that are being adopted in the system. This will help the
new company in gaining a competitive advantage over the rival firms that are present in the
market with respect to the products and services that are being offered by them. This helps the
new companies in increasing their revenues, as the units of the business can be consolidated
together (Bena & Li, 2014).
The mergers that takes place in between the companies allows them in spreading the
research and development at different locations o that the market can be understood. This allows
the company to be exposed to the different innovation centers that are present so that it can
develop the products according to the expectations of the customers. Secondly, it also helps the
research team in enhancing their idea and understand the level of creativity that is needed so that
the companies can survive in the surrounding environment (Meyer & Peng, 2016). This will also
allow the company in gaining customers on a global scale, which will allow them in increasing
their level of profits. The company will also be able to diversify their risks, as they will not be

5INTERNATIONAL BUSINESS
dependent on only one location and the products will be assessed in a proper way by entering
other markets as well (Larsson & Finkelstein, 2013).
The major reason for merging of both the companies is due to the fact that it can help the
new company in entering the new market with many opportunities. The use of new product lines
will help in increasing the channels of distribution, which will form a core competence for the
company. The merging of the companies to form a new one will help in increasing the value of
the shareholders, which can be achieved by reducing the cost of various departments such as
operations and the work force that is present within the company (Zaheer, Castaner & Souder,
2013). This helps the company in increasing its rate of profit as well. It will also help in
increasing the confidence of the investors and stabilize the earnings of the company as well. The
major reason for merging of two companies is that it makes the new company dominant in the
market so that the economies of scale can be reached in a better manner (Dutordoir, Roosenboom
& Vasconcelos, 2014).
There has been an increase in the complexity between the mergers and acquisitions of the
companies due to its effectiveness and scope. To mitigate the dangers that are present in taking
the decisions in a wrong manner, the buyer company needs to understand the potential areas
within the organization so that a clear criterion can be set for acquisition of the firm. The
organizations need to set a clear target so that the acquisition can be a success. The company has
to set a clear target by using various metrics that will help in calculating the values and define the
different criteria that are present for the merger. This will help the new company in gaining a
competitive advantage in the market (Gomes et al., 2013).

6INTERNATIONAL BUSINESS
The use of the aggregation strategy will help in developing the effect of synergy between
the operations of the company so that it can fare in a better way in the different locations where
the company will be located. This strategy will result in exploiting the economies of scale so that
knowledge and innovation in the companies can take place in a continuous manner. An example
of this would be the development of products due to the increase in the finance level due to the
merger of the companies (Meyer & Peng, 2016). This extra flow of cash allows the company in
increasing the level of products so that the reach in the market can be increased to a great extent.
The use of aggregation strategy will also result in globalizing the headquarters so that it can
control the rate of operation in the market. Most of the global companies like Toyota and Dell is
operating on a global scale and has set up its headquarters in Asian countries as well. This has
resulted in efficiently improving its level of services in the Asian markets as well (Gomes et al.,
2013).
The adaptation strategy that is taken up by the merger companies enables them in
understanding the needs of the local consumers so that it can help them in providing better
services. It also allows the company in setting the prices in a proper way by understanding the
level of income that the consumers have in the local market. This strategy allows the companies
in taking in to consideration the income levels of the consumers along with the differences that
are present among the groups of customers (Meyer & Peng, 2016).
There are many rationales that need to be followed during the merger and acquisitions
that needs to be followed so that it can help in forming the new company in a successful manner.
The strategic rationale helps in achieving the objectives in a strategical manner, as there are
various alternatives that are available. This helps in providing the parent company to control the
capacity of the target company in a secure manner. The speculative rationale on the other hand is

7INTERNATIONAL BUSINESS
where the acquirer treats the organization that will be acquired as a commodity so that the
organization can reap benefits after the acquisition has been done (Garzella & Fiorentino, 2014).
There is a potential risk in this rationale, as the parent company can do anything that they wish
with the target company. This type of rationale is vulnerable to the changes that may take place
in the external environment. The rationale known as management failure may happen when the
management of a company fails in executing the strategies, which has been taken up wrongfully
in the present condition of the market. The merging of the company in this rationale helps in
formulating new strategies so that it can ensure the survival of the firm in the market. The
political rationale takes place due to the political influence that is increasing in the modern world
and this type of mergers usually takes place on the government levels. The rationale behind
business redefining happens when the mission and the vision of the organization cannot be met
due to the technological failures, which needs to be updated immediately by investing on a
priority manner so that the business can earn better profits (Sherman, 2018).
The mergers that take place in the world are basically of three types where the first one is
known as vertical integration, which is characterized by the backward and forward integration of
the supply chain. This is the process where the manufacturers merge with the suppliers or the
retailers. This helps in decreasing the risks that are present with respect to the supply of the
materials. The integration that is based on the customers is known as forward integration and
with respect to the suppliers is known as backward integration. Secondly, the integration that is
horizontal in nature happens when one of the companies acquires another company who are
based in the same sector (Bjursell, 2017). This integration helps the two companies who are in
the same sector to increase their value in the market by offering the same product in a better
manner. Thirdly, conglomeration refers to the acquisition of the companies that are unrelated so

8INTERNATIONAL BUSINESS
that production can continue in the respective sectors. This integration is useful, as it helps in
spreading the risk of the business in a wider area. The expansion of conglomeration helps in
increasing the risk of the companies (Pitkanen, 2013).
The major reason for the mergers and acquisitions is the fact that it allows the flow of
resources in to the new company. The target companies become the internal units and are
dependent on the independent firm that has acquired the company. An example of this would be
DaimlerChrysler where Daimler paid $35 billion in acquiring Chrysler so that they can enjoy a
share of 40 percent in the market. The high amount was paid so that it can help in providing
better level of capability to derive the level of synergy and make significant changes in the
managerial level so that it can be derived for self-interests. The use of due diligence by the
company allows them in assessing the financial status of the target firm so that the resources can
fit in a proper manner in the acquiring company. This results in matching the resources of the
company in a strategical manner so that the firm can achieve the target in a joint manner and at a
lower cost as well (Meyer & Peng, 2016).
The period of post-acquisition results in many challenges within the organization, which
needs to be channelized in a better way. The major challenge of the new company is to
understand the synergies that will help in keeping the work place of the company motivated. This
has to be done by setting up new objectives so that it can result in creating new capabilities and
the available resources can be exploited in a proper manner as well. The new company also need
to address the concerns of the stakeholders so that it can result in diminishing the fear of loss of
jobs and their powers within the organization. The inappropriate use of management power
within the organization may result in the loss of motivation among the employees, which may
also create a high level of turnover of the employees.

9INTERNATIONAL BUSINESS
Hidden champions was a term that was coined by Herrman Simon who was a German
professor, as he was able to understand the niche markets that had competitive advantage in the
technological sector, which can be exploited on a global scale. This was due to the fact that the
use of the technological advances by the company will result in being ahead than the other
companies in the market and the products that will be developed by the company will be
advantageous as well (Meyer & Peng, 2016). The use of global focusing also needs to be done
by the new companies that are formed through merger and acquisitions so that it can lead to
better ideas of business within the organization. The reduction in the barriers of trade will help
the company in gaining a competitive advantage due to the increased area of operations for the
company.
Corporate culture is the set of beliefs that are assumed by the employees within the
organization. In a merger and acquisition, it is important to understand the culture that is present
within the organization so that it can help in strategically aligning the objectives, which will help
in the smooth functioning of the business (Skog & Sjoman, 2016). The acquiring company needs
to understand the importance of the culture so that it can help in increasing the productivity of
the target company with the same employees and the resources that are available to them. The
corporate culture is based on different variables such as the behavioral aspects, which helps in
exchanging the behavior of the employees that are present within the organization. It helps the
organization in adapting various ways in solving the problems that are present within the
environment so that they can work together in harmony (Becker, 2016).
According to Agarwal, Jaffe and Mandelker (2014), the first level of the corporate culture
is known as artifacts and creations, which begins when the employees have a difference in their
cultures, which needs to be seen in a proper manner. The second level deals with the espoused

10INTERNATIONAL BUSINESS
values, which is inclusive of the mission and vision of the company along with the personal and
internal values of the employees through which they are working within the organization. This
helps the management of the organization to take decisions at a faster rate, as they are prone to
take the risks within the organization. The third level of the corporate culture is based on the
basic assumptions that need to be identified cognitively within the members of the organization.
Stahl et al., (2013) was of the opinion that the confectionary market in the Nordic region
had very popular names that have been known to exist for more than 100 years. Cloetta and
Fazer has been the respectable brands, as they are known to be provide strong and better quality
products to the consumers. Cloetta Fazer has been one of the largest producers of sugar and
chocolate confectionaries in the market of the Nordic region. In the year 2000, it was seen that
the company amounted to a sale figure of MSEK 3000 and its employee strength was around
2000 who were involved within the trade and confectionary of the products. In the year 2001, it
was seen that Valora Holding AG came in to an agreement with Cloetta Fazer that the sale would
be looked after the latter and they would keep their entire focus on the confectionery.
Deng, Kang and Low (2013) stated that the confectionery has around 6 production plants
out of which three are located in Sweden, Finland has 2 plants and Poland has 1 plant
respectively. The company holds the third position in Norway and Denmark and fifth position in
Poland respectively along with a 25 percent of share in the market in the Nordic region. The
major competitors of Cloetta Fazer are Nestle, Cadbury and Kraft Foods.
The primary reason for the merger was to make the company competitive in nature so
that then customers can have a better experience with the products in the Nordic region. Cloetta
was founded by Christoffer, Bernhard Cloetta and Nutin who were three brothers belonging to

11INTERNATIONAL BUSINESS
Switzerland and the company was launched in Copenhagen in the year 1862. The main
headquarters of the company is located in Ljungsbro in Sweden. Sixteen years after the company
was formed, Svenska Chokladfabrik AB took over a major number of shares from the Cloetta
family and by 1980 the company also took over Adaco and Consiva and formed a strategical
alliance with Brynildsen and Fazer. One of the major acquisitions for the company was in 1998
when they took over Candelia and became the leaders of confectionery and chocolate industry in
Sweden (Fu, Lin & Officer, 2013).
Karl Fazer established a French-Russian bakery in Helsinki in 1891 and by 1897 the
company started to produce in industrial quantities. In 1963, the production for the company
shifted to Sweden and in 1967 Swedish Karl Fazer AB established the company in Sweden.
Fazer also bought A&E Peterson A/S that was situated in Denmark in 1980 and started its
production in Poland in the year 1993 (Ishii & Xuan, 2014).
Cloetta and Fazer made a strategic alliance in the year 1990, which helped Fazer in
acquiring Chymos three years down the line. The mission of the merged company was to spread
delight and joy to all the people irrespective of their age and preference in their tastes by
providing them a wider variety of confectionaries and chocolates. The merging of the companies
was done based on their equal strengths, which prevented them from taking control over the
business of each other. In the year 2005, Fazer bought a majority of shares in the company but it
is still listed in the stock exchange of Stockholm (Becker, 2016).
Before both the companies were merged, each of the organization conducted several
investigations regarding the sales, logistics, development of the products, production and
marketing along with the administration within the organization. This helped both the