When all of these factors are acquired, they in turn give greater strategic opportunities to companies so that they can have an edge over their competitors’ products and services. Such companies will be successful in consolidating business units in an attempt to increase their revenues and share the profits. Merger and acquisition activities acquiring the benefits will have to cope with the growth problems and even survival problems along the line. There are many reasons why mergers occur which is beyond the aim of maximizing profits. This shows that all mergers should be profitable if the merging partners have the sole aim of profit maximization.
The level of international involvement is associated with the cost efficiency on the supply-side. Lu and Beamish (2001) examine the effects of internationalization between SMEs and firm performance and found positive impact when company expands business by doing FDI’s. Furthermore, when companies make an alliance with a local partner to absorb local knowledge, companies will gain degenerate deficiency of lacking resource and capabilities. The other results of the relationship are an inverted U-curve and S-shaped relationship. Hitt, Hoskisson and Ireland (1997) find an inverted U-curve relationship between International diversification, which are demographic and product, and firm performance.
Vertical takeover is when a company acquire organization which will help to gain market advantage. For example Davis Service Group may acquire a textile producer company and gain significant advantage by offering not just cleaning service but repair shop and “switch old for new” as well… Businesses grow when they have the resources to expand and opportunities exist for growth. Explain how the acquisition of Berendsen provided such a good opportunity for the Davis Service
Personality or policy conflicts may cultivate that either hamstring operations or acquire buying out such contracts to remove personal position of power. Particularly in conglomerate merger, management of acquiring firm simply may not have sufficient knowledge of the business to command the obtained firm adequately. Attempts to maintain control may induce resentment by personnel of obtained firm. The resulting contraction of the efficiency may eliminate expected operating synergy or even reduce the post merger profitability of the obtained firm. The list of possible counter synergism factors could goon endlessly; the point
3.2 RANGE OF STRATEGIES THAT CAN CONTRIBUTE TO A BUSINESS COMPETITIVE ADVANTAGE When a business thrives in gaining competitive advantage, it often sets eyes on a manifold of strategies that aim to em-better its image and its competitive positioning. It focuses on strategies that may help increase its rate of consumers acquisition, retention and satisfaction; strategies of industry and competitors analysis. Moreover, it sets eyes on those strategic process to build strong investments portfolios ( Liquidity) that can help establish longevity and leadership in the market. Competitive advantage inevitably leads to faster, continual exponential growth, increased sales, market share gains and overall business profitability. Competitive
There is a high risk of SMEs are being eliminated if they do not enhance their competitiveness in the new swiftly developing world of globalization. 4. Steps to strengthen SMEs in Singapore SMEs may set up some steps to improve price preference, opportunity to increase productivity, priority sector lending, innovate, provide of skilled labor, networking for increasing competitiveness, upgrade technology, upgrade capabilities and restructure and reformation of labor law, make local talent become stronger, after that they can remain grow and competitive. Innovation- Investment in innovative activities is increasing and faster rate for large company in SMEs. SMEs have been innovative in terms of enhance product process and designs and utilization of new technologies.
Whether because the company is becoming too bureaucratic or it runs into physical or logistical resource constraints, eventually its marginal productivity peaks. To find higher growth and new profits, the large firm may look for promising young companies to acquire and incorporate into its revenue
Therefore, business units that operate in rapid growth industries are worth investing in only when they are expected to grow or maintain market share in the future. On the horizontal axis, relative market share serves as a measure of company strength in the market. Higher corporate’s market share results in higher cash returns. The selection
Market Orientation According to Naver and Slater (1990), market orientation is one of the organizational cultures which will lead to high performance of a business. This is because the business is able to provide customer superior value with lead cost and time. Market orientation includes customer orientation, competitor orientation and interfunctional coordination. Market orientation will lead to new product performance whether the new product is achieving customers’ expectation or out performing than their competitors (Zhang & Duan, 2010). From Zhang and Duan’s research (2010), market orientation is important than innovation orientation, because customers’ expectation was studied and innovation of new product was built according to customers’
If a company is not able to grow internally due to lack of managerial and physical resources, it can externally grow through mergers and acquisitions. Enhanced Profitability The combination of two or more companies can raise the profitability of the company more than the average level due to efficient utilization of resources and cost reduction. These can happen because of economies of scale, operating economies and synergy. Economies of scale arise when increase in production causes the average price per unit to come down. Combination of companies can also reduce operating costs.