Ghemawat & Ghadar (2000) developed the Socialist-Academic Perspective of global mergers to demonstrate that cross-border deals are driven by the need to align business operations with the inevitable forces of globalization, such as the integration and growth of capitalist economies. The Socialist-Academic Perspective is plausible because multinationals engage in mergers to gain a more competitive advantage in the international business environment (Mackenzie, 2013). Ribeiro (2010) explains that globalization has opened lucrative business opportunities across borders, which motivate global mergers between multinational companies. Rothenbücher & Niewiem (2013) of AT Kearney postulated a different perspective on global mergers. They maintain that global mergers are means or tools used by multinationals to win the race towards long-term growth. The AT Kearney’s Management Consultant Perspective is convincing because consolidation of industries through mergers enables multinationals to compete favorably and to achieve their goals for strategic growth within the global business environment (Sharma, 2016). This paper presents a comparative analysis and appraisal of the Socialist-Academic Perspective and the Management Consultant Perspective of global mega-mergers. The goal of the comparative analysis in this paper is to demonstrate that global mega-mergers are desirable strategies for promoting growth in the international business environment.
According to Ghemawat & Ghadar (2000), the gains of global business are meant to benefit a few top players. Therefore, companies establish global mega-mergers with a goal of becoming winners and beneficiaries of the increasingly competitive international business. The Socialist-Academic Perspective provides a realistic explanation as to why multinationals aim at the foreseeable scaling of production, research and development, marketing, and branding through the establishment of global mega-mergers. Conversely, Rothenbücher & Niewiem (2013) argue that global mega-mergers are established amidst significant uncertainty. Therefore, the Management Consultant Perspective was developed with a goal of opposing the argument that companies that enter into global mega-mergers clearly foresee the benefits of their combined entrepreneurial efforts. However, both perspectives recognize the fact that the endgame of companies that form global mega-mergers is to gain a competitive advantage in international business. Notably, both perspectives are based on a comprehensive evaluation of a wide range of theoretical underpinnings on international business strategies. Furthermore, the Socialist-Academic Perspective and the Management Consultant Perspective provide legitimate justifications for the increasing signing of merger agreements among multinational companies.
The Socialist-Academic Perspective indicates that global mega-mergers are strategies for survival in the international business. This means that multinationals propose mergers because it is a choice between do or die among the main players in international business. On the other hand, the Management Consultant Perspective is based on the argument that multinationals use global mega-mergers as tools for capturing scale advantages. Therefore, the Management Consultant Perspective was aimed at demonstrating that global mega-mergers are avoidable business choices or actions. Rothenbücher & Niewiem (2013) effectively support their arguments by demonstrating that there is no transparency in the process of establishing global mega-mergers. The Management Consultant Perspective is warranted because it enabled AT Kearney to uncover the ultimate objectives of companies that form global mega-mergers. Therefore, Rothenbücher & Niewiem (2013) shed more light on the actual motivations for the formation of global mergers, such as the consolidation of industries. Regardless of the divergent views presented by the proponents of the Socialist-Academic Perspective and the Management Consultant Perspective, it is notable that they agree that global mergers enable companies to minimize the risks of international business practice.
Rothenbücher & Niewiem (2013) provide reasonable explanations and illustrations to back their Management Consultant Perspective on global mergers. For example, they indicate that the lack of transparency is attributed to the failure of 60% of mergers and acquisitions. Therefore, the Management Consultant Perspective successfully debunks the view of the Socialist-Academic Perspective that global mergers are inevitable decisions. Vaara & Tienari (2011) argue that if multinationals had no choice but to engage in global mergers, the success rate of this business strategy would be higher. This means that the Management Consultant Perspective is backed by other authors on the subject. Nonetheless, the arguments of Ghemawat & Ghadar (2000) are more comprehensive because they are informed by an understanding of a wide range of variables that influence international business operations. Notably, factors that influence success in international business, such as supply chain operations, competition, customer value, and forces of globalization, are integrated into the Socialist-Academic Perspective. This is unlike the Management Consultant Perspective, which mainly focuses on factors that influence the consolidation of industries in the international business environment.
The Socialist-Academic Perspective is based on classical social theories, especially Marxism. This makes it useful in understanding how capitalistic characteristics of the international business environment influence the formation of global mega-mergers. Ghemawat & Ghadar (2000) specifically demonstrate how changes in financial markets across the world influence the strategies of international businesses. Since Marxism has dominated business practices for centuries, it is argued that the Socialist-Academic Perspective of global mega-mergers is more reliable and consistent than the Management Consultant Perspective. However, it is necessary to appreciate the fact that there is no empirical evidence to indicate that the winner-take-all strategy defines the success of companies in the global business climate (Oprescu, 2015). According to the Management Consultant Perspective, companies enter into global mergers to eliminate the risk of being acquired by larger firms. In this sense, the Management Consultant Perspective agrees with specific arguments of the Socialist-Academic Perspective, such as the claim that global mergers are often unavoidable business strategies for enduring the challenges of international business practice.
The Socialist-Academic Perspective provides persuasive illustrations to support the argument that global mega-mergers are desirable strategies promoting growth in the international business environment. The perspective is also supported by empirical evidence, which shows that global mergers allow companies to implement economies of scale for increased efficiency (Stahl et al., 2013). Therefore, the Socialist-Academic Perspective rightfully indicates that global mergers represent the best strategy for creating greater value, supporting growth, and ensuring survival in international business. Companies also increase their share of the global market and become more competitive through the establishment of global mega-mergers (Barattieri, Borchert & Mattoo, 2016). Regardless of the challenges companies face in promoting the success of mergers, this strategy is desirable as it allows global businesses to improve their financial strength, which is necessary for supporting international supply chain operations.
References
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