Introduction
An organisation has been defined as the route by which businesses and organisations develop international networks and impact on a global scale (Bayazitova, Kahl, and Valkanov, 2011). Pankaj Ghemawat and Fariborz Ghadar look at organisation as the core motivating factor for the rapid merging of companies and demystify the doubtful logic of these Mega-Mergers (Ghemawat, 2002). A.T.T. Kearney carried out a study that looked into Acquisitions and Mergers and significantly came up with a merger endgame strategy. This paper will give a critical comparison between Ghadar and Ghemawat’s perspectives with that of A.T. Kearney on Mega-Mergers. An independent conclusion is then made on the subject.
Analysis
According to Ghemawat and Ghadar, many companies are driven to believe the dubious dictum that the global economy is a winner-take-all economy (Ghemawat, 2002). This is largely linked to the nearly worldwide credence that industries will inexorably become more concentrated as the organization of the world’s market takes place (Bayazitova, Kahl, and Valkanov, 2011). Companies deeply embrace the comparative advantage theory that was introduced by Ricardo almost two centuries ago, but business thinkers take an assumption that this points toward concentration of industry (Ghemawat, 2002). The arguments of this theory are nonconcrete because it conveniently ignores economies of scale, which are a key driver of industry concentration. The companies think that the best strategy that roll out profits is through merging and expansion, but there are other lucrative strategies available.
A.T. Kearney has merger endgame strategies that divulge how to get ahead in the consolidation duel. Due to a lack of transparency in the market strategies and investment, merger decisions are made with some vagueness, and often growth investment falls short (Rothenbuecher, Niewen, and Schrottke, 2013). The key motives for these mergers, according to them, are that they happen due to consolidations. They also aim to capture scale advantages by pursuing growth through these mergers. The methodology they provide is that which creates market transparency for the merger endgame. The main idea they are selling is that companies just need to understand at which stage of consolidation they are in, thus allowing them to make a certain merger investment decision to enable them to benefit in the end (Rothenbuecher, Niewen and Schrottke, 2013).
Strategies provided by Ghadar and Ghemawat stipulate that some biases need to be avoided by companies for them to get a well-rounded view of how to effectively embrace and tackle them without necessarily turning into Mega mergers (Ghemawat, 2002). These biases include the overemphasis on growing revenue as opposed to growing profits. Companies also desire to exploit a high stock price. This tends to fuel mergers and becomes yet another bias. Grooved thinking can be a hurdle that is embedded in the industry's mindset, thus affecting companies. Further, they elucidate on herd behaviour in the oligopolistic industries that are also leading to merger influence (Ghemawat, 2002). The personal commitment of the leadership of the company also affects the consolidation strategies of these companies. There is emphasis put on the examination of all parties by the managers during a potential acquisition.
Having the right strategies and also making the right divestment and investment decisions at the right time are inextricably bound together with a winning endgame. Through the endgame methodology, executives are in a position to assess the positioning of their companies while analysing the top three players in that specific industry. Organisation had pushed breweries to merge from the period of 2004 to 200, which marked an annual growth rate of 12% in this specific industrA.T.A.T Kearney’s strategy has consolidated an acquisition program, defined ned growth path alongside evaluated targets.
Ghadar and Ghemawat insist that for most companies it’s more logical to develop locally than try to institute an international brand (Ghemawat, 2002). Consolidation is time-consuming, and thus, companies should consider exploiting the opportunity when many players in the same industry are considering a merger to improve the company’s competitive positioning. Companies can build scale through making friends and also by allowing competitors to take the first move toward consolidation if they are unsure about these uncharted waters. The viability of a company as a non-consolidator is intricately bound to its analysis and imagination a company has as it manoeuvres substitutions to Mega-mergers (Ghemawat, 2002).
A.T. Kearney has a methodology that can help companies gain from Mergers (Rothenbuecher, Niewen, and Schrottke, 2013). Ghadar and Ghemawat believe that other alternatives could be more lucrative to companies away from Mega-Mergers (Ghemawat, 2002). A win-win strategy, according to Keaney, for a Mega Merger can be determined by a few questions that help companies establish whether they are ready for merging. These questions establish facts ike what drives consolidation in the market, the future of the specific industry, the competitors driving consolidation in that industry, and the benefits of consolidation globally and regionally in that specific industry.
Conclusion
Mergers can either be successful or not. A recent Europe Business Review report stipulated that among mergers 70% to 90% fail (McMorris, 2015). This is mainly due to the lack of a clear strategy and a lack of effective project management (Schmidt and Rühli, 2002). There are some of the Mega-Mergers that fall under the 10% that have been successful that havebeen successfuls. Walt Disney and Pixar merged to release animated films for kids, and ever since the merger, they have continued to be stronger. Another very successful merger was that of XM Radio and SSiriuwhichichh was on July 29, 2008. In the oil industry in 199,9, Mobil and Exxon made a merger that was worth $81 billion to form ExxonMobil.d has since remained a strong leader in the oil market with influence in the international market (Spraggins, 2013).
When it comes to mergers that failed, they go back to 1968 when Pennsylvania Railroads and New York Central after they had merged to become the sixth largest corporation in America at the time. In 197,0, they filed for bankruptcy, thus the collapse of the corporation (Gupta, 2015). In 1998, US automaker Chrysler merged with Daimler-Benz in a deal worth $37 billion, but nine years later, Daimler sold Chrysler to Cerberus Capital Management firm after the merger had undergone a corporate cultural clash (Mergers and more mergers, 1998). Mergers can work if companies embrace the right strategies and continue to reinvent their models as the markets continue to evolve due to other organizations. Companies should also consider other sustainable strategies away from mergers that can help them embrace organisation and help them achieve growth.
References
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