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Acquisition of a Foreign Firm
- As a CEO, you are trying to acquire a foreign firm. The size of your firm will double, and it will become the largest in your industry. What does your firm do and what does the foreign firm you are trying to acquire do? Where are the firms based?
My firm offers diverse financial services and it is located in Washington DC. In particular, it provides community banking services, brokerage and retirement services, wholesale banking, credit cards and customer services and internet services. The foreign firm that my firm is trying to acquire on the other hand is based in California and also offers wide ranging financial services to its clientele. In particular, it provides banking services, asset management, investment and corporate banking services and products as well as wealth management. Furthermore, the firm offers security services in three American states; Florida, California and Connecticut.
- You are very enthusiastic about the opportunity to be a leading captain of industry and the associated power, prestige, and income. (You expect your salary, bonus, and stock option to double next year). However, you are troubled by the fact that 70% of mergers and acquisitions (M&As) reportedly fail. How would you proceed?
Indeed, it can not be disputed that acquisition of a new firm impacts on the organization’s ideologies and practices in different ways. According to Miller (2008), most failures result from a lack of cultural cohesion. In this regard, cultural cohesion is a very important aspect that can make the resultant firm to either succeed or fail because of is influence on talent retention. In this consideration, I would proceed by attaining an in depth understanding of various cultural influences related to disciplines, beliefs and problem resolution strategies as well as practices of the foreign firm. In addition, I will critically analyze the synergies surrounding brands, physical assets and competencies with the aim of incorporating and retaining these in the resultant company. In this respect, Ghughan (2005) indicates that understanding and appreciating the various cultural underpinnings that anchor the preceding aspects is of paramount importance. As such, I would make efforts to understand the cultural aspect that are related to the above structural supports.
Most importantly, I would align my corporate strategy to the acquisition strategy. In particular, my corporate strategy seeks to enhance profits and maintain upward growth and development by providing high quality and diverse products. The main aim of acquiring the new firm is to diversify the service and increase economies of scale. Bridging any gaps between these two strategies would go a long way in enhancing performance and preventing incidences of failure. It would also be important for my firm to redefine its position in the market and work towards attaining its goals and objectives. Brunner (2004) cites that most companies that make acquisitions fail because they become over whelmed by the entire development and loose track of their corporate goals and objectives. Defining the position of my firm in the market after acquisition is a visionary measure that will enable the firm to develop a viable strategic direction. Further, this will prevent incidences of lacing undue emphasis on short term legal and financial issues at the expense of important corporate goals and objectives.
Also, it is worth appreciating that the resultant firm would be bigger and would pursue diverse approaches. It would be important to put in place distinct communication strategies and enhance organizational capacities with respect to human resource management, production, marketing and so forth. Effective communication strategies would ensure free information flow and enhance a learning culture n the organization. In addition, it would prevent communication related conflicts that strain relationships and undermine effective functioning in the work place. Building capacities on the other hand would be instrumental in ensuring quality production of products and services. In this regard, Miller (2008) posits that some companies fail because of various challenge related to organizational leadership and effective communication.
- What institution-based issues would you encounter? Discuss.
There are various institutional based issues that my firm looks forward to encountering and which would impact in different ways on the performance and general wellbeing of my organization. To begin with, there is a possibility of legal issues especially considering that the firm to be acquired is located in a foreign country. In this regard, it is worth noting that the legal expectations of the California state might slightly differ from those of my home family. Also, the resultant firm is likely to b treated differently by the regulators and law enforcers because of the relative increase in output and assumption of a new status or position in the industry. These can affect production and the firm’s ability to meet goals and objectives. Particular areas of concern include increase in taxes as a result of increase in revenue and so forth.
Then, challenges might also stem from the issue of acceptability by the foreign firm. Acquiring it will have far reaching implications on its work force as they would be required to operate under new rules and regulations. Effectively assuming these can be problematic especially considering that some of their practices and processes differ considerably from those of my firm. Issues pertaining to morality and culture are likely to be problematic because of the varying beliefs and practices. These would directly affect performance as well as managerial behavior that are instrumental in providing guidance to the resultant company. Also, aspects pertaining to the credibility of the business operation are also likely to raise certain concerns. Credibility in this regard is defined in terms of the cohesiveness between organizational practices and corporate strategy, goals and objectives.
Also, the personnel of the acquired firm are likely to experience difficulties in assuming a new culture. In this regard, they would be expected to assume new practices, processes and align their beliefs and perceptions to new organizational goals and objectives. This can negatively impact on the organizational relationships and have far reaching impacts on the productivity of the company. This would occur especially when the respective personnel find it difficult to cope with the new work environment. It might result in loss of personnel that are important in maintaining quality production.
- What resource-based issues would you face? Describe
There are various resource based issues that the company firm is likely to grapple with. To begin with, there would be need for more financial reso.............
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