Running Head: Mergers, Acquisitions and International Strategies 8
Date of submission
Mergers, Acquisitions and International Strategies
Contents Introduction 2 Walt Disney Company; A corporation involved in acquisitions 3 Benefits of Disney Acquisitions 3 Strong brand reputation 3 Strong product portfolio 4 Diversification of the nature of business 4 Increased competitiveness 4 Tribune publishing: a corporation that has not been involved in mergers and acquisitions 5 Business level and corporate level strategies for Walt Disney Company 6 Business level strategy 6 Recommendations for business level strategy 6 Corporate level strategy 7 Recommendations for improvement 7 Business level and corporate level strategies for Tribute Publishing 7 Possible business level strategy for Tribute publishing 7 Justification 8 Possible corporate level strategy of Tribute Publishing 8 Justification 8 References 8
Mergers and acquisitions are strategies that have been used in the corporate world to expand the scope of business and advantage from the synergy effect created. An acquisition is a strategy where a larger company acquires another smaller company (Hubbard, 2013). The smaller company operates under the larger company after the acquisition. A merger on the other hand is a strategy where two or more companies merge their operations and become one. Both companies cease to exist after the merger (Hubbard, 2013).
The Entertainment industry in the United States of America has had a rich history in mergers and acquisitions. Companies have been merging to form one large company and in other situations a smaller company giving up its ownership to a relatively larger company. In this analysis, we analyse the Disney Company as a company that has a history of acquisitions and compare it to USA Discovery Communications, a company that has no acquisition industry in the USA.
The Walt Disney Company has been involved in a number of acquisitions. The strategy that led to the acquisitions is that of increasing the market share (Hubbard, 2013). The company has a mission of growing into the best Media Company in the world. Disney therefore has been acquiring a number of companies in the industry to expand its scope of operation. The company has been second in size in the world from Comcast. To defeat Comcast, acquisitions were a better option. The company has therefore has acquired several companies in the industry. These include Jack Wrather Esatate, ESPN, ABC, Pixar, Marvel and Lucas Film (Watts, 2013).
The company’s main benefit from these acquisitions is that of the synergy effect. The power of Disney in the market has increased from these acquisitions. Synergy effect comes due to a number of factors. These include improved management, increased distribution channel efficiency, increased market share, diversification in products and distribution channels, increased level of competitiveness among others (Watts, 2013).
The strategy has been beneficial to Disney Company. The company has benefited in different ways. For instance, the acquisitions have enabled the company to build a strong brand reputation. Brand reputation here refers to the acceptability of its products in the market. The company has been able to serve the customers better after the acquisitions (Watts, 2013). The company is now able to identify the needs of its customers and serve them better. As a result, the company has been able to keep its customers satisfied by its quality of service. There have been minimal complains about the quality of service since the company acquired the companies.
The company has also been able to build a strong product portfolio. Disney Company originally provided lean services to its customers. This was due to the limited capacity of the company to offer a wide range of services. Jack Wrather Esatate, ESPN, ABC, Pixar, Marvel and Lucas Film offer various services to the industry. Combined with the services that the Disney Company originally offered to the market, the company has been able to increase its product portfolio invincibly (Watts, 2013). It is due to this invincible product portfolio that Disney has been able to take the leading position in the market ahead of the greatest competitor; Comcast.
Disney has also been able to diversify its nature of business. The company has been able to offer different products and services in the market compared to what it offered before the acquisitions. Since the company become part of Disney Company after acquisitions, the Products that and services of Jack Wrather Esatate, ESPN, ABC, Pixar, Marvel and Lucas Film are now products of Disney and therefore the nature of business of the company has been diversified greatly by these acquisitions (Watts, 2013).
Disney has also been increasing its competitiveness in the market. Before acquisitions, the company was facing a great competition threat from Comcast. However, after the acquisitions, the threat of competition has faded. The company has grown into a market leader above Comcast. As a result, profit making for Disney has been so easy. The increase in competitiveness has also given the company an invincible acquisition power in the industry. Today, acquiring another company has been so easy for Disney Company since the company has what it takes. It is hard to defend an acquisition planned by Disney. Today, Disney makes an estimated 45 billion USD annually (Watts, 2013).
Tribune publishing is an entertainment company that has not been involved in acquisitions business. However, the company is losing a lot of potential profits from operating solely. The company should consider merging with another media company in the USA. A good target for the company to merge with would be Cox enterprises. This is a good target for acquisition since the company has been growing in popularity in the recent past.
Cox Enterprises has been characterized by operational inefficiencies in the course of operation. The management of the company is therefore relatively faulty. As a result, the Tribune Publishing can take advantage of this and launch an acquisition of ox enterprises. The success of the acquisition is likely due to the revenue differential of the two companies. Tribute publishing makes an estimated 653,000 newspaper sales compared to the newspaper sales of Cox enterprises estimated at239, 000 annually. As a result, the company could easily acquire Cox Enterprises (Hubbard, 2013).
Tribute Publishing could benefit from synergy by acquiring Cox Enterprises. Synergy could result from a number of factors. For instance, the combined resulting size of the company would be so large (Vogel, 2014). As a result, the company would be able to operate more efficiently. This is because the company would advantage from economies of scale reducing cost of production.
Secondly, Tribute publishing’s management could take over the management of Cox Enterprises. As a result, the management of Cox Enterprises would be enhanced and therefore the profit of the subsidiary would increase. According to Hubbard (2013), due to the improved management of Cox Enterprises, the overall profitability would increase.
The competitiveness of the company in the market would also increase. This is because, the results of the acquisition is a larger sized Tribute Publishing. Large size would mean that the company offers more competitiveness in the market. This can be attributed to increased brand reputation, increased market share, better quality of service, and increased products diversification among other factors. Is the company is more competitive, it would then make more combined sales, make bigger profits and grow together (Vogel, 2014).
The business level strategy is the strategy that is employed by a company to create and keep a competitive advantage (Vogel, 2014). Disney Company has been using a business level strategy of quality customer service and this service has been able to propel the company to its high level of competitiveness. Disney’s management have the virtue of always ensuring quality service to its customers. The company has been offering quality TV channels, quality movies and other services it provides. The services have been of high quality and as a result, customer complaints have been minimal. Reduced customer complaints have made the company maintain the level of competitiveness that it has today.
Apart from ensuring good quality of customer service, the company should;
· Ensure that the services are cheaper
· The cost of offering the services is minimized
· The company has a defined channel of obtaining customer responses
· The company has a defined channel of correcting imperfections in its product quality
The corporate level strategy of Disney Company is that of integrated management. Integrated management is a kind of management system where the decision making channel is centralized. Despite the fact that the different companies that have been acquired by Disney Company have had management positions and personnel, the decision making of the resulting company after the acquisitions has been integrated. The decisions of the company are made from the headquarters in California. Integrated management has proved beneficial for the company. There is a defined line of authority and this ensures fewer conflicts are witnessed in the management process.
The following can be done to ensure that the integrated management is made more efficient
· Delegating some management decisions to lower level management
· Building a good relationship between the management of Jack Wrather Esatate, ESPN, ABC, Pixar, Marvel and Lucas Film
· Coordination and consistency in management decision making
The company could use low price as a business level strategy
Business level strategies are purely made to increase and maintain the level of competitiveness of a company in an industry. Tribute publishing operates in the media and entertainment industry where there are many companies (Vogel, 2014). As a result, the level of competition is high. There are many companies offering similar newspapers in the USA. However, customers prefer lower priced products to the higher priced ones. As a result, by offering low price for its newspapers, the company will be able to attract customers and maintain them.
The possible corporate level strategy that the company can pursue is that of integrated sales.
The company’s corporate level strategy is appropriate after considering a merger/acquisition. If the company merges with Cox Enterprises, the corporate level strategy would be beneficial for the company formed. This is because the new company would make more sales than the individual company sales from economies of scale in company sales. The retained profit of the company would therefore be more than the profit that would be realized if the two companies made the sales individually.
Watts, S. (2013). The magic kingdom: Walt Disney and the American way of life. University of Missouri Press
Hubbard, N. A. (2013). Mergers and Acquisitions. In Conquering Global Markets (pp. 97- 131). Palgrave Macmillan UK.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis. Cambridge University Press