Merger Along With Acquisition and International Strategies Term Paper
- Length: 7 pages
- Sources: 6
- Subject: Business
- Type: Term Paper
- Paper: #93796357
Excerpt from Term Paper :
Merger, Acquisition, And International Strategies
Ford Corporation: The Volvo takeover
It's imperative for the automotive companies to attain benefits of scale whilst developing latest products which is costing exceedingly high in the present business environment. Compared to the 90's the chances of attaining benefits of scale while saving costs has altered quite a bit. Model volumes have declined which creates difficulties for companies to attain economies of scale, while saving costs. Hence, as a last resort, companies merge with each other, acquire and form alliances with each other to save rising costs while developing new technology and products (Lundback, 2002).
Ford Motor Company
The Ford Motor Company is the second leading profitable automaker in the world. Ford has recently acquired the Swedish-based Volvo for $6.45 billion. Fords profits last year were a bit more than that with $6.57 billion. It's yet another quick acquisition among many others. Ford at present has 80 assembly plants and can easily manufacture 15 million more vehicles than the present demand. The merger hastily agreed upon after last year's alliance between Daimler Benz and Chrysler. Jac Nasser, the newly hired CEO of Ford stated that with the passage of time, only five / six companies would exist in the automotive market compared to present twenty in existence (James, 1999).
Strategy that led to acquiring and its Effects
The president of General Motors Richard Wagoner has declared detachmentfrom the bidding process with Ford over Volvo. General Motors has its own interests in South East Asia for that matter. It values its links with Suzuki and Isuzu. Ford has reserves of $16.9 billion and is busy acquiring smaller automakers for instance Mazda which it owns 33.4%. Shares of Fiat dropped as it hoped to fuse with Volvo but remained unsuccessful. Deteriorating Japanese car manufacturer Nissan is working out a deal with Fiat, Ford, Renault and Volkswagen on joint ventures and agreement on shares (James, 1999).
Ford's recent takeover has brought the competition from worldwide competition in medium and small sized cars to luxury cars now. In case of Europe, the medium car market is totally exhausted as the dealers profit from aftercare entirely, whilst making zero profit on sales. With Volvo's purchase, Ford will step up the competition in luxury car market by using Ford's car parts in Volvo and using their own distribution network for delivery.
Ford's luxury car production will rise from 250,000 to 700,000 with a threshold of 1000,000. From a long-term standpoint, they will employ same engineering architecture, design capacity and vehicle platforms for Lincoln, Jaguar and Volvos. Certain Jaguars and Lincoln have a common platform already. It can cost one billion dollars for one design alone, a number beyond reach of most.
Ford is a unique blend of social organization spread across four continents now; along with Volvo's employees has an employee workforce of 225,900 working in 38 countries. Its yearly turnover is $153.6 billion which is slightly less than General Motors. The Volvo acquisition will cause stir on BMW acquired Rover, which declared a massive layoff. This occurred a few months after an agreement was reached with the trade unions which made a deal of 2,500 layoffs and new work timings. The R75 is in competition with Volvo models is expected to sell 140,000 the following year (James, 1999).
2: AECOM Capital
AECOM Capital was established in 2013 with the sole aim of investment in private rest estate prospects and public infrastructure. The team of AECOM professes to play a pivotal role in partner's projects as they venture for investment and delivery options simultaneously (AECOM Capital).
With major offices present in Los Angeles and New York City, AECOM Capital is involved in a combined venture as a partner attempting to reap the returns to the maximum whilst providing state of the art project execution abilities on tough projects via Tishman Construction which deals in construction management and works as a services affiliate. John T. Livingston chairs AECOM Capital, who's a seasoned investor, developer and builder.
Acquisition ofURS Corporation
In case AECOM is able to acquire a number of distinct companies, it might help the firm in a number of constructive ways. If AECOM in able to purchase URS Corporation, it might gain a number of reimbursements which comprise:
AECOM will purchase URS Corporation for $56.31 / share
It will become the biggest E&C Company with global reach and promise of extended services deliverability
Adds AECOM's growing portfolio by increasing expertise and capabilities
Value in terms of transaction enterprise will be nearly $6 billion (AECOM, 2014)
The company on the whole will become a completely integrated infrastructure and federal services dealer employing around 95,000 employees in more than 150 countries. The clients will be served by this completely integrated infrastructure corporation along a diverse array of markets for instance:
Both corporations are giants in the infrastructure sector. URS brings its construction capabilities and solidifies AECOM's construction front. URS on the other hand also has expertise in:
• Government services
• Oil and gas
• Power utilities (AECOM, 2014).
3: Ford Company's worldwide business/corporate level strategy:
There are certain traits which the automotive industry can relate with other worldwide industries for instance, consumer goods, apparel and electronics to name a few. The first and foremost trait in all of such globalized industries is that FDI (Foreign Direct Investment) has flowed in heavy amounts; apart from that, global production and inter-border trade has increased exponentially after the late 1980's. With clear signs of market growth and sustenance with low cost labor from nations like India, China and Brazil have brought in huge quantities of FDI in local markets allowing export to developed nations. This new form of global sourcing pattern has been promoted and encouraged by World Trade Organization (WTO) treaties with its investment and trade liberalization (Sturgeon, Memedovic, Biesebroeck, & Gereffi, 2009).
The consequent trait of Ford Company is the rising tendency to outsource as well as bind the value chain undertakings with supplier firms. Due to this, the developed country suppliers have become more active with FDI and trade activitieswhile struggling countries are now increasing their capabilities. The developed countries house the biggest suppliers also known as the worldwide suppliers with operations on a multinational scale whilst providing services and goods to numerous kinds of chief firms (Sturgeon and Lester, 2004).
Another visible trait is final assembly of a vehicle as well as production of parts is usually kept a secret to target markets due to political tensions (examined in detail in text). With saturation of market, influx of motorization as well as automotive industries to build and sell in targeted locations has allowed the assembly lines to be scattered in multiple countries as compared to three decades ago (Sturgeon, Memedovic, Biesebroeck, & Gereffi, 2009).
The third visible trait of the company is its robust regional assembly. Even though, the automotive industry is now a much more integrated industry as compared to that of mid-1980's, it now commands more robust regional scale form of assimilation. In comparison to automotive industry, the consumer-based manufacturing industries for instance electronics and apparel are now developed along a worldwide scale pattern of assimilation.
The automotive industry has a diverse economic geography where design engineering has seen an influx in present clusters, circulation of basic design to gain overall regional integration in production and lastly worldwide sourcing of certain parts. Automotive industry is driving the patterns overall. Technical expertise, political tensions and market disparity has compelled the automakers to keep vehicle assembly line and production of parts near target markets (Sturgeon, Memedovic, Biesebroeck, & Gereffi, 2009). The political influence of an automotive company depends on:
• Leading firms
• Association with industry
• Employment on a large scale
• High unionization rate
• Legendary status of automakers in consumer's mind
Hence in case, local laws and import tariffs aren't present or might be declined by WTO directives, the foreign companies set up production locally preventing local backlash. Due to this, political pressures can easily explain the reasons for straight investment in automotive sector (Sturgeon, Memedovic, Biesebroeck, & Gereffi, 2009).
4: Corporate Level Strategy
Thinking strategically: It's imperative to remain informed about monetary, political, technological and IDB comparator institutions. It's necessary to step beyond the routine questions and realize the bigger picture and its context. It's necessary to recognize and signify key issues in difficult situations (Fairholm, 2009)
• Detects the pattern and intricate links between information and issues
• Having a comprehension of the influence of worldwide events on business of bank and related countries
• Analyzes new windows of opportunities to instigate further business and attain company's objective, work with comparators and fulfill stakeholder's demands
• Keeps in mind and knows about the larger picture at hand (goals, trends, themes and agendas) while conducting business (resource allocation, meetings and problem solving)
• Keeps in mind the demands and needs of the stakeholder and project the company's goal as well (Fairholm, 2009)…