Mergers and acquisitions strategies at Amazon.com and CarMax

¶ … CarMax and Amazon.com with an Emphasis on Mergers and Acquisitions

Mergers and acquisitions are the means of business expansion on the positive side, but the company can use these methods in order to ensure their long-term survival on the negative side too. Struggling companies can also request other organizations to acquire them because they cannot operate in isolation. The poor liquidity situation and unmanageable debt are leading causes of mostly completed acquisitions (Cartwright & Schoenberg, 2006). Companies create mergers in order to reap synergistic effects, and a marked difference between merger and acquisition is present because a former approach results in the death of all the companies involved in the deal. Merger results in the birth of a new company that can collectively use resources of all the parties. Acquisition is a sophisticated name for a buyout deal that results the company to become a subpart of another organization. A merger is a source of sharing organizational resources. Small organizations share their technological knowledge with larger ones in order to generate royalties. Experts define acquisition as a means of taking support from powerful players in the industry. The information technology industry is a most volatile one where practices and products are changing rapidly. Organizations operating in the information technology industry need constant growth in order to prevail in the global market (Hitt, Ireland, & Hoskisson, 2013). Furthermore, the challenge of acquiring new sales channels remains significant. Amazon.com is the name of the greatest online retailer in the world, and therefore, it needs to expand with speed (Palmatier, Miao, & Fang, 2007). Recently, the company acquired Audible.com in order to offer audio books and mp3 songs collection as well. The decision of acquisition served the company's goals well because Amazon.com became capable of selling online books, educational programs, and modern formats of books as well.

CarMax does not have any history of acquisitions and mergers. CarMax is a website that supports dealing of vehicles in America. S&P has registered the company as a public organization, but the management did not feel the need to expand the company's operations with the help of applying frameworks of mergers and acquisitions. In general, mergers and acquisitions benefit all of the partners because stronger ones can attain economies of scale, and smaller ones have the satisfaction of having continual operations.

Amazon's Buyout of Audible.com

Amazon bought Audible.com because of a deal that had a value of 300 Million. Amazon had fulfilled its objective of acquiring new sales channels by completing the above-mentioned deal. Audible.com is the largest producer of online books in America. The featured deal was beneficial for both of the parties because Audible became eligible of getting technical and financial support from Amazon, and therefore, its ability of developing new products and services grew substantially. Amazon at the same time developed its competency to have a significant increment in terms of sales. With the passage of time, Amazon-Audible deal changed, and emerged as a joint venture.

Audible is a subsidiary of Amazon with separately managed setup. Don Katz, founder of the company retained control over the operations and in this way, Amazon's leadership created goodwill with their new partner. The parent company of Audible.com became a leading name in the industry of e-books, and audio books. Amazon.com is a sophisticated retailer and seller, but it does not produce products directly those are sellable in nature. The joint operations of Amazon and Audible have been successful because both of the companies benefited from it. Amazon gave Audible a platform to sell its products against modest fees. The companies have worked together, and sales of audio books improved by 60%. The Amazon generated 90 million in sales after buying Audible.com. According to CEO of Amazon, Jeff Bezo, the value of online media is increasing, and therefore they have entered the deal with their new partner in order to tilt the business in the light of new standards. He added that they can use any help in the process of strengthening the company's standing in the global market of online retailing. The successful deal between two online businesses revealed a deeper reality about Amazon's management and leadership style. The company delegated power to the ranks of Audible and Amazon did not interfere with the matters its partner, and offered them with its selling services. Amazon knows the art and science of selling, and Audible has the power to produce high quality audio products. Both of the competencies submerged in order to create memorable business success in the history.

Suggesting CarMax to Form an Alliance with Amazon.com

CarMax is a relatively unknown commercial organization of America with a promising business idea. The semi-permanent global recession caused people to demonstrate economic rationality. The customers are becoming cost sensitive, and therefore, they want to meet their needs efficiently. Ownership of a personal vehicle is a dream of a common-man, and CarMax needs to form alliances with OLX.com and Amazon.com in order to enhance its reach in the world. CarMax does not need to lose its identity, but it requires an appropriate platform to sell its products. CarMax along with its partners can charge their customers against usage of their services to find a dream vehicle. Amazon does not currently operate in selling used vehicles, and therefore, partnership with CarMax will allow the famous online retailer to enter in a new industry. In this fashion, Amazon will improve its ability to expand aggressively. CarMax can jointly operate with OLX.com and Amazon.com without foregoing its managerial rights. both of the potential allies have a history of forming strategic alliances with an objective of sharing profits on sales. Amazon will form a better strategic partner because it has a commitment to follow modern leadership and management philosophies. The company does not influence operations of its subsidiaries. CarMax can sell its offerings with a better skill in association with Amazon.com. The social theory of marriage has greatly influenced the literature of strategic alliance. Business and corporate level alliances are formed in order to serve common interests, and CarMax has an attachment to sell cars at a larger platform, and Amazon has that ability, so it is logical for CarMax's management to create a deal with the greatest e-retailer in the world.

Strategic Recommendations for CarMax

CarMax is fearful to enter international markets. The company is providing services to the American nation, but it is time to swim in the river of corporatism because online businesses like CarMax cannot survive without global expansion. The leaders of the company are satisfied that they are generating personal wealth. However, they have to understand that entrepreneurial spirit cannot be fulfilled without attaining growth, and therefore they have to form a strategic deal with the companies like Amazon. CarMax and Amazon need to communicate with each other, and that is a simple matter of willpower because both are American companies.

Strategic alliances are consistently growing in all parts of the world. The search for a company with no history of mergers and acquisitions was a tough task. CarMax is a left-behind company, and operating with a nationalistic mindset. Human resource management at Amazon can play a significant role in harnessing human talent in the ranks of CarMax. The company is thinking, but it is not thinking big, and therefore, it is lagging behind with the passage of time. The entrepreneurial skill of limited nature is destructive to the society because it is causing the money supply to swarm in selective hands. The swarming of money in a few pockets lent a hand in the incremental process of income disparity in countries. Finally, CarMax can transform into a savior of the American nation by expanding to a global level.

Conclusion

Strategic management is a technical name for making decision for the purpose of balancing long-term and short-term gains of the companies. The world of the 21st century is having organizations that are flat in nature. The flat nature of the organizations is causing corporate and business levels are coinciding with each other. Modern organizations do not have to formulate corporate level strategies, but their business level plans are sufficient to guide them through. They have to serve short-term goals because long-term planning cannot be performed because of growing uncertainty in the international market. Strategic alliances, and ventures are becoming norms of the corporate culture because of the growing emphasis on teamwork and collaboration. Amazon and CarMax need each other, as if they were part of a jigsaw puzzle that remains incomplete without even a single piece. The marriage of the Amazon and CarMax is a much needed measure. The strategic alliances are an effective manner of collaboration, and they are usually covered in the names of buyouts and joint ventures.