Mergers & Acquisitions
Should a firm attempt to have fewer or more suppliers?
It depends on the situation the client is in terms of availability of materials and such as well as the number of vendors out there. A firm should balance between not putting all the proverbial eggs in one basket by using only one or two vendors and using too many and thus making administration and logistics more complicated (eSmallOffice, 2013)(Entrepreneur, 2013).
The "sweet spot" is probably 3 or 4 vendors although it can be more if more are required to reliably get all the materials but less may be needed can provide what is needed on time and in a reliable fashion and at a good cost. In short, there shouldn't be more vendors than needed while at the same time, there shouldn't be too few to protect against problems with vendors (eSmallOffice, 2013)(Entrepreneur, 2013)..
What are the advantages and disadvantages of each approach?
As noted above, using a small number makes for easier administration since the number of accounts and contacts necessary is much better. However, if that small number of vendors are inconsistent and/or incomplete in their service, the problems can outweigh the benefit of the simplicity. Keeping more vendors is better because it diversifies the sources or goods and service and makes it easier to replace shortages and address problems found with other vendors. However, too many vendors causes complexity, requires constant re-evaluation to make sure the right vendors are beign used and more amount of "hands in the cookie" jar and most of those hands are not employees of the firm, which can present a problem (eSmallOffice, 2013)(Entrepreneur, 2013)..
The figures below indicate the number of mergers that took place in the savings and loan industry over a 12-year period.
Year Mergers Year Mergers
2000 46-2006 83
2001 46-2007 123
2002 62-2008 97
2003 45-2009 186
2004 64-2010 225
2005 61-2011 240
a. Calculate a 5-year moving average to forecast the number of mergers for 2012.
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