This paper examines mergers, acquisitions, and international business strategies through a comparative lens. It analyzes Samsung's acquisition of Hanguk Jeonja Tongsin and the role that transaction played in building Samsung Electronics into the world's largest electronics manufacturer. The paper then evaluates Samsung's international business-level strategy — combining cost leadership and differentiation — alongside its global (standardization) corporate-level strategy. In contrast, Hibbett Sports, a US-based sporting goods retailer, is presented as a firm that has grown organically without mergers or acquisitions. The paper identifies Olympia Sports as a viable acquisition target for Hibbett and recommends cost leadership and acquisition-based corporate strategy to strengthen Hibbett's competitive position in the domestic sporting goods market.
A well-crafted strategy is crucial for business success in both the local and international markets. Firms achieve this success by using business-level strategies, corporate-level strategies, or both. Business-level strategies (such as cost leadership and differentiation) influence a firm's competitive advantage in its products and markets, while corporate-level strategies (such as mergers and acquisitions) affect the firm as a whole (Hill & Jones, 2012). Firms operating in the global market must also choose effective international business-level strategies and international corporate-level strategies.
This paper compares an international company, Samsung, which has a history of mergers and acquisitions, with a US-based company, Hibbett Sports, Inc., which operates solely in the US and has no history of mergers or acquisitions. The paper specifically evaluates Samsung's acquisition strategy as well as its international business-level and corporate-level strategies. It also identifies one company that would be a profitable acquisition or merger candidate for Hibbett Sports and proposes one business-level strategy and one corporate-level strategy the company should consider.
Mergers and acquisitions constitute important inorganic growth strategies for firms. A merger involves two autonomous firms joining to form a single entity, while an acquisition involves one firm purchasing another. Mergers and acquisitions are driven by numerous motivations, including financial synergy, economies of scale, growth acceleration, product and risk diversification, market share expansion, strategic realignment, and tax considerations (Johnson, Scholes & Whittington, 2010). For instance, a banking firm contemplating entry into the insurance industry could acquire an already established insurance firm, thereby avoiding the complexity of building that presence from scratch.
Mergers and acquisitions have been integral to Samsung's growth. Samsung is a Korean multinational firm with interests in diverse industries, including consumer electronics, textiles, insurance, retail, food processing, chemicals, construction, shipbuilding, and securities. Nonetheless, electronics represent the firm's major source of revenue, accounting for more than 70% of total revenues (Samsung, 2016). The firm designs, develops, manufactures, and markets a wide range of electronic products, including smartphones, tablets, computers, television sets, LCD displays, household appliances, memory chips, semiconductors, and storage devices. These products are marketed in more than 100 countries worldwide.
Founded as a trading company in 1938, Samsung has achieved tremendous growth over the decades to become one of the most powerful business conglomerates globally (Samsung, 2016). Throughout its operational history, the firm has made several acquisitions, the most consequential of which is discussed in the following section.
One of Samsung's most important acquisitions was the purchase of Hanguk Jeonja Tongsin in 1980. This acquisition set the stage for Samsung's entry into the telecommunications hardware business. At the time, Hanguk Jeonja Tongsin was a major producer of telecommunications hardware in Korea. Acquiring it was therefore crucial for accelerating Samsung's presence in the fiercely competitive electronics industry. In the 1980s and earlier, the global electronics industry was dominated by giants such as Nokia, Motorola, Sony, and Toshiba. Given such intense rivalry, it would have been far more difficult for Samsung to gain considerable market share by entering the industry from scratch.
Indeed, one of the primary reasons a firm pursues an acquisition is to gain market share in a competitive industry (Hill & Jones, 2012). Rather than pursuing the target market from scratch, the acquiring firm purchases a company already established in that market. The target firm's expertise, technical knowledge, and market knowledge allow the acquirer to enter more easily. Hanguk Jeonja Tongsin was later renamed Samsung Electronics, which is today one of Samsung's major business divisions. Samsung Electronics embarked on a wide-ranging global strategy in the 1980s, establishing operations in Europe, Asia, and North America. It is now the largest manufacturer of electronics in the world, particularly smartphones, memory chips, and semiconductors. Clearly, the acquisition of Hanguk Jeonja Tongsin was a prudent strategic choice.
An acquisition may also be driven by the need to diversify a firm's product portfolio. Firms diversify into different industries to spread risk and overcome product life cycle challenges (Hill & Jones, 2012). Samsung was originally established as a trading company focused mainly on groceries. By the 1950s, the firm had already developed interests in retail, securities, and insurance. In the 1960s, the company ventured into the electronics industry, reinforcing that presence through the 1980 acquisition of Hanguk Jeonja Tongsin. That subsidiary soon became one of Samsung's main businesses, giving the firm a substantially more diversified product portfolio.
"Hibbett's growth model and Olympia Sports proposal"
"Strategy frameworks applied to both firms"
Overall, Samsung's strategy is characterized by acquisitions, cost leadership, differentiation, and standardization. Today, Samsung is one of the most powerful firms in the world, a testament to its effective strategic management. Hibbett Sports, by contrast, operates domestically with no history of mergers or acquisitions. For Hibbett to enhance its competitive position in the sporting goods retail market, the firm should leverage cost leadership as a business-level strategy and pursue strategic acquisitions — beginning with a candidate such as Olympia Sports — as a corporate-level growth strategy.
You’re 46% through this paper. Sign up to read the remaining 2 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.