Respond to Six Students.
Respond to Six Students.
1.Here is what another student wrote about acquistions. “A company that I have recently worked for went through an acquisition. This company is Huntington Bank. They went through an acquisition with TCF Bank, and it is interesting because TCF Bank recently went through an acquisition with Chemical Bank right before they were acquired by Huntington. Acquisition strategy in the United States has been very popular for firms for a number of years. This was a strategic move for both Huntington Bank and TCF Bank because the market power of Huntington Bank was incresased as well as TCF Bank was not going to be as successful on their own. The banking industry is very competitive and this acquisition benefitted both firms. Volatility brings undesirable changes to primary markets and this leads banks to acquire other banks because it allows the firm to shift its core business in a larger way. The economic value increased, and the acquisition was overall successful. This was an effective acquisition because both the acquiring and targeting firm had complementary resources which were the basis of core competencies, the acquisition was friendly which helped with the integration of both the firms, and they acquired willing to adapt to change (Hoskisson, 2013).”
Does these bank change seem to happen very quickly?
2. IBM’s strategic downsizing is so interesting because it feels as though something like this has to be approached quite delicately. By selling all those non-core firms, as well as laying off all the staff that it did, that is a huge change that will drastically affect the organization. While I am sure IBM had a structured plan going into this change, it can be difficult to know all the consequences that will subsequently follow. If this were not handled properly, this decision could have easily been one that either did not help IBM or even made the firm worse off. However, clearly they were prepared for the changes that came and managed themselves greatly throughout the execution of the plan.
3. I enjoyed reading your post for this week’s discussion. I recall IBM going through downsizing in the 1990’s, after a decade of being a ‘household’ name for personal computers. Hoskisson defines Restructuring as, ” … a strategy through which a firm changes its set of businesses or its financial structure”, and Downsizing as, ” … a reduction in the number of firm’s employees, and, sometimes, in the number of its operating units, … ” (Hoskisson et al, 2013, p. 272-273). According to Britannica Money, IBM’s large company size made it too slow to respond to changes in technology and IBM decided to downsize to restructure (Britannica Money, 2024). But looking at the definition of downscoping, would you agree that IBM also used that restructuring strategy to reduce the amount of markets they were into (personal computer, as well as business computers)? From what I am reading about IBM, it almost appears to me as a combination of both strategies – downsizing and downscoping. They shed non-core related businesses to reduce diversification, while reducing staff as well.
Thanks for sharing your thoughts with us this week.
Best,
Susanne
References:
Britannica Money (2024). IBM. www.britannica.com. Retrieved April 26, 2024,
from https://www.britannica.com/money/International-Business-Machines-Corporation
Hoskisson, R., Hitt, M., Ireland, R.D. & Harrison, J. (2013). Competing for Advantage (3rd ed.). South-Western Cengage Learning: Mason, OH.
4. As someone who has watched YouTube for many years and continues to watch it, one company that comes to mind when discussing acquisition is Google when they acquired YouTube back in 2006. The intent behind this purchase was to expand into the video-sharing market, which was becoming quite popular at this time. At the time, it was questionable if purchasing YouTube for $1.65 billion was worth it for a company like Google, but with how Google capitalized on integrating YouTube into its search engine, among other important developments, this acquisition was a huge success. YouTube is a household name at this point and Google has upgraded and added many new features over time, most of which have increased their levels of success.
I would say that Chapter 10’s concepts are applicable to organizations that solely operate domestically. Regardless of the context or location, the things that this chapter details such as economic, institutional and political risks, along with challenges such as fluctuations in the economy, are all important to consider for any kind of organization. Moreover, domestic firms should be just as knowledgable as any other kind of organization in regards to principles surrounding management, like ensuring cultural diversity and forming strategic alliances. With this in mind, it is clear to me that Chapter 10 is of great use to an organization, domestic or otherwise.
References:
Hoskisson, R. E. (2013). Competing For Advantage. South-Western Cengage Learning.
5. As mentioned in the book “A firm may make an acquisition to increase its market power because of a competitive threat.” (1) Before moving to Michigan I worked at Frontier Foundation & Crawl Space Repair. They were in the Basement Systems network, of which the main competitor is Groundworks. They both offer similar services and market towards the same niches. Both Basement Systems and Groundworks are networks that allow people to franchise their products, services, and trainings. Both organizations have “branches” across the country. Over time these branches have wanted to sell their businesses, it has been a competition between Basement Systems and Groundworks to buy up these local businesses. They are trying to increase their market power by performing horizontal acquisitions. I believe this was successful for Groundworks because they were willing to pay what the owners of the local companies wanted. Unfortunately, this is not benefiting Basement Systems because they are unwilling to pay the premiums that Groundworks is.
Regarding international and domestic operations, I believe the strategies will be similar, especially in a country as diverse as the United States. I worked at McDonalds in high school and different parts of the country would offer different specials and products depending on their need and want. Smaller countries may not need to adapt as many international strategies as a larger one would.
6. In 2018, D.R. Horton acquired Westport Homes that is considered a horizontal acquisition. Westport Homes was known as a top-five builder in the Indianapolis, IN and Columbus, OH market. It was a horizontal acquisition because as Hoskisson states, it is an “acquisition of a company competing in the same industry in which the acquiring firm competes.” (2012, pg. 260) Westport Homes was a competitive builder in those areas and D.R. Horton utilized this acquisition as an entry position into the mid-western market which now spans south into the Louisville, KY market. D.R. Horton recognized the opportunity to strengthen their market power as America’s builder by acquiring Westport Homes as it allows them to branch into a new marketable region. It has been successful because the two firm’s were able to create a synergy in how they provided homes for new home buyers through an existing model that was easily transferable to the way D.R. Horton functions. The regional president position of D.R Horton in the Ohio Valley Region was filled with the prior owner of Westport Homes; therefore, it equipped a possible transition of power between the two firms.
The concepts presented in Chapter 10 are relevant to a certain degree to an organization operating only domestically. The strategies may not be fully applicable, but they are still equipping them to consider acquisitions or expansions to further develop their organization with competitive advantage in the future. For example, Hoskisson shares, “A multi domestic strategy is an international strategy in which strategic and operating decisions are decentralized to the strategic business unit in each country to allow that unit to tailor products to the local market.” (2012, pg. 292) It would be beneficial for an organization who is currently functioning through domestic operations to apply how they could assess and analyze other markets to approach a better decision making for how their products effectiveness in other markets.
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