Jan 15 2011
Significance of a Merger
The use of financial advice is imperative – and when crucial decisions are required by management concerning areas which ensure their continued success, advice needs to be calculated and delivered with complete precision, otherwise irresponsible actions can leave the company not only going backwards, but perhaps, go out of business.
A number of advantages can be witnessed within an acquisition/merger strategy which if applied properly will convey a positive outcome. Central to its purpose is to incorporate and integrate existing capabilities with those recently acquired by expanding operation and knowledge bases. Specifically, 3 key areas such as production, managerial and technical elements are applied so that economies of scale can be realised, resulting in cost savings and faster development times.
Joining with another company as shown can be advantageous both tangibly and intangibly. In other words, the knowledge base will be developed and added to already acquired knowledge to such an extent which provokes new thought and generate ideas for better decisions.
A current example is GM. They devised a strategy through the advice of certain advisors which included a clever way to get around their current market sector problem – high competition. Fiat, Subaru and Suzuki were among only a few companies who GM acquired. As a result of the competitive nature of the market, levels of demand were too low to support production. Despite the aggressive approach, the advice issued was well calculated and perhaps crucial for their continued success.
Nevertheless, problems can arise, resulting in no guarantee for success. GM’s chairman and chief executive, Rick Wagoner, recognises this by saying it only needs a few successful results to prove the value of their strategy. In total, 30 joint projects were undertaken by GM and Subaru, but 20 didn’t work out. Therefore, it is important to understand, a lot of negative things can occur; and be careful when devising your plan, otherwise the resulting time will be pointless.
The car industry is expected to become stronger as they continue to extract savings from their strategic alliances with the likes of Fiat, Mitsubishi, Subaru, Isuzu and Suzuki. The car industry is however only one example of how the idea of mergers have transformed the industry; and if applied in similar, highly competitive markets, the results can be similar.
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