2. Diversification
• It is strategy whereby a company enters different
product or market segments to increase market
penetration the main objective behind this is to
exploit the new avenues available and add to the
group profits.
• It is mixed blessing. While some companies
succeed , others are often forced to re evaluate
their decisions companies fail to achieve the
desired results because they enter areas where
they do not have core competencies and
competitive advantages.
3. • Some of well known groups that have
diversified into unchartered waters Includes
Godrej, Tata, The AnilDhirubhai Ambani group,
The UB group, Larsen and Tourbo and Bharti
group.
4. Strategic Alliance
• Long term agreement for corporations between two or
more independent firms to work together towards
common objective. Firm in a strategic alliance do no
form a new entity to further their aim but collaborate
while remaining apart and distinct.
• A Strategic alliance is a relationship between two or
more parties to pursue a set of agreed upon goals or to
meet critical business needs while remaining
independent organization, partners may provide the
strategic alliance with resources such as products
distribution channel manufacturing capability, project
funding capital equipment knowledge expertise or
intellectual property.
5. Examples are:
• Starbucks
• According to Rebecca Larson, assistant Professor of Business at Liberty University,
Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide in-
house coffee shops, benefiting both retailers. In 1996, Starbucks partnered with
Pepsico to bottle, distribute and sell the popular coffee-based drink, Frappacino. A
Starbucks-United Airlines alliance has resulted in their coffee being offered on
flights with the Starbucks logo on the cups and a partnership with Kraft foods has
resulted in Starbucks coffee being marketed in grocery stores. In 2006, Starbucks
formed an alliance with the NAACP, the sole purpose of which was to advance the
company's and the NAACP's goals of social and economic justice.
• Apple
• According to "An Overview of Strategic Alliances," Apple has partnered with Sony,
Motorola, Phillips, and AT&T; in the past. Apple has also partnered more recently
with Clearwell in order to jointly develop Clearwell's E-Discovery platform for the
Apple iPad. E-Discovery is used by enterprises and legal entities to obtain
documents and information in a "legally defensible" manner, according to a 2010
press release.
6. Difference between Merger and
Acquisition
• A merger occurs when two separate entities combine forces to create a new, joint organization. An
acquisition refers to the takeover of one entity by another. A new company does not emerge from
an acquisition; rather, the smaller company is often consumed and ceases to exist, and its assets
become part of the larger company. Acquisitions – sometimes called takeovers – generally carry a
more negative connotation than mergers. For this reason, many acquiring companies refer to an
acquisition as a merger even when it is clearly not.
• Legally speaking, a merger requires two companies to consolidate into a new entity with a new
ownership and management structure (ostensibly with members of each firm). An acquisition takes
place when one company takes over all of the operational management decisions of another. The
more common interpretive distinction is whether the purchase is friendly (merger) or hostile
(acquisition).
• In practice, friendly mergers of equals do not take place very frequently. It's uncommon that two
companies would benefit from combining forces and two different CEOs agree to give up some
authority to realize those benefits. When this does happen, the stocks of both companies are
surrendered and new stocks are issued under the name of the new business identity.
• Since mergers are so uncommon and takeovers are viewed in a negative light, the two terms have
become increasingly conflated and used in conjunction with one another. Contemporary corporate
restructurings are usually referred to as merger and acquisition (M&A) transactions rather than
simply a merger or acquisition. The practical differences between the two terms are slowly being
eroded by the new definition of M&A deals.
•
7. BASIS FOR COMPARISON MERGER ACQUISITION
Meaning
The merger means the fusion of two
or more than two companies
voluntarily to form a new company.
When one entity purchases the
business of another entity, it is
known as Acquisition.
Formation of a new company Yes No
Nature of Decision
The mutual decision of the
companies going through mergers.
Friendly or hostile decision of
acquiring and acquired companies.
Minimum number of companies
involved
3 2
Purpose
To decrease competition and
increase operational efficiency.
For Instantaneous growth
Size of Business
Generally, the size of merging
companies is more or less same.
The size of the acquiring company
will be more than the size of
acquired company.
Legal Formalities More Less
