Davis-Growing a company with international acquisition

1) Describe two major ways in which a company can grow. Give examples to

illustrate the two ways of growing.
Answer: A business can progress by two types of growth: organic growth or inorganic growth. Organic Growth: Organic growth in business refers to a company expanding its business through the use of its own resources and assets. Growing organically means a company develops without the use of mergers and acquisitions or other takeovers Organic growth allows company executives to set and achieve corporate goals in whichever manner they choose. Combining two companies often comes with the burden of sharing management responsibilities with executives from both firms; this can have an impact on the entire strategic outlook of the new company. A merger pursued as a way to achieve specific goals can wind up changing those goals completely. Executives stay in complete control of the company, when it is growing organically, and can steer the business in a specific direction to achieve their objectives. Disadvantages: Growing a company organically takes an enormous commitment of resources and time. Equipment must be acquired, personnel hired and trained and sales conduits established. Often, companies utilize mergers and takeovers to acquire a fully developed business unit and avoid reinventing the wheel. Organic growth also puts all of the business risk squarely on the core company, as opposed to a company that acquires anew unit, sharing the risk between the core company and the new addition. Organic growth strategies are built on four main mainstays: revenue, headcount, PR, and quality Revenue: Revenue is the vital spark of any business. Businesses that are growing organically seek to grow revenue volume in the most efficient manner possible. Revenue growth eventually leads to profit growth, which is the end goal of organic growth strategies. Growing revenue

public corporations use organic growth strategies. there needs to be a quality product. Inorganic Growth:. Outback Steakhouse and Tiffany and Company are just a few major brand names that grow every year through organic growth strategies. sales and marketing and production departments to function efficiently. Popular Companies Using Organic Growth Strategies Many well-known. Inorganic growth is seen often as a faster way for a company to grow when compared with organic growth. growth is often accelerated through increased innovation. Bad PR can be more damaging to a company than good PR can be effective. went out of business in 2009. this would be an example of horizontal integration Vertical Integration For example.allows for the effective functioning of the other three pillars. If Sunlight joined another firm hiring sheets to hotel sand hospitals in the UK. Quality is more important than quantity for company headcount. Good PR strategies also allow for revenue growth to keep those properly staffed departments busy. This . Best Buy's main competitor. Quality: To successfully grow any enterprise. they must be properly staffed. Sunlight could join with a company that makes hotel sheets. Headcount: Headcount is precarious for any growing business. Best Buy. employees cannot be hired and advertising budgets become short. Mergers make it possible to share the resources of the two organizations and focus on the best activities of each. and one way for firms to compete is to align themselves with those companies that are developing the innovative technology. Horizontal integration Refers to a situation where two firms at the same stage of production join. In many industries. Merger Two firms join by agreement. Customers will rarely buy a product a second time if the first experience isn't top notch. Organic growth relies on repeat business from satisfied customers. PR: Public relations and advertising allow companies to spread out about their products and services. For customer service. Good PR drives traffic to company websites and gets perspective customers’ attention. Quality control and customer service are critical to gaining a sufficient sales volume to grow a company. as employees are the biggest asset of any corporation. such as technology. Without cash coming into a business. Circuit City. This shows backward vertical integration where Sunlight benefits from controlling the supply of the sheets it uses.

A business could also consider forward vertical integration. A takeover is considered "hostile" if the target company's board rejects the offer. because the shareholders and the board are usually the same people or closely connected with one another. private company. it recommends the offer be accepted by the shareholders. If the shareholders agree to sell the company. it joins with a distribution company to economize on its transport costs. In a private company. or the bidder makes the offer without informing the target company's board beforehand. the purpose being for the private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. For example. This could benefit Sunlight by showing its environmental responsibility. Hostile takeovers: A hostile takeover allows a suitor to take over a target company's management unwilling to agree to a merger or takeover. Backflip takeovers: A backflip takeover is any sort of takeover in which the acquiring company turns itself into a subsidiary of the purchased company. then the board is usually of the same mind or sufficiently under the orders of the equity shareholders to cooperate with the bidder. it usually first informs the company's board of directors. This type of a takeover rarely occurs. which always involve the acquisition of a public company. The advantage of vertical integration is that it gives the business greater control over the supply chain of its product or service.ensures quality control and on-time delivery. This enables the company with the larger number of shares to have control over the other business and select which activities to keep. There are different types of Takeovers as below: Friendly takeovers: Before a bidder makes an offer for another company. If the board feels that accepting the offer serves shareholders better than rejecting it. but the bidder continues to pursue it. The Sunlight business was partially vertically integrated by including the cleaning and delivery processes in its service. This point is not relevant to the UK concept of takeovers. This is usually done at the instigation of the larger. Takeover One company buys at least 51% of the shares of another company. private acquisitions are usually friendly. Pros and Cons of takeover Pros: . Reverse takeovers A reverse takeover is a type of takeover where a private company acquires a public company.

 The financial cost to the company. Answer: Acquisition is one sort of Inorganic growth. Berendsen's acquisition is like Horizontal integration as Sunlight and Berendsen are specialist companies at the same stage of production. Sweden. It was possible to puddle the knowledge and expertise of the two companies so that both promoted. Taking over Berendsen. but can lead to disastrous failure if circumstances do not go favorably. gave Davis Service Group the control to put the best systems in place at Berendsen. 2) Businesses grow when they have the resources to expand and opportunities exist for growth. it was the market leader in providing exile services in its geographical area like Denmark. Berendsen was an ideal acquisition because. High leverage will lead to high profits if circumstances go well.  Lack of motivation for employees in the company being bought up. Explain how the acquisition of Berendsen provided such a good opportunity for the Davis Service Group. This put Berendsen in a stronger position to improve its sales and profits. Austria. the Netherlands. Increase in economies of scale  Increase market share  Profitability of Target Company  Increase in sales/revenues  Decrease competition (from the perspective of the acquiring company) Cons:  Unseen liabilities of target entity. suppliers and other stakeholders. like Sunlight. employees. 3) What aspects of European Union markets have particularly encouraged:  Horizontal growth of the Davis Service Group?  Organic as opposed to inorganic growth? .  Reduced competition and choice for consumers. rather than merging with it. This can create extensive negative externalities for governments. Norway. Poland and Germany.

the policy would remain one of recruiting the appropriate native speakers. Currency: the countries in which Berensden operates already used the Euro or had currencies linked to the Euro. are experiencing growth in key sectors such as manufacturing so more uniforms is needed. Organic growth is when a company increases the revenues of the existing business. Language: Berendsen’s business operates across several European countries and uses English as a common language. Most businesses in these countries had previously been government-owned. Large global companies are opening up new sites and they require textile services from Sunlight and Berendsen. Much of the growth of Sunlight and Berendsen involves organic growth. for example. the need for protective uniforms for industrial workers provides plenty of new contract work for textile services. British firms locating factories and offices in the EU are able to benefit from a skilled labor force. where would you recommend and why? What factors might encourage or discourage this choice? Answer: If the company were to enlarge into new markets. Countries like Poland. Within Europe. New EU legislation also provides an opportunity for Davis Service Group. Some sort of barriers to experience international growth was easy to overcome in this acquisition: Cultural differences: purchasing patterns and the culture in the areas where Berendsen operates are similar to the UK. the Channel Tunnel. Trade and living standards in the EU are growing fast. For example. 4) If the company were to expand into new areas of the globe. With this staffing policy the company has to search widely in the UK to get replacements. The Internet and email enable companies to communicate instantly. This makes it easy to trade within this market place. means people can travel to and across Europe more easily. They had poor equipment and/or had no need to rent out textiles. which joined the EU in 2003. The development of fast transport links. most member countries use a common currency – the Euro.Answer: Berendsen's acquisition is like Horizontal integration as Sunlight and Berendsen are specialist companies at the same stage of production. . high-speed trains and cheaper air links.

Davis can establish itself as there are very few players in this industry in South East Asia.Encouraging Factor:  South East Asia is most emerging markets of the world. Threat of local players consumer perception Established US local company .  Davis Group can get the advantage of European Union and can tap the Eastern Europe markets  Davis group can go to developing region like Eastern Europe and South East Asia Discourage Factors:     Entry barriers because of government policies.

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