MANAO, LOUIE JOHN B.

1. What is the difference between an Acquisition and a Merger, site examples and situations where
an Acquisition happens and where Merger happens.
A merger is the voluntarily fusion or combine of two businesses under essentially equal conditions into a
single new legal entity. The businesses that agree to join are about similar in size, customer base, and
operational scope. The phrase "merger of equals" is sometimes used to describe this situation. Contrary to
mergers, acquisitions typically entail one firm aggressively purchasing another.
In a merger, two businesses must come together to form a new entity with a new ownership and
management structure (ostensibly with members of each firm). What distinguishes a deal more frequently
is whether it involves a friendly (merger) or hostile acquisition (acquisition). Mergers don't cost any cash
to complete but dilute each company's individual power. Merger refers to a strategic process whereby two
or more companies mutually form a new single legal venture. For example, in 2015, ketchup maker H.J.
Heinz Co and Kraft Foods Group Inc merged their business to become Kraft Heinz Company, a leading
global food and beverage firm.
While in Acquisition, av company makes an acquisition when it buys the majority or all of the shares of
another company in order to take over that business. The acquirer can make choices regarding newly
acquired assets without the consent of the target company's other shareholders if they buy more than 50%
of the target company's stock and other assets. Acquisitions, which are quite common in business, may
take place with the target company’s approval or in spite of its disapproval. A no-shop clause is
frequently present during the approval procedure. The acquisition example includes purchasing whole
foods in 2017 by Amazon for $13.7 billion. Company AT&T bought Time Warner Inc. in 2016 for $85.4
billion.
When two or more organizations decide to join forces to form a new entity, this is known as a merger.
Contrarily, an acquisition occurs when a bigger, more financially secure firm buys out a smaller one. The
latter ceases to exist, and the larger business enterprise takes over all of its operations and assets.

A real-life example of merger is Raytheon and United Technologies

In 2020, the Raytheon Corp. and United Technologies Corp formed a new company, Raytheon
Technologies Corp. It is considered as a merger of equals since these enterprises are the gems of the
aerospace and defence industry. Trading of Raytheon Company’s shares stopped a day prior.
Every share of Raytheon’s common stock was converted into 2.3348 shares of United Technologies’
common stock. It was a right offering in which existing shareholders are given a choice to buy additional
shares. After the completion of the integration, United Technologies became Raytheon Technologies
Corporation.
Its common stock shares began to trade on the New York Stock Exchange with the ticker symbol RTX.
The merging firms combined 2019 pro forma net sales of $74 billion and a global workforce of 195000.
An example of an acquisition is Microsoft and LinkedIn
Microsoft acquired LinkedIn for $196 per share to a $26 billion deal and fought with its competitor
Salesforce.com, Inc. The shares of LinkedIn rose 64% after the announcement was made. It was an all-
cash deal and included all of LinkedIn’s net cash. It represents a 50% premium to LinkedIn’s last closing
price, and the total amounted to $9 billion. In addition, Microsoft bought LinkedIn at a lower price by
25% than its all-time high.
Microsoft financed this deal with the issuance of new indebtedness. As a result, the deal is expected to
dilute ~1% to the non-GAAP EPS.
This deal is mainly the 433 million LinkedIn subscribers and professional clouds. The core idea was
primarily to boost data productivity.

2. Briefly discuss the pattern of FDI in terms of Strategic behavior and its Product life cycle. 
It is common for businesses in the same industry to have similar strategic behavior and undertake foreign
direct investment around the same time direct their investment activities towards certain locations at
certain stages in the product life cycle. Foreign Direct Investments flows are a reflection of strategic
rivalry between firms in the global marketplace. The theory of Foreign Direct Investments has
implications for strategic behavior of businesses. The theory can be extended to embrace the concept of
multipoint competition when two or more enterprises encounter each other in different regional markets,
national markets, or industries. Foreign Direct investments pattern in product life cycle is that it also has
stages where Firms invest in other advanced countries when local demand in those countries grows large
enough to support local production, and then shift production to low-cost developing countries when
product standardization and market saturation give rise to price competition and cost pressures.
3. Differentiate Radical view from Free market view and from Pragmatic view in terms of the
political ideology of FDI. Site examples to support your answers
The Radical View Supporters of the radical view, which traces its roots to Marxist political and economic
theory, argue that the Multinational Enterprises is an instrument of imperialist domination and a tool for
exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries. The
Radical View has a bad attitude towards FDI. They believe is that FDI should never be allowed, as
foreign corporations undertaking production facilities in a country can never be viewed as instruments for
economic development in that country.

An example on Radical View on FDI is from 1945 until the 1980s, the radical view was very influential
in the world economy. Until the collapse of communism between 1989 and 1991, the countries of Eastern
Europe were opposed to FDI. Similarly, communist countries elsewhere, such as China, Cambodia, and
Cuba, were all opposed in principle to FDI (although in practice the Chinese started to allow FDI in
mainland China in the 1970s). The radical position was also embraced by many socialist countries,
particularly in Africa where one of the first actions of many newly independent states was to nationalize
foreign-owned enterprises. The radical position was further embraced by countries whose political
ideology was more nationalistic than socialistic. This was true in Iran and India, for example, both of
which adopted tough policies restricting FDI and nationalized many foreign-owned enterprises. Iran is a
particularly interesting case because its Islamic government, while rejecting Marxist theory, has
essentially embraced the radical view that FDI by MNEs is an instrument of imperialism.

By the end of the 1980s, however, the radical position was in retreat almost everywhere. There seem to be
three reasons for this:

(1) the collapse of communism in Eastern Europe;

(2) the generally abysmal economic performance of those countries that embraced the radical position,
and a growing belief by many of these countries that FDI can be an important source of technology and
jobs and can stimulate economic growth; and

(3) the strong economic performance of those developing countries that embraced capitalism rather than
radical ideology (e.g., Singapore, Hong Kong, and Taiwan).

While in the Free-Market View argues that international production should be distributed among
countries according to the theory of comparative advantage. The Free-Market View has a good attitude
towards FDI. They believe is that international trade boosts the economic growth and development of all
countries involved, according to the theories of Ricardo and Smith.
An example of free-market view a well-publicized decision by IBM in the mid-1980s to move assembly
operations for many of its personal computers from the United States to Guadalajara, Mexico. IBM
invested about $90 million in an assembly facility with the capacity to produce 100,000 PCs per year, 75
percent of which were exported back to the United States. 2 According to the free market view, moves
such as this can be seen as increasing the overall efficiency of resource utilization in the world economy.
Mexico, due to its low labor costs, has a comparative advantage in the assembly of PCs. According to the
free market view, by moving the production of PCs from the United States to Mexico, IBM frees US
resources for use in activities in which the United States has a comparative advantage (e.g., the design of
computer software, the manufacture of high-value-added components such as microprocessors, or basic
R&D). Also, consumers benefit because the PCs cost less than they would if they were produced
domestically. In addition, Mexico gains from the technology, skills, and capital that IBM transfers with its
FDI. Contrary to the radical view, the free-market view stresses that such resource transfers benefit the
host country and stimulate its economic growth. Thus, the free-market view argues that FDI is a benefit to
both the source country and the host country.
And for the Pragmatic Nationalist View is that FDI has both benefits, such as inflows of capital,
technology, skills and jobs, and costs, such as repatriation of profits to the home country and a negative
balance of payments effect. According to this view, FDI should be allowed only if the benefits outweigh
the costs Shifting Ideology. In recent years, there has been a strong shift toward the free-market stance
creating a surge in FDI. Pragmatic Nationalism has an ok attitude towards FDI. As long as the benefits
outweigh the costs, FDI should be allowed.
Example of this is Japan. Japan offers one of the more extreme examples of pragmatic nationalism. Until
the 1980s, Japan's policy was probably one of the most restrictive among countries adopting a pragmatic
nationalist stance. This was due to Japan's perception that direct entry of foreign (especially US) firms
with ample managerial resources into the Japanese markets could hamper the development and growth of
their own industry and technology. This belief led Japan to block the majority of applications to invest in
Japan. However, there were always exceptions to this policy. Firms that had important technology were
often permitted to undertake FDI if they insisted that they would neither license their technology to a
Japanese firm nor enter into a joint venture with a Japanese enterprise. IBM and Texas Instruments were
able to set up wholly owned subsidiaries in Japan by adopting this negotiating position. From the
perspective of the Japanese government, the benefits of FDI in such cases--the stimulus that these firms
might impart to the Japanese economy--outweighed the perceived costs.
References:

Wallstreetmojo Editorial Team. (2022, June 21). Merger. WallStreetMojo. Retrieved 2022, from

https://www.wallstreetmojo.com/merger/

Thakur, M. (2022, May 12). Acquisitions Examples. WallStreetMojo. Retrieved 2022, from

https://www.wallstreetmojo.com/acquisitions-examples/

Voyevodins’ Library _ “International Business: Competing in the Global Marketplace” /

Charles W.L. Hill . . . Chapter 7 . . . factors of production, Financial Accounting

Standards Board (FASB), financial structure, first-mover advantages, first-mover

disadvantages, Fisher Effect, fixed exchange rates, fixed-rate bond, flexible machine

cells, flexible manufacturing technologies, floating exchange rates, flow of foreign direct

investment, folkways, foreign bonds, Foreign Corrupt Practices Act, foreign debt crisis,

foreign direct investment (FDI), foreign exchange exposure, foreign exchange market,

foreign exchange risk, foreign portfolio investment (FPI), forward exchange, forward

exchange rate, franchising, free trade, free trade area, freely convertible currency,

fronting loans, fundamental analysis, gains from trade, General Agreement on Tariffs

and Trade (GATT), geocentric staffing, global learning, global matrix structure, global

strategy, global web, globalization, globalization of markets, globalization of production,

gold par value, gold standard. (2013). Voyevodin’s Library. Retrieved 2022, from

http://enbv.narod.ru/text/Econom/ib/str/083.html