Free Merger, Acquisition and International Strategies Essay Sample
To make businesses profitable by acquiring many customers, many companies today have embarking on a globalization journey. Other due to money limitations have opted, to operate only within the United States of America. Whether company performs well internationally or locally, however, is based on the proper implementation of the corporate level and the business level strategies. Companies wishing to go international must have a good internationalization strategy including having a proper market entry strategy, pricing strategy, marketing strategy and the business location strategy. A proper implementation of these factors will enable the company to have economies of scale and thus have an advantage over the competitors. The paper compares the business level and the corporate level strategies of one international company that has a merger and one local US Company without a merger and proposes whether the merger was effective or will be effective.
International Company: Nike
One of the US multinational company with a merger is Nike. Having been established by Phil Knight and Bill Bowerman in the year 1964, the company has grown to become one of the leading sports Apparel Company in the world. The company is currently headed by Mark Parker. Since inception, the company has engaged in the manufacture, designing, sale and distribution of the sports accessories and services, equipment, apparel and foot wear. One of the closest competitors to the company is Reebok Cooperation, which also specializes in sport's shoes and clothes. In the year 2003, Nike made a very great move by acquiring Converse which is another great shoes and apparels company. The company was acquired by Nike at the cost of $ 305 million after being in operation for 95 years. During the year of merging with Nike, Converse has annual sales of about $200 million.
Why Nike made the Right Option in Merging with Converse
As part of its international corporate level strategy, the company engages in the differentiation and segmentation of products. First of all, to have a competitive niche, the company engages in three line sports goods and accessories manufacturer. They thus produce sports apparels and shoes for the children, men, and women. Out of the three products, the company monitors the quality of the products produced based on the physical needs, the sociological and the physical appeal of the customers. As part of its differentiation strategy, therefore, the company engages in a lot of diversification of the products. The diversification, however, comes with a quality appeal that leaves the customers satisfied.
Apart from the sports shoes and apparels that the company is largely known for, Nike also engages in the production of performance equipment and accessories, something that other companies are trying to cope up with. Further, Nike does not just focus on one sport but rather a myriad of sports of sports. For example, Nike makes apparels and shoes for athletics, football, rugby, hockey, golf, handball, volleyball, basketball and tennis. The strategy thus sets Nike apart from the other competitors as any sportsman or woman can find the sporting products under one roof. Nike is also ever advancing and upgrading its, products to suit the needs and the preferences of the sports users. The company also engages in mass customization, which enables it not only to meet the customer expectations but also in producing products on a large scale. The company thus minimizes risk and increases the satisfaction of the customers through the process.
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As part of its international business level strategy, the company uses the differentiation strategy. The company combines technology and innovation to produce very high-quality products to the customers and at an affordable cost. As such the company has made itself unique and distinct from the competitors because of the brand in which they have created. For Nike, manufacturing of the shoes is not based on the notion of how much or who may afford the product but rather the quality of the product is the issue. For this reason, a lot of people are ever willing to purchase the products at whichever cost because the products are of a very high-end quality. It is the unique qualities and the values that dictate the price. Further, to create a quality brand name for themselves, the company sponsors sporting events especially in schools and also offers specialized customer sporting needs.
As opposed to the corporate level strategy where the company focusses on the making of diversified products such as sports apparels, shoes and equipment for women, children, and men, the business level strategy is concerned with the quality production of these products. Through the just do it theme, which features significantly in the companys advertisements, the company aims at becoming the best sporting attires and shoes company in the world through the development of quality items. The company also uses unique and very reputable athletes such as Tiger Woods and Lance Armstrong to maintain the name and the image of the enterprise. These athletes are of a very significant value because they already have a reputation and therefore people will most likely shop at Nike.
Why Nike made the Right Option in Merging with Converse
While the acquisition of Converse in the year 2003 may have cost Nike an enormous amount of money, the returns are overflowing. Nike has continually earned an average of $ 2 billion every year since the purchase. As at the year 2016 for example, while Nike reported a revenue of about $ 32.1 billion, Converse contributed about $ 2 billion dollars which is roughly 10 percent of the total Nikes revenue. Converse is also one of the fast growing units of Nike with a growth rate of about 18 percent. In fact, while it is estimated that the company gained $ 2 percent revenue from Converse, in fact, Converse contributed 12 percent of the total earnings before tax for the Nike Company. One of the fascinating ideas about the acquisition of Converse was for the company to break the monotony of sportswear and venture in another daily casual wear. Based on the above analysis, therefore, it is proper to infer that indeed the acquisition of converse is beneficial to Nike because the earnings are more than the cost of the acquisition of Converse.
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Local Company: Evol Foods
The company currently has about 200 employees. It has been ranked as one of the fastest growing companies in the United States of America. In the year 2013 alone, the sale of the Evol foods company had grown by about $ 17 million. The company at the time valued at $ 48 million. In the year 2014 however, the company improved on performance by making a $ 25 million worth of net sales. Due to the profitability level of the company, I will recommend that the company mergers with Bright harvest sweet Potato company. The merger with the company will ensure that the company has a diversification of its products which is a prerequisite for growth in the profitability of the company. Bright harvest sweet potatoes Company is for example known for its large production of frozen fresh potatoes. The fact that Bright harvest Sweet Potatoes Company engages in the use of natural ingredients in its foodstuffs make it a suitable company for a merger. Besides the company is also profitable. The company has existed since the year 1967 and has the best processing plants for sweet potatoes in the United States of America. It means that the company not only has experts but experience in potato processing. Today the company makes a profit of about $ 27 million which if merged with Evol will lead to greater returns.
The Business Level Strategy That the Company Should Adopt
The best business level strategy that the company can cling on and become successful is differentiation. First, there are a lot of food companies which do not rely on natural products for their meals. Further, most of the food companies today do not breed their cows, goats, and pigs naturally and thus poses a significant risk to the health of the consumers. The company, however, may adopt a differentiation strategy by being unique. This can be achieved by maintaining a policy of using naturally fed cows, goats, and pigs for their products. Further, the company can ensure that the eggs used are gotten out of the traditional chickens and not those which have been grown through antibiotics and other growth boosters. With about more than 3000 distribution centers in America, Evol foods only needs to engage in proper marketing to distinguish itself. For example, the company can use some of the most renowned chefs and environmental activists in the marketing of their products. The use of such an approach will enable the company to earn a reputation of being an environmentally sensitive company and at the same time embrace the reputation of serving Pizzas and burritos from natural ingredients. Further, the company should not concentrate on the prices of the products and the cost of what rearing animals naturally but rather focus on the health status of the food served. When naturally served food becomes the custom of the company, customers will automatically trickle in and thus earn a lot of profits for the company
The corporate level strategy
The best corporate level strategy that may be adopted by the company to be adopted by the company is diversification. Diversification implies that the company should expand to other food products which are fresh. For example, the company can look into starting the sale of fresh potatoes, yams, cassavas and many others. Since Bright Harvest Sweet Potato Company is already reputable on the market, it will be easier for the company to sell out the potatoes and make a name for itself. Apart from just frozen potatoes, the company may also decide to come up with other new products which rely totally on the natural foods. Pulling together of resources between the Bright harvest company and Evol is thus the best option in promoting the diversification strategy
From the above discussion it is proper to infer that for a company to grow, a well-hatched strategy is required. For sporting Apparel Company like Nike which operates internationally, the business level strategy of differentiation and the corporate level strategy of diversification have assisted in the growth of the company. On the other hand, the locally operating Evol foods which produces natural foods like Pizzas and Burritos, merging with a company like bright Harvest sweet potatoes will work.