Markets Global Position

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ABSTRACT

Globalisation has changed the appearance of the economy. Especially in the 1990’s firms expanded into new markets to operate more global and to develop their business. To do so, many companies choosed to expand via corporations with other companies to make the market entry easier or simply to strenghten their market position.

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Mergers and acquisition became one of the most used tools for development, whereas a merger between well known and successful companies always caused a sensation. Mergers caused such a stir as the companies involved in a merger faced a complete new identitiy and innovations were about to alter the company.

The research project proves the decision for a merger rather than an alliance and the synergies gathered due to this tool of development. Two companies, Daimler-Benz and Chrysler, are investigated to illustrate the academic frameworks in practice to come to a conclusion why they merged. Methodology includes analysis of secondary data which has been published on the subject area.

The findings and analysis of the research conducted, concluded that synergy is the most important aspect when companies grow through mergers. Furthermore, the results show that internationalisation due to globalisation is the key driver of mergers.

The paper concludes with an evaluation of the study and recommendations for further research.

CHAPTER ONE

1.1. Reason for Choice of Topic

Companies come and go, chief executives rise and fall, industry sectors wax and wane, but an outstanding feature of the past decade has been the rise of mergers and acquisitions (M&A). Whether in times of boom or bust, M&As continue to be the preferred option for businesses seeking to grow rapidly.

A company has several options to choose from when it comes to growth strategies. One option is to grow organically by increasing sales personnel, new product developments and by expanding into new geographical areas. Alternative options to achieve the desired growth, companies traditionally build, buy, merge with other companies or co-operate through alliances. However, the best example of how to grow inorganic is to merge or aquire (Sherman, 2005).

M&As are mainly about growth according to Lees (2003) and Sudarsanam (2003). Internal or organic growth is in most cases a slow process and M&As is another option that will increase the growth process. By doing an M&A deal, the acquiring company or the merged companies can get instant access to new markets, technology and operations can be completed more efficiently. Several reasons and motives exist why a company chooses to grow through M&A. According to Gaughan (2002) the most common motive for M&A is to create synergy. However, other motives play also an important role, like diversification, improved management, market power or tax motives.

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