1.1. Background to the research
According to the Chambers 20th Century dictionary the research could be defined as a â€œSystematic investigation towards increasing the sum of knowledgeâ€?. It was also stated as â€œAn endeavor to discover new or collate old facts by the scientific study of a subject or by a course of critical investigationâ€? in the Concise Oxford Dictionary.
Research can also be defined as the process in which helps you to find something new or it helps in clarifying certain doubts about the research that is been done already. This research looks in to the factors that encourage business organization all over the world to engage in the process of mergers and acquisitions (M&A). It also examines the factors and incentives on the basis of which the M&A have been a continuous popular strategy for the firms for expanding their businesses. Why and what type of firms will engage in this process.
This research also helps the firms to understand the benefits that they can get from the M&A process. There are various other growth and diversification strategies like franchising, licensing, Joint ventures which are popular amongst the business organizations.
This research also discussed the challenges that firms face while engaging in the process of M&A. M&A is not an easy process because it is difficult for the organizations that are previously competing with each other to join and work together as one new entity.
Organizations have different culture; they are using different management practices. It is very difficult for the employees to adjust to the new culture of the organization. In this research it is also going to be found out that what benefits that a firm can get after a successful M&A process.
Mergers and acquisitions is an issue of great academic interest. There are studies about this issue in the field of industrial economic and strategic management as well as on organizational theories. Especially in the current economic situation, where companies are facing liquidity problems and facing tough competitions from their rivals, M&A is an important survival strategy as well for the organizations. With the globalization and the world is being a global village, the need for companies to join together and to cater the needs of the customers have to work together.
The phenomenon of M&A is equally popular amongst the firms with same kind of business as well as for the organization in different business. The firm that is discussed as a case study in this research is a big pharmaceutical company of the world. After the merger the company became the biggest pharmaceutical company of the world. In year 1998 the volume of business through the M&A process was 2.4 trillion. This figure increases every year with more and more companies are entering the process of M&A. In this research the case study GlaxoSmithKline (GSK) was discussed. It is going to be evaluated in this research that how the organization benefitted from the merger and acquisition process and whether it was a successful merger or not.
In this research the definitions of M&A given by different authors and the types of mergers were also discussed. The motive that attracted the organization to involve in the process of mergers and acquisition and the benefits that they got from this process was also discussed.
M&A is a complex process that involves two different companies, having their separate identity, so the problem arises in the integration process after the M&A. In order to measure the performance of GSK the financial statements are analyzed.
1.2. Significance of the Study
This research will help in finding out the factors that encourages companies to engage in the process of mergers and acquisition (M&A). What are the factors that firms have to consider while starting the process of mergers and acquisitions? It is also going to be find out in the research that why companies are using M&A as business expansion strategy for the growth of their business both in the International as well as local markets.
This research will help in better understanding of the issues that are involved in the process of M&A. The firms have to look at the human resource aspect of the mergers and acquisitions instead of just considering the financial and business aspect.
Apart from the factors and parties involved in the process of mergers and acquisitions it is also going to be find out that what are the factors that have to be managed in the process, otherwise they will result in the failures of the whole process of M&A. This study will also help the companies who are planning to engage in the process of M&A about the relationship between the parties involved in this whole process.
Globalization has made it easy for the firms to interact with each other, share their experiences about the markets, made strategic alliances to expand their businesses. This study will help in understanding the fat that how firms are using the mergers and acquisition as international business expansion strategy. It is also going to be find out in this study that why companies adopt the M&A to expand their businesses in the international as well as national market when they have other business expansion strategies available to them like Strategic Alliances and joint ventures.
1.3. Statement of Purpose
The purpose of this study was to find out that what were the factors that encouraged firms to engage in the process of mergers and acquisition? This research was going to evaluate the different business growth and expansion strategies that firm are using in order to expand their businesses. As GSK was taken as case study for discussing the mergers and acquisition as a business growth strategy, it was also going to be discusses that why GSK selected M&A as a growth strategy to expand their business.
This research also looked into the factors that encouraged firms in general and GSK in particular to involved in M&A process. It was also going to evaluated that what were the positive points, that GSK would get after their merger and what were the challenges that GSK faced in the during merger and pre merger phase .
In order to evaluate the performance of the GSK in this research the financial statement of the GSK was evaluated so as to saw the performance of the company in the post merger stage. This research looked at the annual turnover of the GSK after their merger so as to see that how much growth company had after the merger. In this report the earning per share (EPS) of the GSK was discussed and compared over few years in order to get the feel of that how well the company was working and how much benefit, the shareholders of the company had of their M&A.
The purpose of doing this research to help the students, researchers and companies to understand that how they can merger and acquisition effectively in order to expand their businesses. This research is really helpful full for the companies who are interested in doing mergers as they come to know through this research that what are the benefits they can get after the M&A process.
They will also come to know through this research that what will be the challenges that they will have to face if they want to be a part of mergers and acquisition process. This research will provide will help the firms who are interested in the process of mergers and acquisition to understand that how they will face with the problem of cultural differences if they are going for mergers with organizations from others cultures. They will also come to know that how important is the proper integration of cultures and integration of different department of the organization in the successful process of M&A.
1.4. Research Questions
What factors encourages firms to adopt mergers and acquisitions as an international business strategy?
What are the other international business expansion strategies available to firm?
What benefits are likely to be gained by the firm, under the international business expansion strategy in mergers and acquisitions?
What factors encouraged GSK to engage in merger and acquisitions?
What are the benefits of M&A?
What are the challenges faced by the firm while engaging in the process of mergers and acquisitions?
What strategies could be implemented to enhance the international business operations?
1.5. Aims and objectives
This research will help the companies who are planning to engage in the process of mergers and acquisitions. They come to know through this research that what factors they have to take into consideration while going for mergers and acquisitions. What are the benefits and what are the negatives of M&A. Who are the parties that are involved in merger and acquisition? The research has several aims regarding mergers and acquisitions of companies, especially Glaxo and SmithKilne. Merger and Acquisitions are never easy as many companies fail in their initial steps but some of them succeeding as well although number of failure is high. They fail because they could not recognize the actual factors on which they are doing mergers and acquisition. There are several factors upon which merger and acquisition takes place like HR, lack of capital, IT, lack of expertise, need for globalization and it is not necessary that companies do merger and acquisition on all factors but it depends on companies' strategies and requirements as well. But in today's dynamic environment companies do merger and acquisition for increase their efficiency and effectiveness; companies have increasingly used mergers and acquisitions to change the scope and/or competitive environment of their business. Other factors which are useful in successful mergers and acquisitions are communication, corporate culture and change for surviving. In this project the researcher will discuss the factors that have impact on before, during and after merger and acquisition. Researcher will also look into the financial statement of the GSK for the last three years to determine that whether the company grows in its market price per share and price earnings ratio. That is the main indicators that determine the performance of the company.
2. Literature Review
2. 1Business Expansion and Growth Strategies
Businesses can expand or grows by number of ways. Whatever type of choice there may be, the business owners are on the hot seat because they have to make judgments', they should consider the best available choice that are in line with their main objective of expanding or growing business. In order to provide an initial understanding of the basic business growth and expansion strategies, some of them are discussed here.
Directly exporting, Indirectly exporting with the help of middle man, producing product in the target company, Franchising and joint ventures, strategic alliances are some of the methods that companies all over the business world are using to expands all over the world. Apart from methods mentioned above, Mergers and acquisitions are the method that big multinational companies in all business sectors are using to expand their businesses internationally as well as in domestic market.
Firms are using M&A as an expansion growth strategy in order to cut down their cost of unnecessary advertisement and other marketing programmes that they are using in order to capture new markets with the help of M&A. Companies diversifies their businesses so that they can enter new markets.
2.1.1 Business expansion through Geographical expansion
It is the first and foremost aim of every business to grow in term of capturing new markets as well as in the financial terms. It is easy with the help of M&A process, two companies that were previously competing with each other and spending a lot of their financial resources on un necessary marketing their products, can join their hands with M&A process to capture new geographical markets. GSK after their mergers captures big market of Europe, Asia, USA and Japan. In most of the world GSK, after their merger became the biggest pharmaceutical company of the world.
It is important to know that what are the methods, modern small, medium and large businesses are using in order to expand their businesses internationally. Some of the methods that organizations are using to expand internationally and in the local markets are as follows;
2.1.2 Ansoff's Growth Matrix (Product & Market Mix)
In order to understand the growth strategies, one of the common business strategy frame work is called as Ansoff's Growth Matrix. This matrix is developed by H. Igor Ansoff, a strategic management guru. This matrix helped organization in establishing a direction for the growth. In this growth matrix product and market are taken against vertical and horizontal axis. It helped organizations to understand the factor that how they grow their business. They can either enter the existing market with new product or they can enter the new market. (Campbell and Craig 2005)
2.1.3 Market Penetration
In this kind of growth strategy the firm actually wants to sell more of its product in to the existing market. The firms want to grow their business by capturing more market share, for that firm allocates more of its resources to product development. This is less risky because the firm already knows the market. (Campbell and Craig 2005)
2.1.4 Market Development
In this strategy the firm tries to enter the new market with the existing products. This happens when the firm wants to sell their existing product to new geographical markets in order to capture them. In this strategy firm has to invest highly on the marketing and sales department, in order to pursued customers to purchase their product. (Campbell and Craig 2005)
2.1.5 Product Development
This strategy necessitates on the development of new product for the existing markets. In this strategy the organization had to invest highly on the research and development. Firms have to come up with new products that are in accordance with the current trends and needs/tastes of the customer. (Campbell and Craig 2005)
Diversification is the highly risky strategy. In this strategy firms want to sell entire new product in the entire new market for entire new customers.
Diversification is of two types, related diversification and unrelated diversification. Related diversification is the one in which firms stick to the business in which it already are working. Unrelated diversification refers to the strategy where firm enters in to the entirely new business. (Campbell and Craig 2005)
Franchising is a business growth model in which the franchisor not only sells the its trademarks to the franchisee but despite of that he provides the franchisee with the whole business model that includes, accounting system, processes, training and technical and marketing support as well.
This kind of business expansion model is very common in retail, food business, as well as in the service sector. As GSK is a big multinational company that is involved in the pharmaceutical industry so, business expansion models like Franchising are not suitable for them.
Licensing is another form of business expansion strategy that is very similar to the franchising. It works the same way as franchising but in licensing licensor only allow licensee to use their intangible assets and in return gets royalty fees on monthly or annual basis. Intangible assets include patents, formulas, designs, copyrights and other intangible assets. This type of strategy was also not feasible for big company like GSK.
2.1.9 Strategic Alliances
Strategic alliances are a kind of business expansion strategy in which two potential or actual competitors enters into a cooperative agreement. This is usually used by the companies, that are interested in entering the markets with less risks and they want to divide their initial fixed cost for starting a business.
There are few other methods apart from the ones that are discussed above. Some companies used to expand their businesses by exporting, some like to go for joint ventures.
2.1.10. Mergers and Acquisitions
Mergers and acquisition is the method that is used by the firms all over the world in order to expand their businesses. According to a research, the total volume of mergers and acquisition business in year 1998 was 2.4 trillion. Mergers and acquisition is the kind of business expansion strategy that was used by GSK. Glaxo Wellcome and SmithKline Beecham were the companies that are in the same business of pharmaceutical and healthcare products.
GSK selects mergers and acquisition because it is easy for the manufacturing companies in the same trade and having almost same culture. A major factor in the mergers of the two firms was G the suitability of the process for both the organization. After the M&A of the two organizations they became the largest pharmaceutical company of the world.
2.2 Mergers and Acquisitions (M&A)
Merger and Acquisition have been discussed by the Strategists and been at the centre of management research as a quick and efficient way to expand their business and to get into new unknown markets, to create competitive advantage, to have spread risk and dominate existing market as well.
Definitions of Mergers and Acquisition
Merger and acquisition is usually defined as a coming together of two companies however although people thought merger and acquisition to have same meaning but technically its different. An acquisition can be defined as the process of taking over of another, firm in which firms develops its own current situation by acquiring other firms resources and competencies (Johnson and Scholes 1999). Acquisition could also be defined by Bowman and Asch (1996) as a process in which a firm acquired the shares and assets of other companies, liabilities and as well as its trading activities.
Business all our the world are learning the fact that they have to find strategic partner, if they expect to be successful in today's globalized business world even big huge multinational companies are looking for companies in national as well as international markets with whom they can make strategic alliances.
In order to operate in another country a firm has to get license for its product; get raw material or other stuff from local suppliers to meet the requirement of â€œlocal or domestic contentâ€? and so on. In order to overcome and avoid those difficulties firm develop global strategic alliances and strategic networks (Coffey, Cook and Hunsaker, 1994).
Companies, Firms are always looking for partners with whom they can balance their strengths and counterbalance their weaknesses. This thing helps companies to achieve greater sales and economies of scale (Coffey, Cook and Hunsaker, 1994). Concept of merger and acquisition is not, new in Europe. This concept is reforming the financial landscape of the global business world from the last three decades and the most number of businesses grouped together in USA. It was shown from the data available that in 1998 more than $1 Trillion were spent on the activities of M&A. Banking industry occupied the major part in the activity (Hitt etal, 1998).
Acquisition is usually seen as a part of the growth of particular firm but some also believes that it was also often used by firms to save their dyeing and diminishing industries. Business growth could either be external or internal. Internal growth was in the form of investment in new or second hand plant or machinery or acquiring an existing going concern organization i.e. the example of external growth.
A firm would choose amongst the internal and external growth according to its own requirements by thoroughly studying it as which one was more profitable.
An acquisition is a bilateral agreement where the owner accepted the cash and securities or the mixture of both of these in returns of the shares in existing company. (Chiplin and Wright, 1988).
(Chiplin and Wright, 1988) stated that, merger could also be defined as a process in which two companies decided to come together to shape a new legal body.
Sian Herbert Jones (1982) defines merger â€œas a marriage between two companies of roughly of the same sizeâ€?. The bigger company in the process usually controlled the assets of the new entity. The shareholders of the companies will have to exchange their shares with the newly created companies.
A merger can also be defined as a process in which one firm amalgamate with another firm and disappeared in the new company. All mergers were accepted by the governments as they were in accordance with the laws of the states where they actually happened as well as they were also on the official scale. (Reed S. etal 2007).
The number of mergers in 1980's has far exceeds the number of mergers in 1960's. Usually in 1960'sthe mergers took place between companies of same sizes and in most of cases doing the same business. But in 1980's and 1990's the trends have with eased the M&A of companies of different size of business and of dissimilar type of business (Tetenbaum 1999).
The tendency of the organization to present in the mergers of vertical nature and the diversification type does not seem to be stop in future. Yet firm that starts merger usually attained small economic profits but value created by M&A and that benefitted mostly to the small firm that was reached (Barney 1997).
Lubatkin (1983) defined the main reason of acquiring and merger a novel firm to get better overall performance by attaining the synergy effect which is also normally described as â€œ2+2=5â€?effect (Cartwright and Cooper, 1993, Hover 1971) between two organizations and that at the end helps them in gaining competitive advantage (Porter, 1985, Weber 1996). (British Institute of Management, 1986, Hunk 1988, Marks 1988, Weber 1996) stated that the successful rate for the firms in the process of M&A were around 20 to 60 percent.
2.2.1Different Types of Mergers and Acquisitions
Mergers and acquisitions can take various forms. It depends upon the firm, a firm may choose to invest its recourses away from its current firm but within same type of business or it can decide to move to a complete new industry and invest in the area that is entirely new to it.
There are following types of mergers and acquisition (M&A). Different authors defined them as
2.2.2 Horizontal Mergers:
Horizontal merger can be defined as merger between companies that produce identical or closely related products. It can also be defined as a combination of two or more competitor working within the same geographic locality. The merger of Carlton and Granada television on UK as both are television companies to form ITV plc was a horizontal merger same as the example of Daimler and Chrysler link up. Other examples of horizontal merger in Europe in airline industry is the Lufthansa-Swiss International Linkup, Air France-KLM merger and the takeover of Buzz by Ryan air are the examples of horizontal merger in recent past.(Smart and Megginson 2008)
2.2.3 Vertical Mergers:
Merger in which companies with current or potential buyer relationship combines to create a more integration company, that type of merger can is called as vertical merger (Scott, Megginson, 2008).
Vertical merger can be of Forward Integration or Backward Integration. Vertical merger can also be used as a marketing tool like Ford has acquired a financial subsidiary that has make it easy for their customer to obtain finance to purchase their products (Ford Motor Credit).
2.2.4 Conglomerate Mergers:
Conglomerate Mergers can be defined are of two types. One is called as product extension merger in which firms with similar but exact line of business joins. On the other hand a pure conglomerate merger occurs between companies involved in completely different line of businesses. Pure conglomerate merger is also called as classic conglomerate mergers. Pure conglomerate mergers were very popular in 1960's but it started to decline from 1980's onwards.
In year 1984 the merger of car maker General Motors and that of computer consulting firm (EDS) Electronic Data System is a prime example of pure conglomerate mergers.
2.2.5 Concentric Mergers:
In the concentric mergers the companies might not moved to the different kind of business as they does in conglomerate merger. In this firm expands its activities at the same time measuring of unity of existing activities. This can be done by acquiring technologies that can help the firm in marketing customer type (concentric marketing) or it can also be done by acquiring customers for existing technologies (concentric technology) Jones 1982.
The merger of Glaxo Wellcome and SmithKlineBeecham was a concentric merger as both companies were in the business of pharmaceutical and health care products and their merger at that time created the biggest pharmaceutical company in the world.
2.2.6 Strategic Merger:
All merger are in some aspects are strategic mergers because they starts with having a particular strategy in mind. It can be define by authors and strategist to create an efficient merged company than that of its remerged companies.
As it was explained in the definition of strategic merger that all mergers are strategic mergers, similarly the merger GSK was a pure strategic merger because they management of GSK was aware of the fact that they was going to be the biggest pharmaceutical company in the world after that M&A process and they were able to reduce their cost of producing new medicines and formulas by economies of scale after merger. They were also expecting to capture the world market by geographically expanding their business.
2.2.7 Different motives of Mergers and acquisitions
2.2.8 Non value maximizing Motives and different theories of Mergers
The basic motive of merger should be of maximizing shareholders wealth but unfortunately not all mergers are motivated towards the maximization of shareholders wealth. Different authors have given different theories related to non value maximizing motives.
2.2.9 Managerialism theory of Mergers:
According to this theory poorly monitored managers will pursue mergers that will not create value maximization for the shareholder but they are of the view that this will increase the asset value of the company. They think that remuneration is linked with the size of the company, so in order to pursue their motive they initiate and do mergers.
2.2.10 Free Cash flow theory of Mergers:
Michael Jensen (1986) hypothesizes that the mergers will use free cash flow to the process of merger that will have a negative NPV in order to expand the assets of the firm. So that they will derive greater remuneration from the firm because they are of the view that larger the firm larger will be their remuneration and they can also get personal benefits from the organization.-
2.2.11 Managerial entrenchment theory of Mergers:
Shleifer and Vishny (1989) purposed that the unmonitored managers try to pursue the projects that have negative NPV so as to increase the size of the firm in order to make them indispensible to the organization because they have the team that has expertise in managing the large organizations.
2.2.12 Hubris hypothesis of corporate takeover:
Richard Roll (1986) contends that some managers overestimates their qualities and pursue takeovers because they are of the belief that they have capabilities that can manage their takeover targets better than the people who are already managing that.
2.3 Value Maximization and Realistic Benefits of Mergers:
Numbers of theories are discussed regarding the benefits of M&A. Some of theories and the important benefits that firms think that they are getting from M&A are as follows.
Donald (2008) describes synergy as a simple phenomena that suggested that joining together of two companies can helped the organization in creating more share holders value than they have created while working separately. Synergy can be of two types.
2.3.2 Operating Synergy: (Economies of Scale and Scope)
Economies of scale and economies of scope were both considered as the part of operating synergy that any organization had after mergers. Studies revealed that both these studies are important determinants in the creation of shareholders wealth (Houston, James and Ryangaert 2001).
2.3.3 Economies of Scale:
It can be defined as the spreading of the fixed expenses that any firm had over the manufacturing level. The expenses that were considered as scale in this case were the fixed cost in the form of rent, maintenance cost of machinery, depreciation of building, lease payments, interest expenses, and property taxes. that you have to pay, no matter how much production you have. So here the cost is decreased with every unit produced e.g. if fixed cost for producing one unit id Â£2 and the firm is producing 1000 units per month. The cost decreased to Â£1, half as it was in previous month, if the firm starts producing 2000 units per month in a month and so on (Donald 2008).
2.3.4 Economies of Scope:
This synergy is refers as by using specialized set of skills or assets that are already there for production related services and products. Like Honda already has infrastructure to produce engines, so they are using those infrastructure to produce items like lawn mowers, snow blowers apart from making engines for cars (Donald 2008).
2.3.5 Financial Synergy (Lowering cost of Capital):
The financial synergies helps the organizations in the way that they can either creates higher cash flows or it can low the cost of the capital.
Synergy is a stated motive in almost all the mergers and acquisition. Bide (1993) examined the motives of 77 mergers and acquisition in 1985 and 1986 and he stated that in one third of the takeovers synergy is the primary motive.
Diversification can be refers to the act of a company to buy a firm that was currently out of its previous main business. There were normally two reasons that encouraged firm to go for diversification. The first the acquiring company wants to take advantage of financial synergy that can help them in reducing their costs second being that with the help of diversification firms wants to enter the new product line or new product so as to spread its operation.
If a firm is having slower growth rate it can increase its market share as well as increase and expands its market.
Investor often perceived companies in unrelated business areas as riskier because it is difficult for top management and they are sometime reluctant and did not have enough financial resources to finance the golden opportunities available to them. (Morck, Shleifer and Vishny 1990).
2.3.7 Strategic Realignment:
The strategic realignment theory that firms engaged in the process of mergers and acquisitions because they think that this is the easiest way of getting used to of the external environments. Changes came from various sources but the change that is related to the regulatory environment and technological innovation is considered as the most.
2.3.8 Regulatory Changes:
In recent years companies, where deregulation occurred are seen to have more M&A activities. This includes financial industry, healthcare, defense utilities, media telecommunication. There is proof which shows that the takeover activity is more in deregulated industries than that of regulated industry (Jensen 1993, Mitchell and Mulherin 1996, Mulherin and Brooke 2000). Deregulation helps in breaking down of the artificial barriers that exists in these companies. This can be evident by the facts that in now day's banks are moving well beyond of their historic role of saving the money of the customers and lending them money when they needed. They are now also involved in the other functions like insurance business, investment and mutual funds. (Donald 2008).
2.3.9 Technological Changes:
Every company is now looking for new technology that can help the organization in achieving its goals and objectives. Technological advancement helped the firms to come up with new ideas for the product, services and entirely new industries. Airplane invention helped the people to thought of the process of creating passenger planes and that also helped to establish the entire new satellite industry. The vacuum tube, transistors and micro chips provided basis of television, radio and computers. Technology is changing every day. Every day new products, process and machines are coming in the market. It is very difficult for the large organization to cope with the changes and to move with the pace of the technology. Large firms see M&A as a window for grabbing new technology.
Instead of setting their own research and development department and then investing highly on the development of new product they often prefer to go for mergers and acquisition. They acquire small firms that are technologically advanced so that they can readily use their expertise in the future.
E-bay acquired Skype technologies in 2006 for $2.6 billion cash. The Skype voice technologies help 157 million customers of E-bay to use this service that help mainly with transaction involving real estate's; big ticket items (Donald 2008).
Q-Ratio could be defined as the cost that any firm incurred to the acquiring the current face value of getting that firm. The firms who were interested in expanding their business had a choice of either investing in new plant and machinery, that will take time as well, or to go for a firm that has already got the infrastructure.
Firms who wanted to expand their business could be possibly had two ways of doing so either they could be investing in new plant and equipment or obtaining the same assets by acquiring a company whose face value (market value) is less than that of setting up a new one (i.e. Q-Ratio 1). This theory helps in explaining M&A during 70'swhen due to inflation interest rate depressed stock prices were below the book value of the shares.
Recently gas refiner Valero energy Corp acquired Premcor Rnc for $8 billion that created the largest refinery in North America. The cost of building new refinery is almost 40 % higher than that of acquiring one (Zellner 2005, Donald 2009).
2.3.11 Mismanagement (Agency Problem)
When there is a conflict arises between the mergers that are currently managing the firm and the share holders of the firm. This is known as agency problem. Because of agency problem some actions have has to be taken because management cannot ignore that problem for long time. If the share prices are falling every day, so there is a great pressure on the managers to correct this situation.
The managers were more interested in their jobs remuneration and jobs security than the maximization of shareholders wealth. So the managers are under pressure to make the firms attractive for the acquirer, because they manager thought that the stock of the firms were considered as undervalued by the investors (Fama and Jensen 1983, Mehran and Peristiani 2006) found that agency problems are an import and factors that contributes towards the start of process of mergers and acquisition. Basically the main problem arises between the mergers and the owners of the firms on the issue of how to use the excess cash flow.
2.3.12 Tax Consideration
Tax consideration is very important when companies are engage in the process of M&A. The companies can used it as a loss carry forward and then also take it as investment on tax credits to offsets the taxable income of the company. Both of firms that are engaged in the process of M&A can benefit in the form of new company when acquisitions are in accordance with the purchased methods of accountings. According to this method the assets to acquire are revealed before their purchase in order to find out the new value of assets. Due to this thing the value of the asset reduces due to depreciation that also increases the future income and at the end firm has to pay less taxes.
The tax free status of this transaction could attract the eyes of investor and they considered it as a lucrative feature that also was offered by the firm that was selling in the process of M&A. The seller firm is always wants higher price for the firm, if the transaction is not tax free in order to cover the liabilities of the tax. (Ayers, Lefanowicz & Robinson 2003).
2.3.13 Market Power
Firms merge to create monopoly in order to control products prices at levels that were not possible for them to be sustained in the competitive markets. The reductions in the number of competitors will also lower the cost of monitoring the system as well as less investment on making competitive advantage (Kitchings 1974).
The market power theory is also related to the economics of scale concept. That when you go for bigger markets definitely you have to increases your production. At the end that decreases the unit cost of the product (Cooke 1986).
2.4 Mergers and Acquisitions success factors
Following are the factors that firms must consider while engaging in successful mergers and acquisitions. Same are the factors GSK adopts while engaging in M&A.
2.4.1 Selection Procedures
Firms that are acquiring other firms are in better position if they collect all the necessary information about the firm to be acquired ( Cartwright & Cooper 1996). Firms must adopt proper structural approach in order to identify the correct bidding strategy and approach for integration. (Hill & Jones 1999). Nobel etal (1997) suggested that acquiring firm must adopt proactive approach instead of defensive approach in order to start an M&A process. If the acquiring firm study the other firm thoroughly in details than it is more likely not to face unwanted risks and be able to get synergies and other benefits that they want to achieve through this process of M&A.
Mark & Mirvis (1998) started that there are more gains than pains in the successful mergers. GSK also thoroughly studied the Smith Kline Beecham before engaging in the process of M&A and that is why according to Marks & Mirvis 1998 they have more gains than pains in their whole transformation process.
2.4.2 Proper Handling of Integration Process
Success of mergers process also depends upon the facts that how well organizations handled the integration process.
Armstrong (1999) has given a three step change model that can also be applied to the integration process. In the change model of Armstrong the firms initially have to unfreeze from its original culture, norms and values. In the second phase of the model the organization have to adopt the joint value of the new organization and then at the last stage the refreezing occurs, where the process of the new systems are implemented procedure are adopted.(Armstrong 1999).
It is important for the firms to show little bit of flexibility in the integration process. So that adjustments can be made.
2.4.3 Opportunities for synergy
In order to get benefits from synergy in mergers and acquisition process firms should clearly identify the synergic opportunities available. Synergy helps organization in achieving pre mergers benefits in the form of sales as well as volume (Hill & Jones 1998).
(Weston etal 1998) explained the same phenomenon by saying that the best elements of both the firms should be combined and the elements that are no of benefit to the organization should be expelled from the organization.
Organizations can benefit from synergy in the manner, if they able to clearly identify the opportunities available. The product and services that are beneficial for the organization should be identified. Departments should be recognized and integrated in the way that it helps organization in cost saving. It should be integrated in the way that different departments will benefit from each other. (Clemente & Greenspan 1998).
2.4.4 Integration of Culture
Culture is the major contributing factor in the success and failures of M&A. Cultural differences are amongst the biggest obstacle in M&A process. The cultural difference could be considered as a large hurdle in the formation of the homogeneous well organized business firm and this factor was more complicated when the firms from different cultural backgrounds join together. (Cartwright & Cooper 1996).
(Clemente & Greenspan 1998) They stated that in order of two cultures to integrate successfully, both organizations should change their cultures. The acquiring company should respect the culture of the company being acquired. The culture of the organization had evolved over the years. It evolved over the year with mix of all the employees' culture that is working in the organization. The acquiring company should respect the culture of acquired company. Both firms should create a corporate culture with the consent of all stake holders. (Marks & Mirvin 1998).
(Cartwright & Cooper 1996) stated that both the firms should understand each other's culture that will help them in reducing the superiority complex. Certain type of cultural differences is helpful, because that helps in creating culture of the new organization. (Marks & Mirvin 1998).
2.4.5 Key Personnel
McKiernan & Merali 1997 and Nobel etal 1997 argued that the hardworking and sincere employees of the organization that were involved in the M&A process were retained by the new firm in and after the process. Such retention is an important success full factor that helps in successful new organization. Weston etal 1998 suggested that incentives should be given to the key employees in to retain them. Peter Drucker 1998. He also suggested that incentive must be given to the employees in the start of integration process that they can be beneficial for the new organization.
Key personnel should be aware of the changes in the organization during the M&A process. Mangers should be given proper training so that they can answer all the questions that arise in the mind of the employees. Training is considered as an important thing in the post merger phase, so that the key personnel feel comfortable in the new organization... (Clemente & Greenspan 1998).
2.5 Challenges in Mergers and Acquisition Process
Mergers and acquisitions are not always very easy for the organizations involved in it. When organizations finally decide to involved in the process of M&A, it has to face different challenges. It is important for the organization to realize the challenges that they have to face:
Following are the factors that are to be considered as challenges in M&A process.
In M&A process integration is the factor that is difficult to achieve because both organizations whether it was the acquirer or the one being acquired had their different management structure and beliefs. It is very difficult for the two companies that are previously competing with each other now integrate as one and work together. This is the challenge that GSK or any other merging firm has to face. (Hunt etal 1987).
Integration means that both companies have to join together in order to adopt common financial and other strategic policies, so that they can efficiently work together.
Same like â€œThe Economist 1999 stated that the acquired company will always have higher staff turnover ratio because they feel insecure and they think that because of economies of scales concept, they are the ones who are going to be the sufferers.â€?
2.5.2 Overestimation of Potential drawbacks
Both firms should understand the drawbacks of each other's so that they can join together to overcome those. It is not always easy for the companies to be success full while entering the process of M&A. Both companies should understand the strategic advantages of each other. (Thompson 1993).
2.5.3 The cost of acquiring
It is amongst the biggest challenge for the acquiring company to correctly estimate the value of the company being acquired. If the company is public limited company so with the news of being acquired by another company increases the value of the stock of the company being acquired, which at the end affect the acquiring company because they have to pay for nothing. (Hill & Jones 1999). According to Bowmann & Asch 1996 the common assumption is that M&A always helps organization in positive way but that is not the case. Companies have to look at that aspect as well.
2.5.4 Cultural Differences
Amongst the challenges faced by the companies while entering the process of mergers and acquisition, cultural difference is always amongst the biggest worrying factor for the management of both the firms.
Rankine (1998) pointed that when the manager's looks at the financial synergy that they are getting from M&A process, they ignore other aspect and they think that after this â€œit's business as usualâ€? for them, but it's actually not.
They should properly study the culture of both organizations before moving ahead. In many companies problem like these arises when people thinks that this is because of difference of culture of both organizations. Hill & Jones 2000. People like Sirower (1997) stated that the cultural difference is not just the only reason in the failures of M&A process. It is one of the important contributing factors so the firm should realize this challenge because it is important in the integration of both the organizations.
There are people like Cartwright & Cooper (1996) who were not agreed with the statement of Sirower (1997). They argued that cultural differences are the most important factor and important challenge for the both the companies. As acquiring company take over the acquired company because they thought that their management was not running the company properly. On the other hand the employees of the acquiring company are quite nostalgic and they prefer to stick to their own old culture that creates problems for the companies in M&A process.
Challenges like cultural differences create problems for the firms to integrate with each other and ultimately this factor also creates difficulties and problems in their consolidation process. It is necessary for the establishment of newly combined organizations, Marks & Mirvin (1999).
2.6 History and Overview of the Glaxo SmithKline
Glaxo SmithKline Plc is a public limited company that was incorporated according to English law on 6th December 1999. Company shares are listed on New York and London Stock exchanges. On 27th December GSK acquired two English companies Glaxo Wellcome and SmithKline Beecham under the arrangement of mergers of two companies. Glaxo Wellcome and SmithKline Beecham were amongst the global leaders of the healthcare and Pharmaceutical Industry.
The merger of GSK plc and its subsidiary companies along with the other small business units are going to became the leaders of the pharmaceutical industry in the world. GSK also worked out to discover new medicines, formulas and new products development to improve the living condition of the human being.
GSK also captured big markets by developing new pharmaceutical and consumer health related product.
2.6.1 Glaxo Wellcome
Burroughs Wellcome & Company was founded by American Pharmacist Henry Wellome and Silas Burroughs in London in year 1880. In 1902 the Wellcome tropical research laboratories was opened and later on in the year 1959 the Wellcome Company purchased another company with the name of McDougall & Robertson Inc that was involved in the veterinary medicines to become more active in veterinary health care industry. In 1970 Wellcome Company moved its production centre s from New York to North Carolina and in the following year another research centre was established.
1904 Glaxo Wellome was founded in Bunnythorpe, Newzealand. Glaxo was a local company that was involved in manufacturing baby food and also processing the local dairies milk. The products were sold in 1930,s under the company slogan of â€œ Glaxo builds Bonny babiesâ€?.
Glaxo logo was still clearly visible in the streets of Bunnythorpe on the dairy factory of Derelict (the factory that was used for the drying and processing of cow's milkâ€?. No one at that time thoughts, that this was a beginning of a major World's biggest Pharmaceutical and healthcare products firm. In 1935, in London Glaxo became Glaxo Laboratories and opened their new unit. Later on in year 1947 and 1958 Glaxo bought two companies, Josephs Nathan and Allen & Hanburies respectively. After the purchase of Meyer laboratories in 1978, Glaxo started to play important role in the USA market, later on in year 1983 Zebulan in North Carolina was the new destination for the small arm of Glaxo Inc as they moved to the Research Triangle Park. American arm of Glaxo Inc moved to Research Triangle Park (US Headquarter/research) and (US manufacturing) Zebulan in North Carolina.
In 1995 Burroughs Wellcome and Glaxo merged to become Glaxo Wellcome. In the same year Glaxo Wellcome opened their medical research centre Stevenage England. Glaxo Wellcome Purchased Polfa Poznan Company in Poland in 1998.
2.6.2 SmithKline Beecham
In year 1843 Thomas Beecham launched in England their tablets called as Beecham pills, giving birth to Beecham group. Beecham opened their first factory in England at the location of St Helen's in the county of Lancashire for the production of medicines in year 1859. By 1960's it was extensively involved in pharmaceutical business.
In Philadelphia in the year 1830 John K Smith opened their first Pharmacy. Later on in the year 1891 SmithKline and company merged with French Richard & Company. They changed to SmithKline & French laboratories and were focused more on research, till 1929. Year later they opened a new laboratory in Philadelphia. They purchased Norden Laboratories, a company doing research on animal healthcare.
In order to focused more on medicines SmithKline & French Laboratories in 1963 purchased RecherchÃ© et Industrie Therapeutique (Belgium). Company started to expand globally and get tremendous growth with the purchase of Canadian company with the name of seven laboratories. They purchased in the US in 1969, Allergan an eye care and skin care product manufacturer in 1982. The company merged with another company Beckman Inc, and changed their name to the SmithKline Beckman.
A major breakthrough in the company life was the point when they purchased their biggest competitors International Clinical Laboratories in 1988.The Company changed to SmithKline Beecham Plc in 1988 when it moved with Beecham. Company moved his headquarter to England, in order to expand their research and development in the US, SmithKline Beecham purchased a new research centre in 1995. In 1997 a new research centre was established at New Frontier Science Park in Harlow. The major centre operated in the city of Dumfries shire, Scotland.
2.6.3 Operational Information of GlaxoSmithKline (GSK)
GSK operates in around 119 countries and London is the city where their corporate head office is located. It also has its operational headquarters in the city of Philadelphia and Research Triangle Park in North Carolina in the USA. The products of GSK are sold in over 130 countries. GSK has its principal research and development (R&D) facilities in the UK, USA, Spain, Japan, Italy and Belgium. GSK manufactures its products in 37 countries.
2.6.4 Business Segments of GSK
The operations of GSK are based on two basic business segments.
- Pharmaceuticals segment that was involved in the manufacturing and development of Prescription Pharmaceuticals and Vaccines.
- The other segment was of Consumer Health care that is involved in the production of the over the counter medicine, products for oral health care and nutritional health care.
2.6.5 Competitors of GSK
In the Pharmaceutical segments GSK has Pfizer, Forest Laboratories, Bayer's, Abbotts and Wyeth's. In the consumer health care segments of the industry GSK has its competitors like Unilever, Proctor & Gamble, Johnson & Johnson, and Colgate Palmolive. These are well established companies than GSK.
3. Research Methodologies
In order to get the answers for the queries that any researcher had in his mind, he can use different type of methods. These methods ranged from questionnaires to in depth interviews, group discussions, surveys and many more.
Grinnel (1993), (cited in Kumar 2005) defined research as a formal investigation that used generally acceptable scientific methodology to get answers that should be publically acceptable as well. Lundberg (1942), (cited in Kumar 2005) stated that research is a â€œscientific method consists of systematic observation, classification and interpretation of dataâ€?.
Qualitative research methodology was used in this research. The reason for using qualitative methods in this research was that in this research financial statement of the company, GSK was analyzed to measure the performance of the company. This research analyzed the financial statement (annual statement) of the company to measure the overall performance of the company after M&A. In this research the overall performance of the GSK as how they were able to expand their business with the help of mergers and acquisition.
Financial statement, specially the earning per share in income statement is the best indicator to measure the performance of the company. Earnings per share (EPS) are the method that was used by the professionals, investors and other financial organization to see that how well company are performing. Apart from analyzing and comparing the EPS, this research also looked at the overall turnover of the GSK and the global positioning of the company in the pharmaceutical sector.
In order to incorporate the opinion of the professionals, employees and other stake holder's data collection methods like questionnaires, in depth interviews and group discussions were conducted. That helped in getting the opinion of those individuals about following key areas of the researchâ€¦.
- What were the factors that encouraged firms to adopt M&A as an international business expansion strategy? This research collected the feedback regarding the factors through questionnaires, in depth interviews and group discussions.
- The second important issue that need to be answered in this research was that what were the benefits that any other firm generally and GSK specially get by the process of M&A. For collected data on this research mostly relied on the information from in depth interviews and annual reports of the company.GSK website was an important source of information in this regard as well
- Apart from the questions that were discussed above, there are issues like how well GSK perform and how well they utilized the opportunity of being the biggest pharmaceutical company of the world after M&A.
- Merger and acquisitions was not an easy process it involved the process in which two companies joined together, that were previously competitors to each other. So this research also looked into the challenges faced by GSK in M&A. Questionnaire, in depth interviews and group discussions were used to get the feedback of the employees and business professionals.
3.2. Research Philosophy
According to Saunders 2008 research philosophy helped in adopting different assumption in which a researcher viewed the world. The research philosophy is important in every research as by selecting a particular research philosophy researcher determined that what approach he was going to adopt and what would be his strategy for the thesis. (Saunders etal 2007)
There were three different ways through which researcher thought about his research philosophy. Those were epistemology, ontology and axology.In this thesis researcher adopts the epistemology philosophy. An epistemology philosophy is the one in which researcher was concerned with what he thought would be acceptable and reliable knowledge in the area of study of the research. (Saunders etal 2007)
In this research the main focus of the researcher was on the motivational factors for GSK for the merger and what were the benefits that GSK had from the merger and acquisition process. This research is epistemology on the other ground as well as he incorporated the existing knowledge on the field of mergers and acquisition and how companies were using that as a market entry strategy.
According to (Saunders etal 2007) that in every research the researcher has to take a stance, had to take a position when selecting epistemology because epistemology philosophy has positivism, realism and Interpretivisim In this research positivism philosophy had been used by the researcher.
(Remenyi etal 1998) cited in (Saunders etal 2007 p103) defined positivism as a philosophy in which the researcher worked with the social realities that could be easily observed in order to get the results. In positivism the results will help in forming the law similar to what natural scientist and physicist did.(Saunders etal 2007)
Positivism theory hypothesis were developed which was latterly tested and confirmed or rejected. Another element of positivist approach was that in this approach the researcher tried to take the researcher to the far level in order to test his hypothesis and tried to be as neutral as possible. The researcher used usually qualitative approach for the positivist approach for their hypothesis testing.(Gill and Jones 2002) cited in ( Saunders etal 2007 p 103)
In this thesis researcher was also adopting the positivist approach where he was actually checking his hypothesis about the motivational factors that encouraged GSK for mergers and acquisition along with the benefits and challenges the firm faced before during and after the merger process.
As it was stated by Reymenyi etal that positivism approach, social realities and could be observed were used to check the hypothesis. In this thesis researcher also used social realities like performance of the company, market control, turnover and other elements of annual statements that could be observed as a tool to check the hypothesis that he developed.
The philosophy of the research was to establish and allowed the researcher to achieve the followingâ€¦â€¦.
- To established the primary motives and benefits that GSK achieved after M&A through the consensus of the professionals and some of the employees of the GSK.
- To analyzed the financial positions of GSK to determine that whether it was worth for GSK to engage in the process of Mergers and acquisition.
- To use the resources and information available to support the understanding of the reader for the merger and acquisition process.
- To get a better understanding of the use of mergers and acquisition as an International business expansion strategy. This research also looked into the fact that why GSK used mergers and acquisition as a growth strategy in the presence of other growth strategies as well.
3.3. Research Approach
Research approach is an important question regarding the research design of any thesis. According to (Sunders etal 2007) researcher had to adopt either deductive approach where hypothesis were tested and a research strategy was selected to test the hypothesis or the researcher could adopt inductive approach where he had to collect data first then he test and analyzed the data and developed his own theory.
Social scientist like Mark Saunders linked these two research approaches to two different research philosophies. Deductive approach is linked with positivism philosophy while mostly inductive approach was linked with interpretivism philosophy. (Saunders etal 2007)
In this thesis researcher used deductive approach, because of the fact that he used positivist philosophy as a research philosophy for the thesis. According to (Collis and Hussey 2003) cited in (Saunders 2008) that deductive approach was similar to scientific research where the law were vigorously tested. (Robson 2002) cited in (Saunders etal 2007)
The research approach of this thesis was based on the feedback of the primary research as well as on the result of the financial analysis of the annual statements of the GSK so that they were adequately supported by secondary research as well. The main purpose of this research was to find out that why GSK selects mergers and acquisition as an international business expansions strategy. What were the main factors that encouraged GSK to involve in the process of mergers and acquisition? It was also discussed in this research that what are the benefits and challenges that were faced by GSK in the mergers and acquisition.
The overall research approach qualitative as the key inputs that this research was getting about the factors that encouraged GSK to engage in the process of M&A, the key benefits and the challenges faced by the firm was collected through in depth interviews, and Group discussions. In this research quantitative method of colleting primary data like questionnaire was also used.
3.4. Research Strategy
According to (Yin 2003) cited in (Saunders etal 2007) that each research strategy can be used for exploratory, descriptive and explanatory research. Selecting a research strategy was very important phase in the process of research design. The choice of the researcher to choose a particular research strategy was always guided by the type of questions that a researcher had, objectives of the study and to the extent of literature and existing knowledge on that particular topic along with the time and resources of the researcher.
Researcher could used that strategy which was most appropriate for his research as these strategies were not mutually exclusive and these could be used in combination with each other.(Saunders etal 2007)
Case study Strategy
Case study strategy was defined by (Robson 2002 p178) cited in (Saunders etal 2007 p 139) as aâ€? strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon which in its real life context using multiple sources of evidenceâ€?.
In case study the phenomenon that was studied and the context in which it was studied was not quiet visible. In this thesis researcher used case study as a strategy that helped him in better understanding of the phenomenon which in this case was merger and acquisition of GlaxoSmithKline in the context of being market leader in the pharmaceutical sector. Other contexts could be the benefits that GSK achieved and how well the firm used those benfits in increasing their market share and turnover. (Yin 2003) cited in (Saunders etal 2007).
A case study strategy helped in getting the answers of the questions like how a particular phenomenon happened, why was it happened? What were the consequences of that phenomenon? It helped researcher in better understanding of the context in which particular phenomenon happened along with their outcomes. (Morris and Wood 1991) cited in (Saunders etal 2007)
Research strategy for this research was based on the key questions that are being answered in this research. The key questions were clearly visible in the title of this thesis that what factors encouraged firms to engage in the process of mergers and acquisition process and why firms like GSK used it as an international growth strategy. In research strategy the approach for getting inputs were developed.
In research strategy it was determined that what sources of primary and secondary data was chosen and the reason for choosing them. The key strategy of this research paper was to used the sources of primary research that are qualitative in nature (in depth interviews, group discussions and analysis of the financial statements) and then triangulates that with the results of quantitative data collection method (questionnaires).
Feagin, Orum and Sjoberg (1991) described research triangulation as a critical part of the overall research methodology because it gave a strong ground for the result. Yin (1984) described that the triangulation of the result can be achieved when the data from different sources were used and this was an approach that was globally accepted.
3.4.1. Secondary research
Secondary research sources were used to provide the frame work for the primary research. The secondary research provided an overview of the theories that were already preset about the topic of the dissertation and the questions that were asked in the title of the research.
It was mentioned in the literature review that what were the theories that firms used in order to expand their business and the reason why they chose them. Factors that encouraged firms to engaged in the process of merger and acquisition and what were the benefits firm perceived and they get from the mergers and acquisition process. In literature review it was also included that were the challenges that a firm faced while in the process of mergers and acquisition.
3.4.2. Primary research
Primary research was used to establish the link between the factors that were discussed in the title and pointed out in the secondary research as well. It also helped to derive the answers for the questions that were asked in the secondary research. It helped to came up with solid answers for the question being asked.
As this research was qualitative (in depth interviews, group discussions) and bit of quantitative data (questionnaire) it helped to came up with solid resultsâ€¦.
Following methods were used to get Qualitative data
3.4.3. Group Discussions
Respondents were invited as a group to give their ideas and discussed the Business growth strategies that according to them were to be used by GSK as an expansion strategy. It was also discussed in the group discussion that what they would think would be the benefits that an organization like GSK supposed to get after the process of merger and acquisition.
As merger and acquisition was not an easy process, so it was also asked in the discussion to the participants to give their opinion that they would consider be the challenges faced by the GSK during and after the process of merger and acquisition.
3.4.4. In depth Interviews
In depth interviews were conducted on the phone and face to face with the previous and present employees of the GSK so as to get their point view on the issue of mergers and acquisition. It was also asked to them that what would they considered be the right strategy for the manufacturing company like GSK that was involved in the process of research and development of the medicines, vaccines and other formulas for the better life of the human being.
3.4.5. Simple content analysis
As this research was purely for academic purposes and the researcher had little resources to interview large number of employees from the GSK, the ideal method that was used by the researcher to examine the performance of the company was to analyze the annual financial statements of the GSK as that was a public document and was easily available on the firm website.
The annual statements gave the researcher an insight in to the GSK financial position that how much GSK gained or lost after their M&A and whether their financial performance improved after that.
For that purpose researcher used simple content analysis technique to analyze the financial performance of the GSK, so as to determined that how much the company gained or lost after the strategic decision of entering into the merger and acquisition process.
Results from the other sources of primary data collection method were used to designed questionnaire. This helped in setting a detailed questionnaire for the respondents. Respondents were asked to answer the questions like what they would consider the main motive that encouraged the firm to get into the process of mergers and acquisition.
What they would consider would be the possible benefit and challenges that were faced by the companies due to the merger and acquisition process. They were also asked to give their feedback on the issue that what they would consider be the ideal growth strategy for the GSK to expand its business operation.
3.5. Citation Style of Referencing
This research was purely for academic purposes. The citation style that was demanded by the university and that was recognized worldwide, Harvard style of referencing was used. All the referencing whether it was used in the literature review or in the rest of thesis was cited using Harvard style of referencing.
Harvard referencing made it easy for the reader to know the source of the work and it also provided the authors of the work cited with the due admiration and recognized them for their work.
3.6. Sampling Strategy
In this part of the thesis, sampling strategy for each of the primary data collection method was defined. Questions like what were the target population, who were the accessible group and how to involve the individuals in the sampling was determined. It was also decided that what would be the ideal method of approaching them.
Sampling strategy for each of the data collection method was defined belowâ€¦.
3.6.1. Group Discussions
Blumer (1996) cited in Flick (2009) holds that some time people that were brought together to speak on a topic in the form of small groups were more useful than that of any number of samples of individuals. He stated that the information that was derived from those discussion group were more use full than any other source because their disagreement and argument about a particular topic uncover that side of the issues that was by any other method was not possible to unveil.
Pollock (1955) cited in Flick (2009) stated that the group discussion helps any researcher in reaching the core of the knowledge. The sampling strategy for the group was affected by the monetary and time constraints. Only two groups were setup in order to get the feedback.
The group A was of 10 to 12 business respondents. They were asked to give their opinions about the asked questions. Another group discussion was also arranged that include the previous and current employees of the firm.
3.6.2. In depth Interviews
The target population for all the method of primary research was same. In depth interview was a method in which, the researcher selected the individuals that he would think had the enough information for the topic of thesis. In depth interviews helped a researcher to get key information on the research topic.
Employees of the organization were the person who could give you relevant information on the benefits that an organization had after mergers and acquisition. They could also be help full in providing you with the information that what problems firm faced after the merger and acquisition. With the help of in depth interviews, the researcher would get data on the integration and any other cultural problem faced by the company.
Questionnaire was the only quantitative method that was used to get the primary data. As this research used qualitative data analysis, so the questionnaires helped in bridging the gap that was being left out by other methods of data collection. The target population for the questionnaires was the employees of the GlaxoSmithKline.
3.7. Research Limitation
Every research had its own limitations and constraints. As this was an academic research so I faced the financial, time and knowledge constraints that impacted this overall research. The important limitations that I faced during this research were as followsâ€¦
(1) Time Constraints
Time was an important issue in all types of research as this being an academic research and I had few months to complete this thesis, I faced this constraint. Some time I had to tradeoffs, especially while doing primary research.
(2) Knowledge Constraints
As it was mentioned in the time constraint that it was an academic research and time being an important constraint, some time I had to trade offs, especially while studying the secondary data. Because this was a vast topic in which theories regarding business growth, benefits of mergers and acquisitions , challenges faced by the firms and the main motives for mergers and acquisition were to be studied, but because of the time constraint I was not been able to covered all the topics in detailed.
(3) Monetary Constraints
This research will be used purely for academic purposes and I being a student had limited financial resources. I faced the problem of financial resources while setting groups for the discussions. That was the reason that I had two group discussions in this research. If had more financial resources, I would definitely set more groups in order to get the relevant information for the thesis
(4) Personnel Biasness
Personal selection of the individuals for in depth interviews and group discussion could lead to the biased results, as I was selecting the respondents there might be an issue of self selection biasness.
(5) Limited number of respondents
There had been a chance that not all the groups of the target population were to be given a chance to respond. There might be chance that some might raised their concerns that this research was not portraying the true picture of the respondents because I asked limited number of individuals to respond to the methods of primary research.
Despite the limitations that this research had, I believed and tried that the overall results of the qualitative and quantitative sources were valid
3.8. Ethical Consideration
It was necessary for any student and researchers to keep in mind the following ethical consideration while writing a thesisâ€¦.
(1) Due recognition of Other's work
In this research proper and deserved recognition was given to the other's researcher /authors work. This was an important ethical consideration in my mind while writing this thesis. It would be large injustice to the author's, whose work was used without proper recognition.
Another ethical consideration that was considered while doing this research was regarding the identity of the respondents. Especially during the in depth interviews the individuals were very concerned about their identities and I assured them that their identities were not revealed.
Researcher might be biased to some answers as in this research I tried to be as neutral as possible initially while selecting the respondents for the interviews and group discussions and later on in analyzing the result of the primary research.
At the end I can assured that this research was not written with any pre developed biasness in mind and i tried to be as neutral as possible in writing this research.
4. Data Analysis and Findings
Data analysis is an important part of any research thesis because it gives a broad picture of the result of research. The data analysis helped in getting results and conclusion that was drawn through different data analysis techniques that were discussed.
As in the research the researcher was using qualitativedata collection methods. I am going to discuss the results of my findings in three different categories, so as to make it easy for the readers to understand, that how GSK (company that the researcher chooses as a case study) grows globally. I will discuss in detail how M&A helps them in expanding their business globally and they were able to capture new big market.
In Data analysis part of this research, I am going to divide my findings into three broad categories.
Post Merger Benefits
- Detailed evaluation of the GSK after their M&A and how they able to reduce their cost by utilizing synergy.
- How they capture the global markets, and expand their business globally through M&A.
4.1 Detailed Analysis
Based on the data of September 2009, GlaxoSmithKline Plc (GSK) had been the biggest pharmaceutical company of the world. Due to the Merger of two Pharmaceutical giants, GSK became the world's biggest company involved in the production of Pharmaceutical products.
After the merger GSK was rated as following in different parts of the world in Pharmaceutical Industry.
4.2 Global Expansion
As it was discussed earlier in the literature review that companies used M&A as a strategy to expand their business globally, it was quit visible that GSK became global leaders.
4.3 Port Folio Expansion
After the mergers of Glaxo Wellcome and SmithKline Beecham both companies benefited in the way that, both those companies were working on some new products and were investing heavily on their Research and Development (R&D) departments. After the merger, GSK
4.4 Synergies and Cost Savings
It was discussed in the literature review of the thesis that, one of the main motive benefit that encourage the companies like GSK to engaged in the process of M&A was Synergies, Cost Savings and Economies of Scale.
GlaxoSmithKline merger generated substantial operational synergy (Appendix Annual Report 2000 GSK). Both companies benefitted and they saved and cut down their cost approximately Â£1 billion annually after their Merger. These savings came from the combination of the following two departments of the organization.
1. Research and Development (R&D)
GSK saved Â£250 million by the combination of R&D departments of both companies.
2. Marketing & Administrative Department
GSK saved Â£750 million through the combination of Marketing and Administrative Department, as these two companies i.e. Glaxo Wellome and SmithKline were previously competitors to each other. After their merger they were able to cut their marketing expenses.
4.5 Tax Consideration
Another Benefit that GSK derived after merger was that, it earned more than 50% of its income outside UK. As the income derived from other countries was already taxed their so that was discussed at considerable lower rate in UK.
4.6 Simple content analysis
4.6.1 Analysis of the financial statements
Analysis of the financial statement revealed the total turnover of the GSK after few years of their merger and helped in determining the fact that how much they grew in order to determine performance of the company as a whole. The researcher would also calculate the earnings per share (EPS) of the firm so as to measure the financial position of the firm and to determine that how well the firm is being managing the share holder's wealth after the process of M&A.
As GSK is a multinational firm that operates in different countries, hence their revenues were also in different currencies but they were reported in the Pound Sterling in their financial statement. In this thesis the researcher analyzed the financial statements of GSK for the last three years and at the end compared them with the year 2000 when the company actually started as a new company, so as to see that how well the company benefitted from the process of merger and acquisition process. The researcher also looked at the share price of the GSK shares in order to determine their standing in the market.
4.6.2 Analysis and Findings of 2006
Figure 1 shows the GSK turnover for the year 2006. 2006 was considered as another positive year for GSK as they made development on all the business avenues. In this year GSK achieved in their sales that was because of their product growth as well as from the cost controlling policy of GSK and because of these two factors GSK was able to show strong financial growth.
GSK showed the same trends of continuous growth in their business. The annual turnover for the year 2006 was of Â£23.3 billion, which was 7% growth. The 7% growth in 2006 was less than that of 8% in 2005, the reason being that GSK started investing more on R&D, but anyhow 7% was still a healthy growth rate (Appendix).
The performance of the company was because of their core pharmaceutical products that include Sertide/Advair for the diseases of Asthma and other diseases like Chronic Obstructive Pulmonary Diseases (COPD).
In 2006 GSK introduced new products in the healthcare sector. As people are becoming more and more conscious about their health and are spending more on their as well as their families' healthcare. As GSK is a pharmaceutical company that also produced healthcare products, they benefited a lot from this situation (Appendix).
Earnings per share (2006)
In the figure 2 GSK was showing a 16% growth in their EPS. As it was discussed that EPS was the instrument that was used by the investors and other financial analysts to measure the performance of the company. As GSK was making growth in its turnover, similarly their EPS was also showing the growth of 16%. In the year 2005 the EPS that was declared by the management was 82.6 pence, which was risen to 95.5 pence at the end of 2006. The rise in EPS of the GSK showed that the company was being operated effectively and efficiently.
Share price of the company was affected by number of factors, as GSK is a public limited company and their share is traded in the stock market. The stock markets are affected by political, social and environmental problems. The share price of GSK was Â£14.69 at the start of the year 2006, which was reduced to Â£13.44 at the end of year. This was due to the political situation in the country at that time.
4.6.3 Findings and Analysis of 2007
As the current recession started from the last quarter of 2007, this factor also affected the total turnover of GSK. The annual turnover of GSK was Â£23.2 billion in 2006 which fall down by 4% to Â£22.7 billion in 2007. The major reason for the decrease and downfall of growth rate of turnover was due to fall in sale of Avandia, their key product by 22%. They also faced tough competition from their rivals in USA.
A part from their fall of sales of Avandia, GSK had growth in the sales of other key pharmaceutical products. Their vaccine business grew by 20% and reached the figure of almost Â£2 billion.
Earnings per share 2007
The earnings per share of GSK showed the same trend of continuous growth just like the turnover. The EPS grew by 4% in the year 2007 and reached the 99.1 pence per share. It was visible from the turnover of the GSK that the firm faced difficulties in overall sales in year 2007. The earning mostly came from the profits from other territories where the firm is operating. The tax rate in those territories is less than that of Britain, so the income is taxed in UK on special rates. Because of that the overall earnings per share increased in the year.
Share price of GSK decreased to Â£13.44 as compared to the amount of Â£14.69 on 1st January last year. During the year GSK share price fell by 5% and closed at Â£12.79. The major factor for the fall in the price of GSK share price was due to an article that was published in the New England Journal of Medicine (NEJM) that suggested that because of Avandia which was the key product of GSK, the patient might have more chances of cardiovascular risk. That article adversely affects the company as that was also visible from the company share price.
4.6.4 Analysis and Findings of 2008
In figure 7 it was clearly visible that the turnover of the GSK showed a positive growth and increased to Â£24 billion as compared to Â£22.7 billion in the year 2007. That was the highest turnover in the history of GSK. The increase in the turnover was due to the extensive growth in the Oral healthcare and nutritional healthcare products. GSK launches 12 key new products in this year. Total turnover of the company grew by 7% in year 2008 as compared to 2007.
Earnings per share 2008
The EPS of the firm, the GSK was less than that of previous year in 2008. This was because of the investment by the company in the research and development of 21 new drug alliances. The EPS was 88.6 pence in 2008 as compared to 99.1 pence in year 2007.
Share price of GSK was almost the same at end of year 2008. As it was discussed earlier that the turnover of GSK grew by 7% to 24 billion is 2008, the highest after the merger of the two companies in 2000.The share price of the GSK was Â£12.84 in December 2008 as almost the same in December 2007 which is Â£12.79.
4.6.5 Comparison of 2000 and 2008
Comparison of the financial data of GSK between 2000 and 2008 would give an insight into the company performance after the merger of the company. As 2000 was the year in which GSK was formed and 2008 being the year in which GSK had the highest turnover of Â£24 billion would give the researcher a clear picture that how the well the company manages its affairs after their M&A and how well was being able to capture the market.
Comparison of Turnover between 2000 and 2008
The figure 10 gave an idea of the difference between the turnover of the company between the year 2000 and 2008. In 2000 the turnover of the company was Â£18 billion which was increased to Â£ 24 billion in 2008. This increase was due to the expansion of business of the company in different territories of the world. It was discussed earlier in the chapter buy the researcher that the GSK after their merger in 2000 became the biggest pharmaceutical company in Europe and USA in 2000. They captured those markets after their M&A that was not possible for the both companies to achieve alone. In 2005 the turnover Of GSK was Â£21.7 billion. It was evident from the turnover over the years that GSK attained steady and continuous growth in its turnover over the years.
There were other reasons like the reduction in the cost of administrative expenses as well as in the marketing and expenses for research and development. Appendix () showed that GSK was being also be able to save more than Â£ 1 billion annually for three year because they have the benefit of Economies of scale and financial synergy.
Comparison of Earnings per share of 2000 and 2008
Earnings per share of GSK were 66.1 pence in 2000 which increased to 82.6 pence in 2005 and finally 88.6 pence in 2008. The earnings per share increased because of continuous growth of the company and merger helped GSK in attaining the economies of scale. The benefits of the merger process helped GSK to attained financial synergy that helped GSK to reduce their administrative and marketing expenses by approximately Â£1 billion annually for the first three years. Earnings per share of GSK are showed in figure 11.
Comparison of Share prices
In the figure 12 the share prices of GSK was showed. The share prices of the company decreased at the end of 2008. The reason was the recession in the economies all across the world. There was another reason that when the GSK was formed in 2000 the investors showed their keen interest in GSK shares as at that time this was a golden opportunity for them to invest because both of the firms which are doing merger had good reputation among investors for giving good dividends.
Over the years the share prices stabilize as the company grew, GSK made progress in 2008 and invested in the development of more than 21 drugs. The share price on 31st December 2000 was Â£18.90 which reduced to Â£14.69 in 2005 and the end of 2008 it was further reduced to Â£12.84. The company was paying its customers good dividend every year apart from decrease in the share price. GSK also maintained a steady positive growth out throughout its life span from 2000 to 2008.
4.7 Group discussions and Interviews
The qualitative primary research methods like group discussions and interviews and simple content analysis were used in this thesis. The formats of these methods are available at the end of this research in Appendices A to C. The important factors of the findings were discussed as followsâ€¦.
4.7.1 Key Factors, benefits and Challenges
The interviews and group discussion that helped in understanding the important factors that GSK considered while engaging in the process of mergers and acquisition. Market power and economies of scale were the factors that GSK considered as the deciding factor in their merger process. This research helped in finding out that predominantly GSK considered market power as their deciding factor in mergers and acquisition.
The merger of two biggest pharmaceutical companies created the GSK that was in 2000 was the largest pharmaceutical company in Europe and USA. In depth interviews and group discussion helped the researcher to find out the opinion of the respondents, 90% of respondents considered market power as the biggest benefit that GSK could get after their merger. Similarly the same number of people considered the same factor as the key primary motive for GSK to engage in the process of M&A.
Some of the participants were of the view that economies of scale and economies of scope as an important factor and benefit for GSK to involved in the process of merger. Due to merger GSK was being able to save annually Â£ 1 billion for three years (see appendix). These reductions in the cost were because of reduction in the marketing expenses, administrative expenses and reduction in the Cost of R&D.
Answering about the biggest challenge faced by GSK during and after the merger process, most of the participants identified cultural difference of the organization and integration of culture as the biggest challenge faced by GSK during and after the merger. The reasons for identifying these factors by the participants were that Glaxo Wellcome and SmithKline Beecham were previously competitors to each other, who were fighting to capture the markets against each other. They had their own cultures that take years to develop. It was not easy for the new firm to integrate and worked together in order to produce new strong coherent culture.
With the passage of few years GSK showed from its progress that it was being able to resolve the challenges and obstacles that they had to face. The management of the company was able to run the affairs of the organization effectively.
4.7.2 Business Expansion Strategies
Majority of the participants of the group discussions and interviews described mergers and acquisition as an ideal strategy for GSK. In the question about why they think that it was the right strategy for the firm. Most of the respondents identified that market power as the main purpose and factor that encouraged GSK for involving in the process of mergers and acquisition, some of them also identified economies of scale and scope as another encouraging factor along with diversification.
Most of them identified that if GSK wanted to grow and expand their business the ideal strategy was M&A. Because in other strategies like franchising and licensing GSK was not able to capture the market as GSK also wanted to gain market control, because in other methods apart from M&A firms had limited control on their licensee and franchisee.
The participants of the research pointed out that as GSK is a pharmaceutical company who is investing huge amounts on the development of new formulas and medicines. GSK was involved in the manufacturing of pharmaceutical and health care products. The respondents believed that M&A was an ideal strategy for GSK. According to them the major factor and benefit that GSK wanted to achieve from the process of merger was to gain the market control.
In other business expansion strategy the firm had to share their business processes and their competitive advantage with their licensee and franchisee As GSK competitive advantage is in their formulas and medicine.GSK was not by any means are interested in giving their competitive advantage to other businesses. In other methods firm had limited control on their licensee and franchisee.
On the question of strategic alliances and joint ventures they participants pointed out that alliances and joint ventures were not always for long periods as they were for small periods, some time for particular areas, so in that case the same reason of sharing the competitive advantage of their own with their potential competitors was an issue in the minds of the management of GSK.
This research concludes that most of the participants identified merger and acquisition as an ideal strategy for GSK.
4.8 Quantitative data analysis
The questionnaire was designed to get the answer of the following questions about the following aspect of the researchâ€¦
- Encouraging factors for Mergers and acquisition
- Benefits of M&A for GSK.
- Challenges faced by GSK while in the process of M&A.
- Best business expansion strategy for GSK.
The questionnaire in this research was not used as deciding factor but as a supporting instrument that helped the researcher in the overall scenario. This questionnaire would help the researcher in determining the facts that what were the factors that the professionals and businessmen considered? While seeing merger and acquisition as a possible business expansion strategy. The format of the questionnaire can be seen at the end in (Appendix A).
The questionnaire helped the researcher in figuring out that what were the benefits that GSK would probably get by M&A process and also that what were the challenges faced by GSK during and after the merger process. The questionnaire would also help the researcher in finding out that what was the ideal business growth strategy for the GSK in the respondent's opinion?
The questionnaire would help the researcher in getting to know the opinion of the respondents about the asked questions. ( see appendix A). The researcher assumed and the results of the questionnaire were based on the assumption that the sample was the true representation of the target population.
The researcher showed the answers of the respondents about the four main facts that he wanted to find out graphically. The researcher selected 40 respondents for this research.
4.9 Graphical representation of data
Encouraging factors for Mergers and acquisition (M&A)
What were the encouraging factors for GlaxoSmithKline (GSK) in M&A process?
Results of questionnaires for factors
On the question of encouraging factor for mergers and acquisition process 78% of the respondents identified market power as the main encouraging factor for GSK. They were of the view that if GSK had market power than it would be easy for it to achieve economies of scale and economies of scope. If GSK would have market power it could have access to the bigger markets that would help in achieving economies of scale and scope.
22% of the respondents therefore identified economies of scale and economies of scope as the most important factors. The interesting fact that the researcher would come to know that out of 40 of the employees of GSK, 31 of them indicated market power as the main factor that encouraged GSK to involve in the process of M&A.
80 % of the respondents identified market power as the major benefit that GSK achieved after their merger. 20% of the respondents considered economies of scale and economies of scope and diversification as the main benefit that GSK achieved because of their merger process. Similarly like the major encouraging factors 32 out of 40 respondents identified market power as the main benefit that GSK would have from the merger process. As one of the respondent identified diversification as another important benefit that GSK would achieve because of merger and acquisition process.
83% of the respondents indicated cultural difference as the biggest problem that GSK might have faced during and after the process of merger. 7 out of 40 employees also identified that GSK would have to face the problems relating to human resource (HR). Overall 17 % of the respondents indicate that GSK might have to face the problems related to HR while they were in the process of M&A.
Merger and acquisition was identified as the ideal growth strategy for GSK by 90% of the respondents. 10% of the respondents indicated in their answers that GSK could use strategic alliances as a strategy for the business expansion.
The reason for selecting the M&A as a strategy for GSK was due to the nature of the business in which GSK is operating. The competitive advantage of GSK was in their formulas and their processes. If GSK would select strategic alliance as a strategy for the business expansion, they had to share all their processes and their competitive advantage with their strategic partner, which for most of the company and especially big pharmaceutical company like GSK would not be possible because they invested billions of dollars on research and development.
4.10 Summary of the overall result
The summary of the results would give reader an overall view of the result collected through different methods (Group discussion, interviews and questionnaires). Most of the respondents identified market power as the major encouraging factor and the biggest benefit that GSK had because of the merger and acquisition process.
Especially when they were asked by the researcher in the group discussions and interviews about what was the reason for selecting market power as a major factor and biggest benefit. The answer from majority of the respondent was that if GSK would achieve market power than other aspects like economies of scale and economies of scope and diversification came with the main factor of market power.
On the question of challenges faced by the GSK during and after the M&A process 83% of the respondents identified cultural problem as the biggest obstacle that GSK would face. The same question when asked by the researcher in the group discussion most of the respondent suggested the same for GSK. Specifically when asked about the reason of selecting cultural problem and not the employee problem, the respondents pointed out that the culture is a combination of employees behaviors, beliefs norms of the employees, that why most of them selected cultural problem in their answers.
On the ideal strategy for business growth for GSK more than 90% of the participants of the group discussion and 90% of the respondents of the questionnaire identified merger and acquisition as an ideal strategy that GSK considered for expanding their business because that is the method that helped GSK achieve market power. This was also supported by the literature review that merger and acquisition is the method that helped the organization to achieve control on the market. GSK became world leader in pharmaceutical business in 2000 after their merger.(see appendix D)
The overall research was concluded with the following conclusions about the key issues that were discussed in this research work.
5.1 Contribution to research knowledge
The researcher review of literature indicated that in the past there not had been any particular research on the issue of determining factors that any firms considered while expanding their business. There were some research regarding the strategies that firm would use to expand their business and there were also some research papers on the potential benefits that a firm had after the business growth.
The data collection methods that were used in the research were very simple and straight forward and easy to understand as they helped the researcher in his thesis. The questionnaire was also very helpful in determining the different aspects of the research. This research will also help the firms in the future if they are interested in expanding their business by using mergers and acquisition as a growth strategy. With the help of this research they are in better position in establishing the potential benefits they can achieved along with the main motives that they have in their minds before merger and acquisition process.
This research would also help the researcher in the future in discovering the ideal business growth strategy for different kind of businesses. This research would also helped them in understanding the fact that how they can manage the whole merger process successfully.
5.2 Major benefits and key factors for firms (GSK)
This research would help the researcher in determining the major factors that were in the mind of the management of GSK or any other organization, while deciding to engage in the merger and acquisition process. This research helped in establishing the fact that what were the potential benefits that GSK would be looking? after their M&A process.
The factors which were selected in the research like market power, economies of scale and scope and other factor like diversification that helped the researcher in determining the most valued factor for GSK. Business organizations in general and GSK in particular considered many factors as these factors were interrelated to each other. In the primary research most of the respondents selected market poser as the biggest encouraging factor as well as the biggest benefit that GSK would get after their M&A.
That result surprised the researcher because he was of the perception that most of the respondent would go for economies of scale and scope as the biggest factor and biggest benefit that GSK got after M&A. The respondents were of the view that if GSK would have market power and control it would be easy for them to achieve the other factors of economies of scale and scope.
5.3 Challenges faced during mergers and acquisition
This research will help in understanding the challenges that GSK would have to face. The interested fact of the research was that most of the respondents identified cultural problem as the biggest challenge that a firm had to face while growing business. According to them GSK would face the same problem. Some of the respondents also pointed out HR issues as the biggest challenge for the organization as they gave this issue more importance than that of cultural issue.
The secondary data in the literature review chapter supported the findings of the research as according to literature cultural issue was the biggest challenge that any organization had to face while growing their business, according to them same was the case with GSK. The researcher thought that respondent would probably go for the option of HR issues as that would create more problems for the organization than that of cultural problems.
5.4 Ideal business growth strategy for GSK
As it was discussed in the literature review that firm can enter the new markets and expand their business with the use of different strategies like franchising, licensing, joint ventures, strategic alliances, Greenfield establishments and through mergers and acquisition.
Any of the method mentioned above would be the possible business growth strategy for any firm. The firm has to consider the following two aspects while selecting the growth strategy for itself:
5.5 Key motives
The firm has to determine that what are the motives of the business expansion apart from geographical expansion of business? What they consider as the prime motive of selecting a strategy. As in case of GSK and it was later on indicated through the result of the primary result that GSK would be considering market power as the benefit that they were going to have after the merger process.
Some organization might consider economies of scale and scope as the deciding factor for selecting a particular type of strategy and the major factor for them to expand their business.
5.6 Type of industry
The firms also have to consider the aspect of business in which they are operating while selecting a growth strategy for them. A strategy can be good for one business but not necessarily good for the other kind of business. In case of GSK, as it was a pharmaceutical and healthcare manufacturing company that was investing a lot in the research and development of new formulas, medicine and health care products.
For company like GSK franchising or licensing was not an ideal strategy as it was also could be seen in the literature review that for the firms who wanted to achieve market control merger and acquisition would be an ideal strategy. The options like franchising and licensing were suitable for the firms who were interested in less riskier options.
According to the overall results of the primary data and the secondary literature, it was indicated that M&A was the ideal strategy for the GlaxoSmithKline. This strategy would help GSK to get the market power, because this is the ideal strategy for the firms that wanted to grow their business with the potential benefit of having market control.
5.7 Surprising about the results
The researcher was surprised by the results of questions regarding encouraging motives and benefits of mergers and the challenges that GSK had to face in M&A process. The findings of the research were surprisingly partially different from what researcher was actually expecting. The researcher was expecting to get economies of scale and scope as the main encouraging factor and biggest benefit as answer for the question asked about the question asked while from the result came as market power.
When the researcher asked the respondents about the biggest challenge that GSK would have to face while engaging in the process of merger and acquisition, the researcher would be expecting to get HR issues as the biggest hurdle in successful M&A. Surprisingly for the researcher most of the respondents identified cultural problem as the biggest challenge that GSK would face after M&A.
5.8 Further Research
This research will be helpful to anyone who is interested in finding out the key factors that are in the mind of any business entity, when they are trying to select any of business expansion strategy. This research will be also helpful for the firms for selecting a business growth strategy. The firms can also use this research as a base for establishing the factors that they wants to achieve after their expansion.
On the whole this research will be helpful for anyone who will be interested in carrying out further research on ideal growth strategy for different kind of business and for the researchers who will be studying the primary motives and benefits of different growth strategies.
This research included different motives and benefits along with the challenges that any firm had to face when they were actually expanding their business.