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Midterm

BUS 432 Study Guide - Midterm Guide: Cost Accounting, Organizational Culture, Human Capital


Department
Business Administration
Course Code
BUS 432
Professor
Dave Thomas
Study Guide
Midterm

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Chapter 5: IHRM on M&A and JV
REASONS FOR M&A
Mergers two companies join together to create a new entity
Acquisition one company acquires sufficient shares to gain control of the other
2 Reasons for M&A
1. Achieve competitive size
2. Increase market share
M&A STRATEGIES
1. Market Dominance
a. Achieve economies of scale and control distribution channels
2. Geographic Expansions
3. Leveraging Competence
4. Resource Acquisition
a. Like the oil industry, more cost effective to acquire companies with proven
oil reserves
5. Capability Acquisition
a. Acquire company with self-driving capabilities
6. Adjusting to Competition
a. Company’s sometimes force into acquisitions to counter acquisition
strategies of their competitors
7. Executive Arrogance
a. CEO’s desire to run a large companies

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M&A /FAILURE
Lack of a shared vision
becomes a problem in post merger phase
Loss of key assets
can be employees and intangibles like relation w/
suppliers
High transition costs
high coordination cost because of geographic distance
Lack of cultural fit
cultures, HRM systems, mgmt. views etc.
M&A Facts
- 17% add value
- 30% no difference
- 53% destroy value
PROBLEMS WITH FIRM INTEGRATION
Organizational cultures
Human resource systems
Managerial views
Other aspects of organizational life
DOUBLE-LAYERED ACCULARATION
Integration is significantly more difficult across borders
Alignment of organizational and national cultures
Differences in:
- Commonly accepted norms
- Management styles
- Prevalent practices
o Both the org culture and the national culture
o Cross border M+A demands it
o International mergers are more difficult because of this
o 2 firm cultures and 2 national cultures,
2 type of acculturations need to happen
There is no evident of a relationship between cultural distance and M+A performance

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When it comes to cross-border or cross-cultural M&As, you cannot disregard the
cultural differences inherent. One corporate culture cannot simply suppress and replace
the other one. A consensus has to be reached and the foundation for a new culture,
based on elements of both cultures involved, has to be laid.
In the case of DaimlerChrysler, both parties were never truly willing to cooperate
wholeheartedly and to accept changes and to enter compromises in order to make this
merger of the two companies a success.
5 TYPES OF M&A INTEGRATION
Degree of Change in Acquired vs Degree of Change in the Acquiring
1. Preservation
2. Transformation
3. Absorption
4. Reverse Merger
5. Best of Both
Most M+As are Traditional and Transformational
Traditional leveraged existing capabilities through transfer
Transformational more complex exploration skills to create new capabilities
How can we predict the character of the org that results from an M+A?
Examine the amount of cultural change required in both companies to achieve the
desired goal
Preservation M+As
- Acquired preserves independence and cultural autonomy
- Low degree of change in both acquired and acquiring
- Happens when motive is to secure talent or skills
- Rarely survives
Transformation M+As
- High change in acquired
- High change in acquiring
- Reinvent the firm
- Hard to implement
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