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Mergers and acquisitions relate to the process in which corporates change ownership or acquire other firms. In a merger, two companies join together and form a new business. When a merger happens, the businesses change their initial names to a new agreed name. A merger involves companies that typically similar in stature and size. A merger occurs where the two companies coming together are offering the same services and are equal. In an acquisition, however, one company buys the other company. Smaller companies are usually purchased and absorbed by bigger companies which have the financial muscle to acquire other firms. One of the reasons that acquisitions and mergers occur is to counter competition (Miller, 2017).
There are various international procedures and strategies followed during the process of merging and acquisition. When companies acquire other smaller companies or merge with other different companies, there are some strategies that the companies use to ensure that the mergers or acquisition are successful. International strategies are important to ensure that the reasons behind the mergers and acquisitions are met.
Two publicly traded corporations in an industry familiar. One company that has acquired other company and operates internationally and the other company does not have the history of mergers and acquisitions but operates within the borders of United States. The annual report provides insights useful in addressing the question.
The two publicly traded companies are in the beverage industry. In the United States, the beverage industry has many players. Due to the increased levels of competition within the industry, companies often engage in mergers and acquisition to counter the competition and increase their market share. Both mergers and acquisitions involve the buying, selling combining or dividing the various business interests for the companies involved. The main idea behind the mergers and acquisitions is to ensure that all the stakeholders involved benefit.
Mergers and acquisitions enable companies to achieve the common interest without creating joint venture business or subsidiaries. In the beverage industry, some of the companies have practised mergers and acquisitions while others have remained without merging or acquiring small companies. PepsiCo Inc. is one of the leading beverage company in the United States. PepsiCo Inc. is an example of a company that has acquired many smaller companies over the years to increase its capacity and reduce competition. PepsiCo Inc. provides various beverage products to its consumers from different parts of the world (PepsiCo, 2014).
Gullah Gourmet Inc., on the other hand, is a company that has existed for many years. The firm provides gourmet meals, desserts, bread and sauces (Grovner, 2014). The company has no history of mergers and acquisition since its formation. The company is commonly known in the United States because it only operates there. PepsiCo Inc. is a company that has a history of acquisitions over the years, but Gullah Gourmet Inc. has no history of mergers or acquisitions since its formation. The two companies operate in the same industry.
For the company that has merged and or acquire another company, evaluate the different strategies that could have led to the merger or acquisition
PepsiCo Inc. has been involved in different mergers and acquisitions since its formation. Pepsi-Cola was the name of the first company to be formed in the 1890s by a pharmacist. Caleb Brahma was the founder of Pepsi-Cola Company. Elmer Doolin later formed Frito Company in the year 1932. The two companies then joined together in the form of a merger to create PepsiCo in 1945. The company kept expanding its operations and increasing its products. In 1977, PepsiCo acquired Pizza Hut Inc. which was Pizza Company. The company later acquired different companies. For instance, it acquired Tropicana products in 1998, acquired South Beach Beverage Company in 2000, Quaker later in 2001, Naked Juice Company in 2006 and the Wimm-Bill-Dann company in 2010. PepsiCo Inc. is an American based multinational corporation but has its branches in different parts of the world (PepsiCo, 2014).
PepsiCo Inc. has been able to expand and improve their operations through its mergers and acquisitions. The best merger decision that the company has done in years was the merger with Quaker in 2001. This acquisition gave the company control of Quaker’s products such as the sports drink Gatorade. The merger nearly doubled the company’s shares of the noncarbonated market which put them in front of Coca-Cola by 13 percent. The merger with Quaker significantly increased PepsiCo’s market share since Gatorade which is one of the bestselling sports drinks. As a result, PepsiCo increased its revenues by more than 20 percent from noncarbonated products. Due to the financial impact that the merger brought to the company, it is considered to be the best merger decision that PepsiCo Inc. has made (Gabriel, 2013).
The strategy employed by the company was to supply a product that would beat Coca-Cola’s Powerade. The merger was successful as the revenue of Gatorade surpasses that of Powerade with more than $300 million. The benefit that Powerade has is the price. Although the two competing products have the same nutritional value, Gatorade is slightly expensive than Powerade. Gatorade is able to beat Powerade because it has a better and well-established brand name. PepsiCo. Inc. realised the strengths of Gatorade before acquiring Quaker. As a result, the company is distributing the drink in over 220 countries. The merger of PepsiCo and Quaker has proved to be a wise decision that the company made due to its financial impact on the company.
To the company that has not been involved in any merger or acquisition, identify a company that would be profitable by merging or acquiring the company Provide an explanation why
Gullah Gourmet Inc. was founded in 1994 by Deborah Nelson. The company has its headquarters in South Carolina. The firm offers homemade gourmet foods that are delicious. The company also offers canned, jarred and bottled products to its consumers. The company has an online store and one retail location. Most of the company’s products are sold in local market. The target for the company’s products is customers and tourists who love the southern food. The company is yet to be involved in any merger or acquisition. Since the company is growing and some of the customers have shown how the products are reliable, it makes a great candidate to merge or be acquired by other firms. One of the firms that would acquire Gullah Gourmet and benefit is Country Bob Inc. The merger between the two companies would be beneficial because Gullah Gourmet has proved over the years that it has a good track record of the sale. A merger between the two companies would, therefore, increase the sales volume. The merger would increase the grocery stores and increase the number of customers. The fact that Country Bobs Inc. has experience in distributing all-purpose sauce would provide an advantage to Gullah Gourmet Inc. (Grovner, 2014).
For the corporation that has international operations, evaluate its international business-level strategy and the international corporate-level strategy
PepsiCo Inc. operates in different countries in the world. Its business level and corporate-level strategies have enabled the company to succeed in different parts of the world. The corporate-level strategy for PepsiCo Inc. is to provide value to their customer by providing diversified products. By merging and acquiring other companies, the multinational company has created a large portfolio of its products. This has enabled the company to provide customers with different products that they need. By increasing the number of products through mergers and acquisitions, the company creates a strong brand to direct its business-level strategy of product differentiation. The strategies used by PepsiCo increase the company’s competitive advantage (Crawford, 2015).
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PepsiCo has different business units in different continents which all follow the same business level strategy despite the geographical difference. The company’s business-level strategy thrive by engaging in a low-cost differentiation strategy of its products. PepsiCo business-level strategy is implemented through taste and marketing of the company’s products. The company take advantage of the economies of scale by mass producing its products. After the 2008 economic depression, the company started creating new products at more affordable prices for its customers. Since then, PepsiCo Inc. has continued to offer its customers discounts on their beverage products and also the Frito-Lay snacks. The business-level and corporate-level strategies have enabled the company to compete with other beverage companies.
One recommendation that I would have for PepsiCo Inc. is to put more focus on noncarbonated drinks. Different acquisitions and mergers that have benefited the company are mostly companies that deal with noncarbonated beverages such as the Quakers. It would, therefore, be beneficial to the company of it used its business-level and corporate strategies in marketing the noncarbonated drinks. Research has shown that carbonated drinks significantly contribute to weight gain and obesity. As a result, consumers prefer taking noncarbonated drinks. If PepsiCo produced more of these products, it would tap into the emerging market.
For the corporation that doesn’t operate in the international market, suggest one business-level strategy and one corporate-level strategy that the company could consider
Gullah Gourmet is the company that does not operate internationally. Instead, the company only operates in the United States of America. I would suggest the company to identify the marketing niches in the larger Americas. The company can expand its operations to the South America and Canada. Gullah Gourmet is currently enjoying a small market which only targets the locals and tourists. To expand the company’s market share, it should conduct a comprehensive market analysis that will help the company in discovering new customers in a larger geographical location. This will also give the company an opportunity to double its size.
Another proposal for the Gullah Gourmet Inc. is merging with an already established prestigious grocery store. One of the challenges that the company faces is lack of retail outlets in different parts of the country. If the firm merged or acquired an established grocery store, it could increase its distribution stores. An increase in the distribution stores would also help the company in reducing the overall product price. Some of the products that Gullah Gourmet Inc. offers are not seen in grocery stores. As a result, many people who are used to shopping for food products in the grocery stores do not consume the products. With such a merger, more customers would be realised, and both companies would benefit from the merger (McCormack, 2013).
Companies use different strategies to increase their level of business operations and revenue. PepsiCo Inc. which is one of the leading beverage companies in the world has continued to venture into new markets using their business and corporate level strategies. The company’s mission is to become the leading producer of beverages. Pepsi Co Inc. has succeeded through mergers and acquisitions with companies that have had a more enriched brand name and established markets. The companies that PepsiCo has acquired and merged with since its formation are companies that have had already established brands. Decisions on mergers and acquisitions are crucial decisions that have helped the company to continue producing financial rewards for its investors, employees and giving their consumers what they want. Gullah Gourmet on the other hand only operates in the United States. The company has no history of mergers or acquisitions, but it has been successful in building its size and revenue. Business and corporate levels strategies are critical to the success of the company. Since the company has succeeded in increasing its revenue and market share, it has become a target for mergers and / or partnerships which would benefit the companies involved.
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