Growing through Acquisitions: The Successful Value Creation Record of Acquisitive Growth Strategies

-- Kees Cools, Kermit King, Chris Neenan and Miki Tsusaka

Mergers and acquisitions will continue to be an important component in building successful strategies for growth in the present competitive and globalized economy. But acquisitive growth will be successful only when executives use acquisitions to create sustainable competitive advantage. This article analyzes the performance of 700 large US companies separating them into three groups based on their level of M&A activity. It discusses three common strategies for creating competitive advantage through acquisitions such as reducing costs relative to competitors, acquiring necessary capabilities and building a new business model. It also explains that the companies need to develop capabilities like linking M&A to growth strategy, implementing high-definition valuation and realizing value through effective post-merger integration.

© 2004 The Boston Consulting Group, Inc. (www.bcg.com). Reprinted with permission.

Contract Theory and Strategic Management: Balancing Expectations and Actions

-- Shyam Sunder

Business firms as well as each of their subunits can be thought of as a set of contracts in which participating agents seek their own goals. Participants contribute resources, expecting to receive in exchange more than the opportunity cost of their contributions. For this system to work, the expectations of each individual must be in balance with what he/she is expected to contribute. In addition, the production technology of the firm must be capable of fulfilling such expectations in aggregate. Changes in factor and product markets continually alter the expectations and actions of the individuals, nudge them out of balance, and threaten the feasibility of the contract set. A strategic manager scans the relevant markets for incipient changes in environment, and redesigns and implements new contracts which balance the self-interest of the individuals with their changing expectations. Redesign and negotiation of contracts is complicated because people protect their self-interest. Many firms collapse when the managers fail to recognize and act upon the changes in business environment in a timely fashion. Some redesign efforts fail because managers do not elicit the cooperation of those who have the necessary knowledge and expertise and expect to be adversely affected by the proposed changes. The contract model of the firm provides a framework and perspective to reduce such failures.

© 2004 L K Academy of Entrepreneurship and Management. This article was earlier published in General Accounting Theory: Towards Balancing the Society, edited by M Dobija, Warsaw, Poland, 2004, pp. 231-249. Reprinted with permission.

Technology Strategy and Business Strategy: A Dyadic Relation

-- P K Banerjea

The word `Technology' is derived from the Greek word `Teche' which means knowledge and `logos' which means study; hence it is quite in order to say technology means `Study of Knowledge'. However, it has traveled a lot from its etymological meaning. The author has interviewed 16 CEOs during his doctoral research about the role of technology in strategic planning, in early 2000, and, out of these 16 CEOs, nine defined technology according to their perceptions. Three of them defined it as a process to meet customer needs, demands and aspirations. Out of these three, one referred it as a fulfillment of societal needs and continuous learning. Two CEOs mentioned about the scientific parameters and engineering skills, and the other one defined it as a design and development system with lesser human intervention, hinting at automation. So, it can be assumed that technology is a resource that is needed to meet the needs and aspirations of the customers, and it is a process of continuous learning, and it fulfills the societal needs with least human intervention. Finally, the chairman of a technology intensive company described it as a powerful force, second only to globalization. The word `strategy' is derived from the Greek language meaning a military commander, and it is described in the Oxford English dictionary as "the art of moving troops, ships and aircraft." In today's world of business, a warlike situation exists that needs to use technology as its main resource. The author tries to describe the dyadic relation between technology and business strategy, when one influences the other in a dynamic relation, that exists in the 21^st century. Today technological forces change the way we communicate, the way we care for our health, and the way we entertain ourselves. With the help of his practical experience as the CEO of a technology intensive JV, and a wide base of the latest research in the field of technology management, the links between these two strategies are established. Some of the graphics speak more than a thousand words.

© 2005 IUP. All Rights Reserved.

Sense-and-respond Supply Chains: Enabling Breakthrough Strategy

-- Karen Butner and Stephen Buckley

Companies are very keen to implement Supply Chain Management as a strategy to gain competitive advantage and improve on their bottom lines. Managing supply chain is becoming more challenging due to a continuous change in customer needs. Sense-and-respond supply chains can monitor, manage and optimize business exceptions and irregular events that occur within supply chains with a limited need for human intervention. This article explains the character of sense-and-respond supply chains and how to use the sense-and-respond supply chain process to provide visibility into supplier capacity plans. It also discusses how sense-and-respond strategies and capabilities can be used to optimize supply chain performance and offer many quantitative and qualitative benefits.

© 2004 IBM Corporation (www.ibm.com). Reprinted with permission.

Product Life Cycle-An Obsolete Concept for New Product Development Strategy in an Emerging Economy

-- Atanu Adhikari

Theodore Levitt and many subsequent researchers have presented Product Life Cycle (PLC) as a typical sales curve over time, from introduction to final withdrawal, divided into four or five stages. This might have been, to some extent, useful to the managers for strategic decisions during pre-liberalization era when markets and marketing thoughts were not concerned with fierce competition, sufficient direct and indirect substitutes, rapid growth of technology, regular change of economy, and consumer behavior. In this paper, PLC concept is critically examined and a model is derived which needs to be considered by companies for New Product Development (NPD) in an emerging economy.

© 2005 IUP. All Rights Reserved.

Case Study

The Procter & Gamble (P & G) - Gillette Merger

-- Ruchi Chaturvedi N

The combination of two best-in-class consumer products companies, at a time when they are both operating from a position of strength, is a unique opportunity.

- AG Lafley, Chief Executive Officer, P&G.

This marks the realization of an historic next phase of great opportunity for Gillette and also for P&G. It brings together two companies that are complementary in their strengths, cultures, and vision to create the potential for superior sustainable growth.

- James M Kilts, Chief Executive Officer, Gillette Co. (Gillette).

This merger is going to create the greatest consumer products company in the world. It's a dream deal.

- Warren E Buffett, Chairman and CEO, Berkshire Hathaway Inc., Gillettee's largest sharesholder.

Mergers that increase market share are generally productive because they increase market share and reduce competition. We don't think that the two companies combined will be any stronger, from a marketing point of view, than the two companies would have been if they were kept separate.

- Al Ries, Consultant, Ries & Ries Consulting, Georgia.

© 2005 ICMR. All Rights Reserved. For accessing and procuring this Case Study, log on to www.ecch.com or www.icmrindia.org