Merger, Acquisitions, and International Strategies
A business growth rate is directly influenced by the strategies that it undertakes. In essence, mergers and acquisitions are important strategies that position businesses in a more competitive platform. Nonetheless, just like any other business strategy, managers need sound advice before deciding on whether to have a merger or an acquisition. Noteworthy, a bad decision on performing a merger or an acquisition may be catastrophic to a company.
In a nutshell, a merger is a consolidation of two businesses into one. Basically, the two companies decide to operate their businesses jointly. Consequently, they share inventions, technologies, and personnel for their greater benefit. Importantly, the shareholders of the merged companies continue to exist in the new business (Ahlstrom & Bruton, 2009). On the contrary, an acquisition is a case where one business wholly buys another company. Notably, the acquired business ceases to exist. In addition, the employees of the acquired company are usually replaced or displaced by those of the acquiring business. Further still, the shareholders of the acquired company are bought out and they cease to exist.
In essence, international business strategies refer to tactics that a business adopts when selling its products in foreign markets. Since methods of doing businesses vary in different countries, a strategic plan is paramount to overcome the legal, language, cultural, political, and economic barriers that may exist. On a general view, the international strategies may include setting up a foreign subsidiary, merging, or acquiring a foreign business (Mukherjee & Basu, 2005). Noteworthy, the main purposes of forming business strategies are overcoming challenges in the industry, acquisition of resources, or overcoming institution and legal requirements. In light of this, this paper will focus on mergers, acquisitions, and international strategies, with respect to Tesla and Novartis companies.
Evaluate The Strategy That Led To The Merger Or Acquisition To Determine Whether Or Not The Novartis Merger Or Acquisition Was A Wise Choice. Justify Your Opinion.
Notably, the merger of Ciba-Geigy and Sandoz to form Novartis was a wise move. In addition, the continued interest of the company to develop new medicines, and to acquire businesses, or business licenses for the sale of specific medications is okay. Evidently, this is a prudent measure for ensuring the business remains competitive in both short and long term.
In brief, Novartis was formed by the merger between Ciba-Geigy and Sandoz in 1996. Basically, the business is based in Switzerland and has a history of over 200 years (Novartis, 2016). In essence, the business concentrates on three business divisions; pharmaceuticals, eye care, and generics. In addition, the business now had enough capital to conduct biomedical research. Of importance, the merger was informed by the desire of the two companies to two businesses to consolidate their interest and expand their business in health care. Furthermore, it a merger would provide them with resources and expertise to conduct more conclusive medical research that would lead to the development of new medication.
The $30.9 billion merger strategically positioned the business as the largest pharmaceutical company worldwide (Fisher, 1998). In addition, the business was able to enjoy benefits in improved research methods and development of new medication. Inasmuch as size is importance, the ability of a company to roll out new and innovative medication is what matters the most in this industry. Basically, after the merger, Novartis found itself with 85 drugs in its combined portfolio that were scheduled for roll out. Unfortunately, the business was faced with many cases of duplicated jobs, especially in the administration sections (Novartis, 2016). Consequently, the business retrenched over 10,000 employees which saved it lots of money. With increased research, the business was able to roll out three new drugs into the market. As expected, this led to increased profits and revenue. In brief, the business sales in the USA doubled. Overly, the business sales increased by 27%, operating income rose by 25%, and there was a recorded sales growth of 8% (Fisher, 1998).
Besides the 1996 merger, the business has aggressively continued to strategically position itself as a leader in the drug and pharmaceutical industry. For example, the business acquired Adumune Therapeutics and got licensing agreement with XOMA and Palobiofarma in 2015 (Novartis, 2016). Consequently, this broadened its interest in immune-oncology medication. In general, the business anticipates making huge profits once the cancer medications that were acquired are approved.
Identify One (1) Company That Would be a Profitable Candidate for Tesla to Acquire or Merge With and Explain Why this Company Would be a Profitable Target.
Importantly, when a business is forming a merger or an acquisition, it aims at strategically positioning itself to minimize cost, increase sales and profits. In light of this, Tesla Company should merge with Panasonic Company. Notably, Panasonic Company produces most of its batteries (Tesla, 2016).
Typically, Tesla Company specializes in the production of electric cars that are powered using lithium ion batteries. In essence, Panasonic is Tesla’s largest supplier of electric batteries. In addition, the company is also charged with a duty of ensuring that its customers have access to electric power charging stations. Accordingly, the Tesla should formulate proper strategies of ensuring that it has a reliable supply of the electric vehicle batteries, and there are adequate battery charging stations.
In order to ensure this, the company should merge with Panasonic Company. Basically, this merger will grant Tesla of a regular supply of batteries. In addition, Panasonic Company will ensure there are enough power charging stations in the country, and in major world cities. Consequently, this will enable the business to concentrate on its core objective of manufacturing and selling vehicles. Moreover, adequate supply of power charging stations will lead to more demand for Tesla vehicles. As a result, this will have an overall positive business impact on the company’s bottom line.
Briefly Evaluate Novartis International Business-Level Strategy and International Corporate-Level Strategy and Make Recommendations for Improvement.
Notably, business-level strategies refer to initiatives that the business undertakes within its internal operations. Basically, these strategies are aimed at enabling the business to gain a competitive advantage by focusing on specific products markets. In essence, these strategies include cost leadership, differentiation, and integrated cost leadership. In light of this, Novartis has developed strategic methods that make its products stand out from those of other competitors (Novartis, 2016). Basically, this is a differentiation tactic. In brief, the company brands all its products using its logo. Generally, this method enables the company’s medication to stand-out and be easily recognized by competitors.
Cost leadership, as well as an innovative pricing model, is an important strategy that the business has adopted. Notably, the business does not enforce patent and licensing regulations of its medicines in the least developed countries. In the same vein, the business subsidizes the cost of some of its medications to various buyers (Novartis, 2016). For example, the business sells Malaria medication at half the price to the public sector. In essence, the business strives to ensure everybody has access to medication. Further, realizing the need for affordable health care, the company also manufactures generic medicines. Basically, these medicines are cheap but effective. Consequently, they are accessible to most of the world poorest population.
Corporate-level strategies are tactics that affect the overall performance of the business. Ordinarily, Novartis uses a value-creating strategy for its corporate-level strategy. Basically, this method entails the business acquiring new businesses and diversifying its market. Noteworthy, the business acquired Adumune Therapeutics and got licensing agreement with XOMA and Palobiofarma in 2015 (Novartis, 2015). Importantly, the business hopes to expand on its immune-oncology field from these acquisitions. Noteworthy, the spread of cancers and tumors has been on the rise. Accordingly, the concentration of Novartis effort in finding medication for these diseases is prudent. Furthermore, cancer medicines are expensive, therefore, the company’s hopes of making cancer medication will add value to the business’ shareholders.
In addition, the business has diversified to the manufacture of generic medicines using its Sandoz facility (Bastien, C., & Serra 7). Notably, drug manufacturers usually have a patency right that gives them monopoly protection over the first few years after discovering a new medicine. On the contrary, once this period has expired, generic drug manufacturers and other competitors are allowed to manufacture the same medication. Evidently, this leads to a reduction in profits for the initial manufacturer. Importantly, in order to avoid such losses, Novartis owns the second largest generic drug manufacturing company. As a result, the company is able to make profits when selling both the cheap generic medicines and the more costly non-generic medicines.
For Tesla, Propose One Business-Level Strategy and One Corporate-Level Strategy That You Would Suggest the Corporation Consider. Justify Your Proposals.
In brief, the company should adopt product differentiation as its business-level strategy. Generally, all electric cars require a battery and a charging station. Nonetheless, the company can improve on its product by ensuring the cars battery are larger and last longer than those used in ordinary vehicles. Consequently, the company’s vehicle will have a reputation of traveling over long distances before they are recharged. Evidently, this will result in the company having a good reputation, and as a result having more customers.
On the same vein, the business should diversify its operations and start manufacturing non-electric and hybrid vehicles. Basically, this will enable the company to have all varieties of vehicles. Notably, the price of petroleum has been declining. In addition, there has been an increased use of electricity in business that used to operate on coal and oil. Ostensibly, this trend is expected to continue into the near future. In addition, there has been an increased supply of petroleum in the world due to the discovery of new oil wells. Accordingly, the price of petroleum is expected to decline in the near future (Breshidsky, 2016). Consequently, this trend espouses that the incentive for people to purchase the cheap to power electric vehicles may not be present in the long run. Furthermore, there are a lot of people who like driving petroleum powered vehicles. Worst still, there is a sizeable world population that does not have access to electricity. In light of this, the electric powered vehicle may not efficiently serve them.
In summary, a business strategy is an important aspect for all organizations. Importantly, it acts as a guide that systematically directs the business development plans. Consequently, all businesses should regularly develop new plans that will enable them to thrive in both foreign and local markets.
Ahlstrom, D., & Bruton, G. (2009). International management: Strategy and culture in the emerging world. London, UK: South-Western Cengage Learning.
Bastien. C., & Serra, T. (2010). Novartis, commercial strategy for success. Retrieved from http://openmultimedia.ie.edu/openproducts/novartis/novartis/pdf/Novartis.pdf
Bershidsky, L. (2016). Renewable energy isn’s about to doom oil. Retrieved from http://www.bloomberg.com/view/articles/2016-06-01/renewable-energy-isn-t-about-to-doom-oil
Fisher, L. (1998). Post-merger integration: How Novartis became No. 1. Retrieved from http://www.strategy-business.com/article/16383?gko=28081
Mukherjee, S., & Basu., S. (2005). Organisation and management and business communication. New Delhi: New Age International Publishers Limited.
Novartis. (2015). Novartis broadens immuno-oncology pipeline with acquisition of Admune Therapeutics and licensing agreements with XOMA and Palobiofarma. Retrieved from https://www.novartis.com/news/media-releases/novartis-broadens-immuno-oncology-pipeline-acquisition-admune-therapeutics-and
Novartis. (2016). Company history. Retrieved from https://www.novartis.com/about-us/who-we-are/company-history
Novartis. (2016). Innovative pricing. Retrieved from https://www.novartis.com/about-us/corporate-responsibility/expanding-access-healthcare/innovative-pricing
Tesla. (2016). About Tesla. Retrieved from https://www.teslamotors.com/about
Tesla. (2016). Tesla Gigafactory. Retrieved from https://www.teslamotors.com/gigafactory