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Assuming rationality from all players, mergers and acquisitions deals originate out of specific strategic corporate requirements. In reality, the advisors (both legal & financial) and middlemen also play a significant role in the original activity. Acquirers / targets may focus on players for a potential acquisition. Buying players implies horizontal integration. There are lot of risks (financial as well as operational) involved and challenges in mergers and acquisitions face by company which is acquiring and target companies as which are listed below:-

• Synergies sometimes do not generate real cash flows as expected.
• Financial Risk arises from the amount of debt (taken to acquire other corporation) in a company’s capital structure.
• Impact of changing debt on valuation.
• Increase in debt increases value over surge in interest tax yield.
• Interest Tax shield gain is partially offset by increase in cost of equity.
• There are complex processes involved in mergers and acquisition. It is difficult to compare betas measured against different indices due to differences in composition of index.
• Changing financial leverage affects the systematic risk that shareholder’s face.
• Risks when the acquirer and the Acquirer-Target merging entities are in two different countries.

For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. (Example: Facebook acquiring WhatsApp)

There are many reasons a company considers before engaging in mergers or acquisitions, which Facebook has evidently accounted for in its strategic decision. One major factor is the massive user base of WhatsApp, which boasts around 450 million users since its launch in 2009, indicating an exponential growth trajectory. Facebook's own messaging service had only reached about 100 million users in the same timeframe, so acquiring WhatsApp presented a significant opportunity for expansion and market dominance.

Future growth potential was another critical consideration. WhatsApp adds approximately 1 million users daily, which exceeds Facebook’s growth rate, signaling a promising avenue for revenue increase. The synergy potential between Facebook and WhatsApp is particularly high—Facebook's Messenger app has struggled to match WhatsApp’s popularity and user engagement levels. The acquisition allowed Facebook to consolidate its position in the mobile messaging industry and extend its reach.

The valuation of $19 billion paid by Facebook demonstrates the expected future cash flows and strategic value of WhatsApp to Facebook's core business. The acquisition also aligns with Facebook’s broader objective of integrating various communication platforms to maximize user engagement and advertising revenue. By acquiring WhatsApp, Facebook also mitigated competitive threats from other messaging apps like WeChat or Line, which had begun to erode its share of the global messaging market.

The strategic decision was rooted in the recognition that WhatsApp’s user base, rapid adoption rates, and future growth prospects provided a compelling case for acquisition. Moreover, the technological synergy and the ability to leverage Facebook's advertising platform offer long-term value. Despite the risks involved in such multi-billion dollar deals, the strategic fit and growth potential justified Facebook's decision, making the acquisition a prudent move in capturing future digital communication trends.

Proposal for a Profitable Company for Acquisition or Merger: Publix Super Markets

In considering a profitable candidate for acquisition or merger, Publix Super Markets presents a compelling opportunity. Established in 1930 and now a Fortune 500 company, Publix operates more than 1,000 stores across Florida, South Carolina, Georgia, Tennessee, and Alabama, with retail sales surpassing $27.5 billion in 2012. Known for exceptional customer service, employee ownership, and a broad product range, Publix has demonstrated steady growth and resilience in the competitive retail sector.

One strategic rationale for a merger or acquisition involving Publix is its significant market presence in the southeastern United States. Merging with another regional supermarket such as Bi-Lo would create a stronger combined entity, capitalizing on complementary geographic footprints and customer bases. The synergistic benefits could include increased market share, improved purchasing power, operational efficiencies, and enhanced brand recognition.

By merging with Bi-Lo, Publix could expand its footprint into additional markets, diversify its revenue streams, and enhance competitiveness against national and regional competitors like Walmart and Kroger. The consolidation would facilitate cost reductions through shared distribution channels, centralized procurement, and optimized staffing strategies. Additionally, the combined entity could invest more heavily in online grocery services, delivery options, and loyalty programs, aligning with contemporary retail trends.

Moreover, both companies emphasize quality products and exceptional customer service, supporting the hypothesis that a merger would sustain and strengthen their commitment to consumer satisfaction. It would also pave the way for technological investments in inventory management systems, supply chain logistics, and e-commerce platforms, which are critical for future growth.

From a financial perspective, the merger would potentially create synergies amounting to improved profitability, increased shareholder value, and long-term sustainability. The strategic move aligns well with the industry's dynamics, where scale and operational efficiency are crucial for competitive advantage.

Evaluation of Apple Inc.'s International Business Strategies and Recommendations

Apple Inc. exemplifies a highly effective international business-level strategy centered on innovation, premium product positioning, and global supply chain integration. Its approach hinges on designing cutting-edge technology and delivering high-quality products, which are manufactured primarily in China and assembled through strategic partnerships with firms like Inventec Corporation. The company's international corporate-level strategy leverages globalization to maximize market reach and operational efficiency.

Apple's globalization strategy involves locating production in cost-effective regions while maintaining design and marketing dominance primarily in the United States. This approach allows Apple to optimize cost structures, benefit from favorable exchange rates, and access diverse talent pools. Apple’s global reach is supplemented by its localized marketing and sales channels, which adapt to regional preferences and regulatory environments. The company's strategy of segmenting markets by developing specific product variations and marketing campaigns ensures consumer appeal worldwide.

To improve its international business strategy, Apple could further focus on strengthening its ecosystem by offering localized services, such as localized app stores, regional content, and tailored pricing strategies. Expanding its repair services and after-sales support in emerging markets like India and Africa could increase customer loyalty and revenue streams. Additionally, substantial investments in local manufacturing facilities and R&D centers could bolster regional presence and reduce lead times.

On the corporate level, Apple should pursue other international alliances with local tech firms to diversify its supply chain further, mitigate geopolitical risks, and foster innovation collaborations. For example, establishing joint ventures or strategic alliances in growing markets like India could facilitate market penetration, compliance with local regulations, and customization of offerings.

Remaining competitive requires Apple to innovate continually not only in hardware but also in services like cloud storage, streaming, and augmented reality applications. Offering free or discounted services in emerging markets could serve as customer acquisition strategies, increasing consumer retention. Furthermore, emphasizing sustainability and ethical sourcing aligns with global consumer preferences and can enhance brand reputation.

Proposed Strategies for a Non-International Company: Southwest Airlines

For a company like Southwest Airlines, which currently operates domestically within the United States, adopting both business-level and corporate-level strategies for international expansion could lead to substantial growth. A focused international business-level strategy would involve expanding flight routes to strategically selected international destinations, leveraging its cost leadership advantage in the airline industry.

The company should target markets with high demand for low-cost travel options, such as Mexico, Canada, and tourist-heavy destinations in the Caribbean. These markets offer opportunities for lower-cost entry points, allowing Southwest to utilize its efficient operations and minimal ancillary services to attract price-sensitive travelers. Service differentiation could be achieved through offering competitive fares, flexible scheduling, and high-quality customer service specific to regional preferences.

At the corporate level, Southwest should pursue diversification through strategic alliances or joint ventures with local airlines to navigate regulatory environments, establish brand recognition, and optimize operational logistics. Establishing a regional hub in an international market with high growth potential, such as Mexico City or Toronto, would enable Southwest to develop a robust route network and economies of scale.

Furthermore, investing in digital infrastructure to streamline booking, check-in, and in-flight services in new markets would be essential for delivering a seamless customer experience. Implementing targeted marketing campaigns emphasizing affordability and reliability would appeal to both business and leisure travelers in these regions.

Overall, these strategic initiatives would enable Southwest to expand its footprint internationally, reduce dependence on the US market, and capitalize on global travel trends. By emphasizing cost leadership, operational efficiency, and strategic partnerships, Southwest can position itself for sustainable international growth in a highly competitive industry.

References

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