Question

Identify the questions a manager must ask to formulate an appropriate business-level strategy, and explain each of them.

Identify the difference between a merger and acquisition, and provide an example of when each would be used.

Answer 1

A business level strategy definition can be summarized as a detailed outline which incorporates a company’s policies, goals, and actions with the focus on being how to deliver value to customers while maintaining a competitive advantage.The business level strategy describes the strategic planning and implementation activities that occur in order to set and steer direction for an individual business unit.

According to the Business-Level Strategies theory, there are two types of competitive advantage that an organization must choose between:

1. Cost Leadership: ensuring you cost less than your competitors.
2. Differentiation: ensuring you are different from your competitors.

Which one you choose with depend on market conditions and your unique set of core competencies.

• Cost leadership aims to increase market share by focusing on producing at low cost.

To achieve this, there are a few things you can do:

• Increase your profits by reducing operational costs
• Only charge industry-average prices
• Charge lower prices than your competitors Ofcourse, whether you’re charging average or lower prices for your products, you must do it while reducing operational costs to maintain positive margins. You will also need to have substantial capital to invest in efficient logistics, materials, labor, and the right technology.

Focus looks to dominate a small market segment by exclusively focusing on serving that segment (you can always add new segments later).

Focused Differentiation implies a smaller target customer base. The upside with this strategy is a greater capacity for the business to serve their customers with maximum efficiency. This strategy could also be referred to as a “unique” or “niche-focused” strategy.

The competition with the Focused Differentiation approach is the ability to supply the particular customer base in question with more unique and advantageous features. The main components of this strategy include:

• The selection of a profitable market subset
• A focus on the areas in which the competition shows weakness
• A focus on where product substitution is most difficult

The differentiation aims to grow market share by concentrating my making your product or service different and unique.

For example, designer goods and reputable customer service. This could even include designer goods at affordable prices, which integrates cost leadership. Differentiation also applies to those with a narrower market, like people who purchase organic produce only, despite higher prices.

As a competing business your goal is to add value to your products and/or services so that they stand out. Effectively implementing your differentiation strategy means that you’ve effectively gained your target customers to your products and/or services so that they stand out. Effectively implementing your differentiation strategy means that you’ve effectively gained your target customers’ trust and they’re willingness to pay a premium price. This ultimately affects your capacity to absorb higher operational costs and investments for your company’s future.

There are also two types of competitive scope than an organization must choose between:

1. Broad market: serving a diverse market.
2. Narrow market: focusing on a niche market.

Meaning

The merger means the fusion of two or more than two companies voluntarily to form a new company.

When one entity purchases the business of another entity, it is known as Acquisition

Minimum number of companies involved	3	2
Purpose	To decrease competition and increase operational efficiency.	For Instantaneous growth

Difference Between Merger and Acquisitions

A merger is the two or more companies come together to join forces towards a common goal. Acquisition, on the other hand, is the process by which a company takes control of another and the latter ceases to exist completely.

1. Title

When a merger happens, a new name is given. It could be coined by joining the companies’ names together or creating a new one. For acquisition, the acquiring company’s name continues to be used.

1. Terms

Mergers are considered friendly and out of a mutual decision by each of the merging companies while an acquisition is considered as either friendly or hostile, voluntary or involuntary.

1. Scenarios

In the case of a merger, two or more companies considering each other on equal basis come together and merge for a strategic decision. When an acquisition is on the table, the acquiring company is usually larger than the acquired ones.

1. Power

For merging companies, their powers are almost nil while for an acquisition, the acquiring company gets the ultimate powers and to dictate terms.

1. Governing Laws

A merger is surrounded by more legal formalities in comparison to an acquisition.

Examples of Mergers and Acquisitions in India

• Acquisition of Corus Group by Tata Steel in the year 2006.
• Acquisition of Myntra by Flipkart in the year 2014.
• The merger of Fortis Healthcare India and Fortis Healthcare International.
• Acquisition of Ranbaxy Laboratories by Sun Pharmaceuticals

Conclusion:- The few numbers of mergers can be seen; however, acquisition is getting popularity due to extreme competition. The merger is a mutual collaboration between the two enterprises in becoming one while the acquisition is the takeover of the weaker enterprise by the stronger one.

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