International-Expansion Entry Modes by Acquisition

An acquisition is when one company purchases most or all of another company's shares

to gain control of that company. Purchasing more than 50% of a target firm's stock and other

assets allows the acquirer to make decisions about the newly acquired assets without the

approval of the company’s shareholders. Acquisitions, which are very common in business, may

occur with the target company's approval, or in spite of its disapproval. With approval, there is

often a no-shop clause during the process.

We mostly hear about acquisitions of large well-known companies because these huge

and significant deals tend to dominate the news. In reality, mergers and acquisitions (M&A)

occur more regularly between small- to medium-size firms than between large companies. Why

Make an Acquisition? Companies acquire other companies for various reasons. They may seek

economies of scale, diversification, greater market share, increased synergy, cost reductions, or

new nich As a Way to Enter a Foreign Market.

If a company wants to expand its operations to another country, buying an existing

company in that country could be the easiest way to enter a foreign market. The purchased

business will already have its own personnel, a brand name, and other intangible assets, which

could help to ensure that the acquiring company will start off in a new market with a solid base.

As a Growth Strategy. Perhaps a company met with physical or logistical constraints or

depleted its resources. If a company is encumbered in this way, then it's often sounder to acquire

another firm than to expand its own. Such a company might look for promising young companies

to acquire and incorporate into its revenue stream as a new way to profit.
 To Reduce Excess Capacity and Decrease Competition. If there is too much competition

or supply, companies may look to acquisitions to reduce excess capacity, eliminate the

competition, and focus on the most productive providers.

To Gain New Technology. Sometimes it can be more cost-efficient for a company to

purchase another company that already has implemented a new technology successfully than to

spend the time and money to develop the new technology itself and offerings.

An acquisition is commonly mistaken with a merger – which occurs when the purchaser

and the target both cease to exist and instead form a new, combined company. When a target

company is acquired by another company, the target company ceases to exist in a legal sense and

becomes part of the purchasing company. Acquisitions are commonly made by using cash or

debt to purchase outstanding stock, but companies can also use their own stock by exchanging it

for the target firm's stock. Acquisitions can be either hostile or friendly.

This is the example of Acquisition, Let's assume Company XYZ wants to acquire

Company ABC. Company XYZ starts to buy ABC shares on the open market, but once

Company XYZ acquires 5% of ABC, it must formally (and publicly) declare to the Securities

and Exchange Commission (SEC) how many shares it owns. Company XYZ must also state

whether it intends to buy ABC or just hold its existing shares as an investment.

If Company XYZ wants to proceed with the acquisition, it will make a "tender offer" to

ABC's board of directors, followed by an announcement to the press. The tender offer will

indicate, among other things, how much Company XYZ is willing to pay for ABC and how long

ABC shareholders have to accept the offer.

different price, use a "poison pill" or other defense to avert the deal, or find another company,

who hopefully will pay as much or more as XYZ is offering, to buy them.

If ABC accepts the offer, regulatory bodies then review the transaction to ensure the

combination does not create a monopoly or other anti-competitive circumstances within the

industries involved. If the regulatory bodies approve the transaction, the parties exchange funds

and the deal is closed.

Acquisition strategy involves finding a methodology for the acquisition of target

companies that generates value for the Maison Chateau rouge. The use of an acquisition strategy

can keep a management Maison Chateau rouge from buying businesses for which there is no

clear path to achieving a profitable outcome. Instead of simple growth, Maison Chateau rouge

must understand exactly how its acquisition strategy will generate value. This cannot be a

simplistic determination to combine two businesses, with a generic statement that overlapping

costs will be eliminated. The Maison Chateau rouge must have a specific value proposition that

makes it likely that each acquisition transaction will generate value for the shareholders. Some of

these maybe Maison Chateau rouge value propositions (strategies):

Diversification strategy. The company may elect to diversify away from its core business

in order to offset the risks inherent in its own industry. These risks usually translate into highly

variable cash flows which can make it difficult to remain in business when a bout of negative

cash flows happen to coincide with a period of tight credit where loans are difficult to obtain. For

example, a business environment may fluctuate strongly with changes in the overall economy, so

a company buys into a business having more stable sales.

Full service strategy. The company may have a relatively limited line of products or

services, and wants to reposition itself to be a full-service provider. This calls for the pursuit of

other businesses that can fill in the holes in the acquirer’s full-service strategy.

Industry roll-up strategy. The company attempt an industry roll-up strategy, where they

buy up a number of smaller businesses with small market share to achieve a consolidated

business with significant market share. While attractive in theory, this is not that easy a strategy
to pursue. In order to create any value, the acquirer needs to consolidate the administration,

product lines, and branding of the various acquirees, which can be quite a chore.

Low-cost strategy. The company has rapidly built market share through the unwavering

pursuit of the low-cost strategy. This approach involves offering a baseline or mid-range product

that sells in large volumes, and for which the company can use best production practices to drive

down the cost of manufacturing. It then uses its low-cost position to keep prices low, thereby

preventing other competitors from challenging its primary position in the market. This type of

business needs to first attain the appropriate sales volume to achieve the lowest-cost position,

which may call for a number of acquisitions. Under this strategy, the acquirer is looking for

businesses that already have significant market share, and products that can be easily adapted to

its low-cost production strategy.

Product supplementation strategy. The company may want to supplement its product line

with the similar products of another company. This is particularly useful when there is a hole in

the acquirer’s product line that it can immediately fill by making an acquisition.

Sales growth strategy. One of the most likely reasons why company acquires is to

achieve greater growth than it could manufacture through internal growth, which is known as

organic growth. It is very difficult for a business to grow at more than a modest pace through

organic growth, because it must overcome a variety of obstacles, such as bottlenecks, hiring the

right people, entering new markets, opening up new distribution channels, and so forth.

Conversely, it can massively accelerate its rate of growth with an acquisition.

Synergy strategy. One of the more successful acquisition strategies is to examine other

businesses to see if there are costs that can be stripped out or revenue advantages to be gained by
combining the companies. Ideally, the result should be greater profitability than the two

companies would normally have achieved if they had continued to operate as separate entities.

This strategy is usually focused on similar businesses in the same market, where the acquirer has

considerable knowledge of how businesses are operated.

Vertical integration strategy. The company may want to have complete control over

every aspect of its supply chain, all the way through to sales to the final customer. This control

may involve buying the key suppliers of those components that the company needs for its

products, as well as the distributors of those products and the retail locations in which they are

sold.

Maison Chateau rouge not using all that strategy because we know that the company sell

clothes and shoes brand . Maison Chateau rouge use Adjacent industry strategy. Maison Chateau

rouge may see an opportunity to use one of its competitive strengths to buy into an adjacent

industry. Maison Chateau rouge use the Nike strength to improve the name of Chateau business.

Their make a relationship with Nike to leading supplier of Jordan X shoes

Geographic growth strategy. Maison Chateau rouge may have gradually built up an

excellent business within a certain geographic area, and wants to roll out its concept into a new

region. This can be a real problem if the Maison Chateau rouge product line requires local

support in the form of regional warehouses, field service operations, and/or local sales

representatives. Such product lines can take a long time to roll out, since the business must create

this infrastructure as it expands. The geographical growth strategy can be used to accelerate

growth by finding another business that has the geographic support characteristics that the

company needs, such as a regional distributor, and rolling out the product line through the
acquired business of clothes and shoes product. Now. Maison Chateau rouge have market in

Japan, France ,Italy and more.

Market window strategy. Maison Chateau rouge see a window of opportunity opening up

in the market for a particular product or service. It may evaluate its own ability to launch a

product within the time during which the window will be open, and conclude that it is not

capable of doing so. If so, its best option is to acquire another company that is already positioned

to take advantage of the window with the correct products, distribution channels, facilities, and

so forth.
Advantage Expansion Entry Modes by Acquisition

Advantage by Speed. Acquisition is one of the most time-efficient growth strategies. It

offers the opportunity to quickly acquire resources and core competencies not currently held by

your company. There is near-instantaneous entry into new product lines and markets, usually

with a recognized brand or positive reputation, and existing client base. In addition, the risks and

costs typically associated with new product development can drop dramatically.

Big of Market power. An acquisition will quickly build market presence for company,

increasing market share while reducing the competition’s stronghold. Where competition has

been particularly challenging, growth through acquisition can reduce competitor capacity and

level the playing field. Market synergies are achieved.

New resources and competencies. Businesses may choose acquisition as a route for

gaining resources and competencies currently not held. These can have multiple advantages,

ranging from immediate increases in revenues to improving long term financial outlook to

making it easier to raise capital for other growth strategies. Diversity and expansion can also help

a company to weather periods of economic or market slump.

Meeting stakeholder expectations. In some cases, stakeholders may have expectations of

growth through acquisition. While not all stakeholders will insist on acquisition in particular as a

growth strategy, under nearly all circumstances, stakeholders are looking for returns on any

investment or other advantages for non-investing stakeholders. When there is pressure to

perform and meet expectations for returns, an acquisition can often yield results more quickly

than other means for growth.

can bring short-term gains due to assets stripping. Synergy between the surviving and acquired

organizations can mean substantial cost savings as well as more efficient use of resources for soft

financial gains.

Reduced entry barriers. Acquiring an existing entity can often overcome formerly

challenging market entry barriers while reducing risks of adverse competitive reactions. Market

entry can otherwise be a costly proposition, involving market research among other upfront

expenses, and take years to build a significant client base.

Next, It can help to fill-in critical service gaps. The marketplace is an ever-evolving

entity which requires businesses to be on their toes. Changing circumstances create gaps in the

services a business is able to provide to their target demographics. By implementing an

acquisition strategy, these businesses are able to continue providing core offerings to their clients

without a service interruption.

efficient method of obtaining needed assets. Many industries are seeing service gaps

because they have a shortage of needed talent. An acquisition strategy can help businesses

identify people with these talents, then work to acquire their services. Intellectual property is

another core asset that benefits from the implementation of an acquisition strategy. IP is actively

bought, sold, and traded as a way to make progress toward industry dominance.

provides an opportunity to create leverage. There are two ways to create leverage through

an acquisition strategy: cutting costs and balancing revenues. Mergers are a common component

of an acquisition strategy because it allows an organization to consolidate multiple operations or

resources that overlap into one specific entity. In return, these can increase the negotiating or
buying power of the organization. Revenue balancing occurs when new markets are acquired,

allowing for more products to be sold or prices to be raised. As part of the acquisition strategy,

companies can move to open new territories, reduce competition, or expand their customer base

through new sales opportunities.

It saves time. An acquisition strategy helps develop internal resources very quickly

because those resources are directly purchased. It’s like being hungry and wanting a hamburger.

If you go to the local diner, you can have one ready in a few minutes and do zero work to have a

meal. At home, you’ll have to do all the work, pay a similar cost for the ingredients, and create a

value for your time involvement. It’s easier to order the burger from someone else.

It reduces training costs. An acquisition strategy is able to reduce internal training costs

because you’re bringing in resources that you’ve acquired. These resources are already fully

developed. You can then use those resources to train others within the organization to diversify

the internal skill set of everyone. At the same time, you’re bringing in the customers, contacts, or

prospects that the experienced individuals, businesses, or brands have already developed.
 Disadvantage Expansion Entry Modes by Acquisition

The first disadvantages of is Financial fallout. Returns may not benefit stakeholders to the

extent anticipated, and the expected cost savings may never materialize or may take far too much

time to materialize due to a number of developing factors. These might include a higher-than-

anticipated price of acquisition, an unusually long timeframe for the acquisition process, lost of

key management personnel, lost of key customers, fewer synergies than projected and other

unforeseen circumstances.

Hefty costs. Under some circumstances, the cost of acquisition can climb steeply, well

beyond earlier projections. This is particularly true in situations of hostile takeover bids. In some

situations of runaway costs, the added value may not be enough to justify the cost in dollars and

resources that went into making the acquisition happen.

Integration issues. Integration of the acquired organization can bring a number of

challenges. Company cultural clash can erupt and activities of the old organizations may not

mesh as well as anticipated when forming the newly combined entity. Employees may resent the

acquisition, and undercurrents of anxiety and anger may make integration challenging.

Unrelated diversification. When an acquisition brings together diverse product or service

lines, there can be difficulties in managing resources and competencies. Management of

employees and departments can face extreme hurdles and the time necessary to address such

issues may deplete much of the value otherwise brought about by the acquisition.

Poorly matched partner. Unless he or she has extensive firsthand experience in

implementing acquisition as a growth strategy, a business owner who does not seek professional

advice in identifying a potential company for acquisition may target a business that brings too
many challenges to the equation. A failed acquisition can rob an otherwise healthy organization

of

Distraction from operations. When the acquisition faces too many challenges or the

timeline for completion stretches out longer than anticipated, too much of the managerial focus is

diverted away from internal development and daily operations. The post-acquisition organization

can be harmed due to lack of managerial resources, resulting in fewer synergies or at the least,

delays in savings realized from synergies.

Creates a clash of different cultures. When an acquisition strategy is being implemented,

there will always be a clash of cultures involved. It doesn’t matter if the deal happens through

contracts or a merger and acquisition process. When there are differences in culture that are

extreme, then problems are created in multiple departments. Even if you are clear about the

expectations of your acquisition strategy going into the process, there can be rogue elements who

attempt to derail it because they are dissatisfied with current events.

Hamper the strength of a brand. When a marketplace becomes confused, the strength of a

brand will eventually suffer. That is because the reputation of a business, multiplied by their

visibility, creates strength. An acquisition strategy affects this equation in multiple ways. A

strong brand may acquire a weak brand, then attempt to use the weaker brand’s equity as a way

to promote themselves in new markets. New brands that are strong regionally may be unknown

in another region. That is why a slow transition tends to be the best solution to implement during

an acquisition strategy.
Recommendation Acquisition Maison Chateau rouge

Acquisitions are good for business because Improved Cost Structure. Acquisitions are

good for Maison Chateau rouge to improve the cost structure of your business. One of the

primary benefits of engaging in an acquisition based growth strategy is an improved cost

structure. The improved cost structure arises as a result of building economies of scale,

leveraging purchasing power, improving efficiencies and other business performance, or simply

rationalizing underutilized business assets. These cost synergies are often the cornerstone of the

investment thesis and considered the most “likely” of benefits to be realized by the acquiring

company. But beware, simply because cost synergies have been identified does not imply they

are guaranteed to materialize. Some deals may actually have negative synergies, depending on

the industry as well as the specifics of the individual companies involved in the transaction.

Increased Cash Flows. Acquisitions are good for Maison Chateau rouge to increase cash

flow. A strong allure of pursuing acquisitions is simply to build a larger empire. And while the

desire to grow large for the sake of empire building is a not a recommended business strategy,

the ability to sustainably grow cash flows in a systematic way very much is. Acquisitions allow a

company to leverage both cost and revenue synergies, leading to increased cash flow. When

negotiated and structured appropriately, acquisitions can provide a positive stream of cash flows

day one, something brownfield and greenfield investments are unable to provide.

Higher Valuation. Acquisitions are good for Maison Chateau rouge want to increase the

value of your business. Acquisition provide a proven way to increase the relative valuation of

Maison Chateau rouge business. Growth through acquisitions provides a company a way to not

only grow cash flow, which results in a higher valuation, but to also increase the multiple on

which these cash flows are valued. While there are a lot of factors that influence valuation and
multiples, the simple fact remains that, all else equal, a larger company will command a larger

multiple than a smaller company.