Merger and acquisitions involve transferring or combining of different corporations that share the same entities to maximize their total profits. Most companies get mergers or acquisition with the intention of ensuring they can benefit within their particular enterprise through increased competitive advantage and growth of their operations. Mergers and acquisition have different structuring wherein a merger it involves two or more different industries who come together to form one whole industry. The acquisition, on the other hand, one larger industry purchases another company but a bit smaller and takes over its assets, equity interests, and stock. A company can acquire another either through buying its outstanding stock shares or purchasing the company’s assets. However, mergers and acquisition processes aim is to consolidate all assets and liabilities of the two companies under one entity. This paper will examine two companies, one that has no history of mergers and acquisitions (Nelson, n.d.) and one that has merged over the history (PepsiCo Inc). Although these companies have different outlooks on mergers and acquisition, they both benefit from corporate level strategies and quality business.
Corporations frequently acquire other or merge with them. Sometime the corporation themselves get acquired by other companies. The companies use various strategies to determine their decision for merger or acquisition. Various factors must be taken in to account to establish whether the merger or acquisition is a wise choice.
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PepsiCo, Inc is one of the leading consumer product industries in the world having the most valuable and important trademarks. In the soft drink business, it is the second largest with 29percent in the United States. PepsiCo was created through the merger of Frito-Lay and Pepsi-Cola. Frito-Lay Company is the leading company in salty snacks in the world with a 56 percent market share in U.S. Pepsi-Cola is known for its Diet Pepsi, Pepsi-Cola, and Mountain Dew soft drinks while Frito-Lay has Doritos, Fritos, Ruffles, Tostitos among other snacks. In the late 1890s, Caleb Bradham, who was a pharmacist created Pepsi-Cola company. Elmer Doolin formed Frito Company in 1932 which then merged with Pepsi-Cola in 1965 to create PepsiCo and Frito-Lay. Pepsi started its expansion beyond the soft drink market and merged with a snack food manufacturer. The aim of the merger was for Pepsi to expand its assets and introduce greater varieties other than soft drinks and PepsiCo for the first time since its creation achieve 1billion in the sale and they moved their headquarters in Purchase, New York. With the aim of expanding its operations, PepsiCo later acquired other companies such as Pizza Hut Inc. in 1977, in 1990 Gamesa, in 1998 Tropicana Products, in 2000 South Beach Beverage Company and Quaker in 2001 (PepsiCo).
Quaker was doing a great deal in providing their basic services, and it was the best acquisition that PepsiCo that has ever made. A company can get into acquisition for different reasons such as getting rid of inefficiencies, increasing market share, and power, penetrating new geographical area or combining complementary resources. PepsiCo acquired Quaker to combine its resources with Quaker. Quaker has their sports drink, Gatorade which brings $2 billion in a year. This purchase was the best acquisitive decision was in which was in 2001, Quaker which gave PepsiCo the control of all products including Gatorade the best-selling sports drink in the world. Gatorade revenues tower PowerAde a drink by Coca-Cola by approximately $300 million. This merger placed PepsiCo as the best-selling beverage company after Coca-Cola as it doubled its share market. The acquisition cemented PepsiCo’s position, and Coca-Cola is feeling threatened by the increased revenue PepsiCo is acquiring. Some many factors influence acquisitions and mergers; market expansion is, however, the primary forces that drive these companies. It was a great deal for both industries since Pepsi has a snack division which Quaker has too and PepsiCo is generating approximately $43.5 billion in the new revenues. The company has also expanded its market share; it is distributing its products and services to over 200 countries (PepsiCo).
Some corporations remain successful without having to make alliances. Throughout their extended history the stay successful and outdo their competition using their own internal strategies. However, the companies still have numerous opportunities for merger or acquisitions that they could profitably exploit.
Deborah Nelson created Gullah Gourmet Inc in 1994 and now has its headquarters in Charleston, South Carolina. This company offers homemade gourmet bagged food and is famous for desserts, bread, dressings, meals, and sauces. Their food is quick and easy to prepare and very delicious. The preparation is very simple and quick and can be done at home; one can go ahead with bottling, canning and jarring these food products are easy too. This company has only one retail location, an online store and customers buy at local markets. Gullah Gourmet is commonly marketed to people who love southern foods and tourist. Over the years the company has never been involved in acquisitions or mergers and operates solely in the United States (Nelson).
For a company to grow to survive among its competitors in today’s world business environment, one of the best decisions it can make is merging with another company or purchasing other companies. Mergers or Acquisition will help the company reduce its business costs and grow revenue. Gullah Gourmet would make a great company for a larger company to merge or acquire with. The acquisition will increase the market share and popularity of Gullah Gourmet especially when identified with a leading food company. It will also increase its customer services. Since it is has succeeded on its own, it would be better if it purchased another company such as Coastal Heritage to increase its market share and revenues.
If Gullah Gourmet merges with it will be a great combination as they compete in the same geographical area. Their market target will be pleased with this acquisition as they can use coupons and discounts to purchase products.
With globalization many corporation operate internationally and thus other than their domestic business they have oversees business that require a globalized strategy at the corporate level. However, they need to frequently improve their strategies.
An international strategy happens when a company sells its products or services outside the domestic market. A business and corporate strategy are important for the success of business. Therefore, a firm should employ a corporate or business strategy that will have provide new sales and profits opportunities. PepsiCo specializes in consumer products and therefore employs products and services differentiation as the business level strategy. The company seeks to overwhelm its profit margins and achieves this through mergers and acquisition. Mergers and acquisition reduce overheads, direct costs and increase organic growth. The company has grown mainly through M &A, a broad portfolio of products: it started as a soft drink company. Currently, there are snack foods, sports drinks, other beverages, etc. The company provides its customers with a variety of products making it as a strong brand. PepsiCo invests new products to maintain their competitive advantage. The company engages in pricing strategy where they offer relatively low prices for their products to increase demand and market share through mass production of its products and differentiating their products through marketing and taste. For example in 2009, although the company was experiencing recessions, they lowered their prices to their new products and continued offering discounts. All the business units of the company such as PepsiCo Europe, Middle East, and Africa follows differentiation business level strategy to guide their functionality. PepsiCo has continued using differentiation business level strategy as a way of separating from their competitors. The company employs innovation of its services and products to help the customers maintain their loyalty and increase their profit margins. Innovation business level strategy ensures the company benefits through the rewards of the high profits without the same market share. The differentiation and innovation of products as a business level strategy have worked to PepsiCo favor and is keeping its competitor like Coca-Cola on the toes. With the new technology, companies including food and beverage industries keep on changing and therefore this strategy guarantees that the company will survive in future. Differentiation, on the other hand, increases profit margins for the company.
Corporate level strategies include diversification linked or constrained. Corporates that engage in linked diversification strategy enter into new businesses which are not certainly related to their current business but has some connections with the other industry. Companies that use constrained diversification optimize their assets effect since the own the businesses jointly (Hill, Schilling, & Jones, 2017). PepsiCo Inc. employs a corporate strategy through product diversification to provide value to customers. These great corporate strategies decisions have helped the company become successful and known worldwide. Soon it might merge or surpass Coca-Cola, the leading beverage company in the world.
Sometimes a corporation chooses to operate local, without global ambitions. They use business level strategies that facilitate success in their local regions.
Human resource management, financial performance, allocation of resources and m&a are part of a corporate level strategy. There are various strategies that a firm can adopt to increase its revenues and its business operations levels. PepsiCo through mergers and acquisition has ventured into many new markets, and Gullah Gourmet is taking the same path could also succeed. Gullah Gourmet Inc. has been successful on its own, and the company has increased in size and revenues. If the company employs great business and corporate level strategies, it can gain produce and a larger sales market. Gullah Gourmet adopting mergers and acquisition as a business level strategy will reduce the company’s overheads, direct costs and increases its organic growth. Gullah Gourmet is not internationally known, but with the right business strategy, it will increase its target market.
Companies perform mergers and acquisitions in the hope of accruing an economic gain. However, for this advantage to take place both the companies should be worth more together when merged than when apart. Companies that merge have the advantage of eliminating inefficiencies, achieving economies of scale and combining complementary resources. There are other reasons for acquisitions such as increasing the market share by buying the competitors companies or when getting into new geographical areas. Gullah Gourmet has succeeded on its, and with time this company will grow to begin merging or acquiring new partnerships. Companies adopt different business and corporate level strategies increase its revenues and its business operations levels. For example, it is right to conclude that it is through mergers and acquisition that PepsiCo has succeeded and if Gullah Gourmet does the same it will improve. Following PepsiCo history since created, it has managed to acquire and merging with companies that have brought more growth and an enriched brand name. These great corporate and business strategies decisions have helped the company to succeed over the years. The company is continuing to produce financial rewards to employees, investors, communities, and business partners in which they operate.
References
Hill, C. W. L., Schilling, M. A., & Jones, G. R. (2017). Strategic management: Theory . Boston, Massachusetts: Cengage Learning
Nelson, D. G. (n.d.). Gullah Gourmet. Retrieved from http://www.gullahgourmet.com/pages/aboutus
PepsiCo. (n.d.). PepsiCo, Inc.-Company Profile, Information, Business Description, History, Background Information On PepsiCo, Inc. retrieved from http://www.referenceforbusiness.com/history2/40/PepsiCo-Inc.html
