Mergers and Acquisitions

At a time when globalization and consumerism patterns have turned out to be the determining forces in the market, organizations mergers and or acquisitions are very critical in maintaining the market capitalization, sustainability and subsequent developments.  Through organization mergers or acquisitions, new focus is easily developed while more resources are made available towards implementing key changes to suite the market demand.  From his study on mergers and acquisitions, Astorino (2009) recommendations appear to cohere with those of DePamphilis (2008) who indicated that the new entity easily reduces the non-constructive competition.  This paper presents a critical review of the merger that led to formation of Royal Dutch Shell Group, the giant oil company. 
The Onset and Demand for the Merger
   
Royal Dutch Shell Group was formed at the onset of the 20th century from the merger of the Royal Dutch Petroleum Company of Netherlands and the Shell Transport and Trading Company of Britain by combing their resources.  As Grant (2008) reports, the merger has globally been referred to as the largest joint venture in the world.  Owing to the fast rising demand of petroleum products in the globe, Marcus Samuel sought to expand his market for kerosene especially in the Far East.  It particularly became an effective window of opportunity following the opening of the Suez Canal (Harwood, 2006).  On the other hand, the Kessler August led the Dutch Company in exploring oil fields in the Far East especially in Sumatra.  As Donald (2009) explains, both companies got into fierce competition mainly to supply the strategically repositioning countries and automobile industry prior to the World War I.
   
To address this competition, the two companies combined their resources and agreed to operate as the Royal Dutch Shell Group.  In his view, William (2009) consideration that the merger lacked a strong basement to counter emerging major forces in the petroleum market would perhaps have been considered a riddle during tat time.  However, this consideration came out to be true as more forces emerged in the market latter in the merger progression. 
The Emerging Structure in the different Systems
   
According to Harwood (2006), the need and articulation of mergers in the society is based on their holistic need to formulate a common unit which guides their operations mainly through assimilation of common objectives.  However, this notion is one of the hardest to not only constitute, but articulate.  At this point, Grant (2008) appears surprised with the model that Royal Dutch Shell Group Took.  Unlike it would have been expected of the new merger to create a new centralized mode of operation, the same was not true.  The two mother companies retained the two separate identifications in their major operations.  Indeed, even the shares in the capital market traded separately.  From a critical point of view, Harwood (2006) wonders how indeed it could have been considered a merger with only divergent considerations.
   
Management of Royal Dutch Shell Group as Grant (2008) indicates sought to establish a highly integrative system where key players were represented in the management.  Particularly, the original mother companies formed the major baseline and therefore determined the model that would be followed in running the widely spread system.  Besides, the structure was further expanded to smaller holding companies which were equally affiliated to the different mother countries.  As Grant (2008) further indicated, the merger had other companies that the branched its key operations to coal, gas and other chemical orientation to diversify the returns. The expanded structure further consisted of over 200 operating companies spread in 100 countries. Interestingly, as - World Bank (2005) puts it, some of the local affiliated operating units such as the Shell in the United States, Shell Cambodia and Shell Bahamas assimilated some form of independence in their marketing and other operations. 
Coordination and Control of Merger
   
The essence of forming any merger as William (2009) argues is the need to infer stronger guidance and create focus in operations.  Royal Dutch Shell Group management was executed through the committee of managing directors (CMD) with members derived from both mother companies.  Though its chairmanship rotated between the two companies, key decisions were made by the committee a consideration that latter came to haunt the merger as more competition set in (Grant, 2008).  Besides, the execution of the executive power mainly from the CMD was further articulated through over 200 operating companies which made it to assume a highly decentralized outlook.  Notably, by mind twentieth century, Royal Dutch Shell Group was experiencing key problems related to its operations as it became hard to coordinate the highly decentralized operations in the management.  A matrix structure was therefore assimilated to harmonize the regional and as well as the functional core commonalities amidst the emerging competitors after the Second World War (Chase, 2006).  While the strategy was indeed seen to be timely as World Bank (2005) reports, its articulation was hard because the management was highly biased and indeed divided at the grassroots.
Strategic Management of the Merger
  
 Since its formation, Grant (2008) credits the progress of the merger to the strategic management assimilated by the group company after 1960s.  From the previously assimilated management matrix, the short term focus of five years was shifted to a long term consideration of extended twenty years and therefore making it easier to project the possible issues proactively and effectively addressing them.  In addition to that, the vision was expanded while reviewing the propositions and requirements of a merger.  At this point, World Bnk (2005) records that it dawned to the companys management that most of its competitors were fast emerging due to their flexibilities that made reaction to the market forces much easier.  However, even with this understanding, the CMD indicates that it could not do much as the grassroots companies were still basing their operations on the successful past when competition was indeed very minimal.  As the role of the committee of managing directors shifted from planning to orient the future of the company with the different outsets, William (2009) argues that the regional operating companies were required to harmonize their operations to reflect the key objectives of the organization.
Analysis of the Royal Dutch Shell Group
   
Royal Dutch Shell Group merger has been referred to as one of the most successful merger in the 20th century mainly due to its fast growth that was assimilated after its formation.  However, though this consideration has great element of truth as William (2009) indicates, it has also formed a center of a major debate among the emergent scholars who are opposed to it.  While linking its operations that were mainly based on the prevailing environment during its formation, Grant (2008) argues that its outlook and operations were indeed very complex.  
Diversification and Value Consideration in the Merger
   
Grant (2008) indicates that the mother companies managements sought to facilitate their ability to promote operations and therefore dominate the existing non-colonized market niche.  At this point, the need to linkup and operate as a team as opposed to running individually was considered to have the following effects.  Harwood (2006) argues that it gave the management a stronger grip and confidence towards approaching the fuel exploration outlook and marketing.  Royal Dutch Shell Group therefore managed to evaluate the need to articulate its goals from a common standpoint. 
Notably, this merger consideration was sudden and therefore failed to allow the two companies enough time to reconsider their structures for the operations.  In his view, Straub (2007) indicates that managers and leaders should be able to select the best method that an organization can use to excel depending on the prevailing conditions. 
   
Coming together as Straub (2007) further indicates created a room for an expanded visionary orientation for the company.  Immediately after the new company was formed, new branches were easily developed at the local and international market.  By the last decade of the 20th century, the company was operating in over 200 countries worldwide.  Indeed, though the merger was considered as a platform for only addressing petroleum exploration and its marketing globally, Astorino (2009) the efficacy of the operations further led to the need of venturing into other products such as natural gas, plastics and real estate operations. For instance, the metal mining company in Billiton, the nuclear reactors in the Gulf and Witco Chemicals polybutylene company ownership made Royal Dutch Shell Group operations to be envied by many (Grant, 2008).

Resources Consolidation
    One key evident aspect in the operations of the Royal Dutch Shell Group as a merger was its emphasis on the resource consolidation.  According to World Bank (2005), the ability of any organization to evaluate and create an avenue for resources consolidation is very critical for success to be achieved.  Though it was clear to the mother companies that their operations could easily flourish due to the highly reduced level of competition, it was possible to view the extra hidden potential that could be harnessed by merging.  In all regions of the Royal Dutch Shell Group involvement as Grant (2008) reports, key investments were critical to reduce emergence of new traders in the industry. 
   
During the companys major restructuring at the onset of the 21st century, the committee of the managing directors indicated the idealness of the original merger ideology to consolidate the resources together.  Exploration of new oil wells in the Far East and the Middle East could not have been possible if it was approached by a single company.  With major contribution valued at 60 for the Dutch based company and 40 for the British Company, Straub (2007) argues that it was easier to team up and fully utilize the newly opened Suez Canal while increasing their supplies to the different countries insatiable demands (Grant, 2008).  Further essence of the resources consolidation was the inherent ability to participate competitively in all countries.  According to Astorino (2009), the resources consolidated anchored its easy entry into new markets either through exploration such as in Nigeria, Venezuela, Oman and Canada or in marketing the products in Europe and the United States.  

Competitive advantage in the Company   
 Organization managements are based on the need to colonize greater markets and therefore derive the needed competitive advantage.  Indeed, as Chase (2006) records, appears to have dawned well to the Royal Dutch Shell Group mother companies as they sought to reduce the overall production costs by emphasizing on consolidation of resources and therefore benefiting from the economies of scale as well as reducing unhealthy competition between them (Grant, 2008).  As Chase (2006) and Grant (2008) continue saying, the new Royal Dutch Royal Group created an inherent outlook after the merger which created the sense of efficacy and guarantee to their consumers.  As a result, their competition with emerging companies was easily counted in wining petroleum exploration and supply to different countries and other consumers.  The widespread existence of the company in the almost all the countries further facilitated its ability to meet more consumers with greater efficacy.  Towards mid of the 20th century, the company had positioned itself effectively and was referred as the largest petroleum company in the world.
Change Assimilation
   
The ability to cite the need for improvement in an organization remains a critical element in its operations at all levels.  Royal Dutch Shell Group could be credited in citing the need for change and effectively orienting its operations to create a competitive advantage. However, from its formation Straub (2007) argues that change assimilation failed to holistically create the long focus for the new venture operations.  According to organization change management theory by Kurt Lewein, the merger would have undergone key refreezing to generate a new structure and as platform for latter continued improvement.  However, though it has been considered a success especially from the initial massive returns, it could not survive latter forces.  As a result, the merger led the company to suffering key threats from the emerging players that easily threatened to outdo it in the latter decades of the 20th century.
   
It is from the above discussion that this paper concludes by supporting the thesis statement, at a time when globalization and consumerism patterns have turned out to be the determining forces in the market, organizations mergers and or acquisitions are very critical in maintaining the market capitalization, sustainability and subsequent developments. It came out from the discussion that Royal Dutch Shell Group was formed to facilitate effective operations at the production and marketing level. However, its internal orientation did not effectively change and operated as two units.  As a result, though it made key returns after its merger, the organization could not survive emerging forces of latter 20th century.  Therefore, it was an unsuccessful merger and required key restructuring, review of its mission and coordination to achieve higher profitability.

REPORT ON THE CONSTRUCTION DESIGN ADOPTED BY DIAGEO PLC TO FACILITATE EFFECTIVENESS IN ITS MANUFACTURING DEPARTMENT

This report analyzes the manufacturing department of Diageo Plc a consumer drinks Production Company with a global customer reach. The analysis of the department is done to reflect the different stages that are involved in the production of its brands and the inherent designs and construction requirements required to ensure an efficient flow of the different processes in the production process. To aid in the analysis, the manufacturing process of one of the famous brands has been analyzed with a specific regard to design and construction demands. In addition, the human resource requirement required in the different stages has been highlighted with reference to their input at different stages and also in their expertise of handling the different production stages.

Analysis of the Manufacturing Department of Diageo Plc
Diageo is rated as the largest multinational consumer alcoholic drinks producer producing beer, spirits and wine globally. Diageo is derived from a Latin words dia (day) and a Greek word geo (world). Its name symbolizes its global reach with its brands mission being utilization everywhere everyday (Diageo, 2010). The company is headquartered in London, England at the City of Westminster and its total revenue in 2008 was 10,643 million.

The company is listed in two of the biggest stock exchanges the New York Stock Exchange and the London Stock Exchange where it constitutes the FTSE 100 Index. The company was formed in 1997 through a merger between Grand Metropolitan Plc and Guinness Plc. Its major brands are beer such as Guinness, Tusker and Harp Lager.  In addition, it produces common Scotch whiskeys which include Johnnie walker, Cardhu, Black  White, Glen Eglin etc. Its wines include Sterling Vineyards, Beaulieu Vineyard, dynamite etc (Diageo, 2010). As of 2009, the company was the biggest whisky producer in the world with two grain distilleries and 28 malt distilleries spread across the globe. In this report, an effort will be made to analyze the inner details of the operations of the production department of Diageo, in specific reference to its global brand Guinness.

Construction for Efficient Manufacturing
The manufacturing department in all the companies production plants aims to produce high quality consumer drinks produced and developed from the mind set of their customers. The department is a highly technical system overseeing the various chambers, instrumentation and technology involved in the production process. The production process consists of intricate designs that necessitate the effective flow of the various chemical processes and stages. As such, the designs are made to effectively capture the desired outcomes of producing high quality products and at the same time achieving peripheral desired goals such as efficient disposal of wastes. In a recent move, the company has adopted designs that enable the total reuse of its wastes, for instance in its plant in Illinois.

To maximize value to their global customers, the company has invested heavily in both human and physical resources. The business relies on satisfied customers and as such, their manufacturing performance highly influences their market outcomes. In a bid to maximize and produce high quality consumer drinks, the company collaborates with technology and consultants who research and proposes the necessary installments needed by the plants to produce high quality products. Most recently, the company linked with Informance International to oversee its enterprise manufacturing intelligence solution in its facilities in Illinois and Maryland, US. The manufacturing process for different brands is essentially different and as such, this report will focus on the inside construction and manufacturing logistics and processes that are involved in producing one of their worlds best known brand, Guinness (Cygnus, 2010).

Guinness was originally made in Dublin Ireland. As of 2010, the company that produces the largest volume of the brand in the country is Guinness UDV producing approximately 4 million pints of the brand every day.  The brand is made from four main ingredients namely barley, hops, water and yeast. It is approximated that over 90,000 tones of barley are used annually, of which 10 is produced locally in Ireland.

The construction of the various interconnected chambers is made in such a way that all the chemical processes are customized within well structured physically interconnected chambers. As such, construction, guided by the chemical processes ensures that tools are placed along a chain that ensures an effective movement of products during the processing stages. The first process involves the conversion of hard barley into malt which is a crunchy and edible material. The process involves steeping the barley in water, after which it is dried.  The malt is first crushed and then mixed with roast and flaked barley. The resulting solution is a product referred to as grist. The grist produced is weighed and then added and mixed with hot water at temperatures of approximately 66 degrees Celsius.  The resulting solution, which is a slur, porridge like substance referred to as wort is afterward sieved. The residual after filtration is separated through the processing machinery and is processed and used as cattle feed. The filtrate after filtration is a clear liquid, sweet in taste, which is then placed in giant copper kettles for further processing.

The next step involves the addition of hops, which gives the stout its bitter taste. Upon addition, the mixture is boiled for approximately 90 minutes after which it is conveyed to the fermentation chamber.  Fermentation is a biological process which occurs naturally when yeast is introduced in the rich presence of carbon IV oxide. The fermentation is allowed to take place for a number of hours after which the mixture is left to naturally undergo maturation.  Maturation is allowed to occur for several days after which a second (secondary) fermentation is performed on the mixture. The whole processing, fermentation and maturation process takes about ten days. The fermentation process is done analytically to ensure that the product attains the right level of carbon dioxide which produces the creamy head famous with Guinness. At this point, the product is considered ready and is hence taken through various tests, analysis and tasting. Before packaging into kegs, the product is tasted again and if it is certified as quality, some amount of Nitrogen is added to the product.

The nitrogen gives the famous drink its smoothness and creaminess for which the brand is famous for. 
Despite the production process seeming flawless and linear, a great deal of efforts, care, control and expertise is involved in producing the brand in its quality as it is known today. In all manufacturing plants, the company has established a TQM, total quality management system that is responsible for following up the step by step procedures until the final product is produced (Diageo, 2010). Due to its customer oriented ness, TQM looks at the product from the view point of customers. As such, it ensures that every aspect of the product is adhered to the letter to ensure compliance to their internal standards.

To aid in efficient production, both human and technological resources are utilized at different production stages to ensure that the product meets compliance. To meet quality standards, the company has invested in innovation and according to the company website innovation forms a fundamental part in Diageos growth strategy. In regard to production innovation, the company employs over 180 people dedicated to innovation in both the processing stages and further chain distribution systems. The team is responsible for focusing on the companys liquid development, technology needs, packaging and running the overall brand research initiatives

Topic Are German Banks Riskier than European Banks

Banking risk is basically the probability of the occurrence of an unexpected contingency that has the possibility of creating an uncontrolled cashflow.  It is important to understand the fact that there exist a clear difference between banking risks and banking uncertainties. While risks are directly attributed to the a business cycle or general company failures, uncertainties are factors that are beyond the control of the banking institutions and may include global financial crises, political instability and calamities. Risks are there therefore directly a management issue that a bank should have in place strong measures to curb their possible occurrence (Lecture 4).
   
The main types of risks that banks face in their everyday operation are quite diverse and may include but not limited credit risks normally involving debtors who fail to meet their contractual obligations, market risks that are associated with price fluctuations, liquidity risks in the event that the assets fail to recover their costs when put up for sale, and interest rate risks that results from sudden changes in exchange rates. Other forms of banking risks include possibilities of banking frauds, operational risks and the possible loss of reputation (Lecture 4).   

The banking sector in Germany faces credit related risks that has been the biggest concern not only amongst the industry players but also within the political and labor circles. This very high credit risk has seen high rates of contraction of the gross domestic product with subsequent results of massive layoffs. European banks are equally exposed credit risks especially in the Eastern Europe and Spain. This situation has forced major European banks to write off bad debts totaling to nearly 100 billion pounds. Though the risk factor is not so sudden with the European banks, it is nonetheless clear that real banking risks do exist and may actually result in very huge financial losses (Evans-Pritchard 2010).

Review of relevant literature and theory
It is generally agreed that banking risks are real both in Germany and in Europe. While several risks may be facing the banking sector of the two study countries some which may be similar while others are country specific, it is clear from this analysis that credit risk remain the single biggest challenge to banks both in Germany as well as in Europe. The case with most European banks may not be so pronounced as compared to the cases of Germany. This is attributed to the very high rates at which the banks write off the bad debts. The main risks that are associated with the European banks are related to credit risks with the banks in which the government has stakes mostly affected (Harrison 2009).

The risk situation in Germanys banking sector continues to face more intense credit risks specifically compounded by the poor global economy and unstable financial markets. According to the Central Bank reports, German banks risk facing bigger debt write-offs unless they significantly increase their capital. According to the Deutsche Bundesbank, most of the Germans banks will most probably face billions of losses on security products unless the global economy and the financial markets make a significant recovery.
This situation has compelled the government to come up with rescue strategies aimed at reviving the nearly collapsing banking sector that would see investors loose billions of money. However, the governments possible rescue is dependent on the approval of the European Union regulators. The regulators are however not in full support of the excessive state aid to the banking sector. The Commission holds to the view that banks should instead focus on strengthening their capital bases by giving fresh guarantees to the existing shareholders (Smith 2009).

The main solution to the German banking risks is seen to lie in possible future write-offs until such a time that there would be substantial recovery in the global financial markets and the entire world economy. The banking sector and especially the smaller banks remain significantly vulnerable to interest rate risks especially the upward turn in interest rates. The responsibility of reducing the major banking risks in Germany is seen to lie in the ability of the European Central Banks to develop strategies for exiting stimulus policies. The long-term consequences of the banking risk crisis according to Bundesbank may result into prolonged periods of low interest rates that is likely to impact on other strategic sectors like the insurance industry whose ability to meet future obligations may be greatly threatened (Smith 2009).
T
hough the banking risks in Germany have for a long time remained a big concern, experts are for the opinion that the problem has mostly been compounded by lack of transparence and failure to disclose financial details. However the risks seem to be less harmful than they are actually feared with the signs of stability both in credit and liquidity. The possibility of the market turbulence and a stronger euro to spring up economic growth will significantly reduce the risks of the banks in Germany (Landler 2007).

The most prudent solution to the risks that are associated with German banks will however lie with the ability of the European Central Bank to stabilize the interest rates, and for the affected banks to write off their leveraged loan portfolio on the value of assets as well as the mortgage backed securities (Landler 2007).
The credit risk has equally been a toxic issue for the European banks as well. Indeed the global banks have been compelled to write-off nearly half of their bad debts especially in the Eastern Europe which remain to be seen as a subprime debacle. The corporate debts in Europe have significantly risen to nearly 94 per cent of the Gross Domestic Product, and the default cases continue to be on the increase (Evans-Pritchard and Bruno 2009).

The European case may even be made more complex in the event that countries start competing with each other on the rescue programs for their banks and end up diverting state aid. This would have the effect of a bloated budget deficit which at present is almost hitting a 13 percent figure of the Gross Domestic Product. While government support to ailing banks is important, it should not be carried out on a scale that raises concerns about financing problems (Evans-Pritchard and Bruno 2009).

While Europe in general might seem much safer from bank related risks, western backs that have for a long time done well in Eastern Europe are currently facing a difficult time given the fact that the major European economies are currently in recession and most of their large banks have cut down on lending both at home and abroad. As a result, the Western banks are faced with the possibility o increasing nonperforming loans and will need to seek recapitalization. This problem has further been compounded by the fact that the institutional investors in the Western Europe mainly banks and insurance companies have big shares in the East European Debts. This means that the Eastern banks cannot get capital infusion from the Western governments that are already straining to pay stimulus packages for their own social safety nets (Schwartz 2009). 

The risks that are associated with the banking sector remain real both in Germany and in Europe. Though the magnitude of risk may vary from one country to country and from bank to bank, the common feature according to this analysis remains the credit risk that cuts across the entire banking sector world wide. This has made policy makers to recommend that a close specific bank diagnosis. It is however clear that failure to address this problem may only compound the crisis. While aiding of the ailing banks has for long been the most preferred approach, it is important that the market place and its dynamics play a leading role in differentiating the banks and allow those that are sound enough to continue their operations without key changes while the unsustainable banks are significantly restructured (Posen and Veron 2009).

Methodology and Data
In a study the methodology section is one of the crucial areas to be tackled. This is due to the fact that it forms the basis of the results of study findings. A study can be faced with big challenges due to a wrong choice of the method to be used. To avoid this good planning of the method is essential and more in order to get reliable results. The four categories of quality management in a study were highly considered. These include validity, reliability, ethics and rigor. Reliability of a study is its ability to have consistence in results. This is done on controlling the sample by stratifying the population to get a more representative sample. Validity is the ability of a scale to measure what it is intended to measure but not going beyond the topic of the study.

The subjects of analysis in this study include details on banking risks of major banks in Germany as compared to the risks faced by key banks in Europe. This study has utilized quantitative research method. The data was collected from different banks and banking consultants both in Germany and in Europe. This was edited so that relativity in banking risks could be analyzed by working out mean, medium and mode, percentages and other measures of central tendencies have also been worked out.

This study has been conducted through quantitative data analysis. The data was collected from different banks both in Germany and in Europe. The data obtained was edited for errors and to separate useful information from less useful ones. The data was then coded for easy analysis. The data was analyzed by working out relevant measures of central tendencies before finally drawing conclusions.

Results and Discussions
From the analysis of the banking risks of the sector both is Germany and in Europe, it is evident that the banking sector has for a very long time been bound by numerous risks. These have however not been brought to the forefront given the nondisclosure policy that most banks tend to pursue. This analysis has however been able to indentify several risks including market risks, interest rate risks, credit risks, market policy risks, e-banking risks among others. Aspects that are associated with uncertainties including political instabilities and calamities have however not been classified as risks since that are not management related issues.

The dominant risk that cuts across the board and that has posed true risk to the banks for a long time is the credit crisis. This has been more pronounced in the Eastern Europe and Germany where there has continually been a trend to lend out especially to institutional borrowers. The trend in global economic recession has compounded the problem of debt crisis in the two countries. The other crisis that closely followed debt crisis is the interest rate crisis. This is because continuous fluctuations in the world market economy and the global economic crisis has made this crisis to keep on confronting the banking sector in these two countries.

The other risks that the banking sector faces both in Germany and in Europe relates to banking fraud which is slow but significantly gaining predominance, operational risks, the possible loss of reputation, liquidity risk, and systematic risks normally as a result failure in the banking system. While certainly banks are worse hit by the banking crises in Germany, other have been able to manage the associated risks and continues to do very well in this sector. At the same time, some banks have also been adversely affected by the banking crisis in Europe. This similarity in scenario clearly indicates the existence of banking risks in the two countries. It is therefore only prudent to categorically argue that all banks face banking risks whether in Germany or in Europe.

Conclusions and recommendations    The results of this analysis indicate that risks associated with the banking sector are bank specific and country specific. This means that any individual bank may be confronted by its own nature of a crisis that cannot necessarily be categorized as a general problem within the country. At the same time, each country is faced by its own economic conditions that are likely to trigger a unique kind of crisis within its banking sector. It is therefore not prudent to say that German banks are riskier than European banks.
   
While banking crises continues to be a concern to most governments especially when it touches on state owned institutions, the trend in the past has always been on the banks to bail out the ailing institution leading to very heavy constrains on their national budgets by creating huge budget deficits. It is even more pronounced where risks that are associated with debts weigh very heavily on the Gross Domestic Product of a country. Clear regulatory policies should therefore be pursued by countries to ensure that the levels of banking risks are significantly reduced.
   
Since banking risks are management related concerns, it is important that individual banks pursues policies that would ensure prudent management of their financial resources as well as avoid overinvestment in loan portfolios that have subjected many banks to credit crisis. Instead banks should strive to pursue policies that would ensure they retain the confidence of the existing shareholders and to ensure stability of their capital base at all time. Where banks consistently display poor performance that subjects investors to heavy banking risks, the governments should step in with regulatory measure to protect the investor from possible investment losses.

Company Analysis of Wal-Mart

Lecturer  Wal-Mart is a large chain, departmental store a household name in the United States but also has subsidiaries in Mexico, Brazil, Japan and a few other countries. Wal-Marts mission is
Our first responsibility is to provide all consumers
(1) The best products and services with guaranteed satisfaction under one roof.  Wal-mart provides a wide array of products like toys, electronics, groceries, jewelry, ladies, men, and childrens apparel, and hard goods
(2) At reasonable prices.  We will continue to offer scholarships to deserving high-school graduates in hopes of providing students with a well-deserved education
Adapted from httpfaculty.uwstout.eduadekolaaSTRAMGTpowerpointsWal-Mart20-202000.ppt. 

As aptly stated in its mission statement, Wal-Mart offers a whole assortment of goods and services at very low prices. In most cases prices are much lower than the prevailing prices you would find in most shops in the area.

Marketing and Management Strategy
Michael Porter described three ways in which a company can be at a competitive advantage these are product leadership, customer intimacy and operational excellence. Wal-Marts marketing strategy is centered on aggressively cutting down working costs and passing the cost savings to the client. The frugal culture, established by Walton, also plays into Wal-Marts success. The company has been criticized for the relatively meager wages and health care plans that it offers to rank-and-file employees. It has also been accused of demanding that hourly workers put in overtime without pay. Store managers often work more than 70 hours per week. Wal-Marts competitive advantage therefore lies in operational excellence. Wal-Mart aims for market leadership in the retail market, expansion in the US and abroad, fostering a positive brand and diversification to other retail and service sectors.

Financial Performance
Based on financial data from MSN Money central  Wal-Mart has recorded a steadfast growth in profit for the past 5 years. In general its financial data is very impressive as depicted below
20052006200720082009Total Revenue284,310.0312,101.0348,368.0378,476.0    405,607.0     change911877Gross Profit64,656.071,296.080,780.087,957.095,086.0     change1013987Net Income after Tax10,731.011,732.012,614.0    13,269.013,753.0 change77565Operating Expenses17,300.018,713.0    20,497.021,952.0    21,952.0 change89678

Based on Wal-Marts financial data obtained from MSN Finance, Wal-Marts financial objectives will include
Reduction of costs and increasing productivity
Expansion into new markets
Bigger bargaining role with suppliers
From the balanced scorecard, the achievement of these four objectives will ensure that Wal-Mart operates in line with its mission statement, to offer low prices and reduce costs.  Bigger bargaining roles with suppliers will put Wal-Mart in the position to demand lower prices from suppliers, and thus suppliers will cut their costs as well. Further use of technology to improve efficiency in internal operations will help to cut costs as well.

In conclusion, Wal-Mart continues to be a market leader in the United States retail industry. It has built and maintained its position through cost cutting measures and expansion and diversification to new markets. In the future Wal-Mart will have to find more apt methods of cutting costs as their costs continue to increase relative to their gross profit. This can be achieved through further application of technology to make operations efficient.

Research in Motion

RIM is the company behind the ever popular phone known as Blackberry which has now become an industry leader when it comes to serious corporate email systems. The company has built up repute for a reliable and secure system which provides complete end to end solutions for mobile messaging services. The success of Blackberry is so phenomenal that its not a surprise that other competitors are quickly coming up with services which are somehow similar to what RIM had been offering for years.

History  Evolution
The company which was founded in 1984 by a 23 year old university student had reached a market capitalization of 69.4 billion by 2008. Due to a reputation based on security, organizations and companies which needed a secure environment for wireless message transmission were early adopters of Blackberry and thus were the companys largest customers.

From start the strategy of the company had been to target the corporate clients and thus with this focus in mind the company has been offering numerous packages and services specifically tailored to the corporate lifestyles. Moreover with the first come advantage when it comes to push email, the company had more than 100,000 enterprise customers. The real revenue drivers for the company had been the complete Blackberry wireless solution which included wireless devices, services and services.  Looking deeper into the revenues one can could see that more than 70 of the revenue came from the handset sales followed by service (18), software (6) and other revenues (3).  This basically shows that the handsets are they key to success for the company and thus innovation is the only way forward.

Ever since its first launch in 1999, numerous models of Blackberry handsets have come to the market with each one different and better than the previous ones. The early ones were only messaging devices with no voice capabilities but later on both of these services merged to what we see nowadays. 
The companys strategy has also witnessed variations over the years. Initially Blackberry was only targeted to the serious corporate road warrior who needed emails on the go. Apart from this the company only targeted the large corporations and governmental departments who needed security and reliability.
This philosophy has changed over the years as more and more individual users are using these devices and have become a status symbol of some sort. Many celebrities and famous people are now seen carrying one of these devices in their hands which is a testament to this.

The overall handset designs have also changed over the years. Starting from the dull looking serious minded handsets of the early 2000s, one can now see the sleek and shiny new Bolds and Curves which offer more than just email and voice calls. This is true as more and more Blackberry devices are being bought by the younger generation which not only uses the popular email features but increasingly use them for the social networking applications.

Therefore this sort of a trend shift has put up new challenges for the company. Blackberry which meant only serious business back in the early 2000 now is a fashion symbol and thus in order to cope up with this sort of a transition, RIM needs to carefully plan and predict its future moves as the market for smart phones is becoming cluttered day by day.

Environment  Industry
The overall smart phone industry has seen a lot of changes in recent times. Even though RIM was the first to come up with two way messaging system, currently a lot of devices are in stores which offer lot more than just email and voice and thus all of them are competing for the same market. Leading the way in the smart phone category is the Nokias Symbian platform which it specifically tailored to meet the corporate requirements. The first smart phone by Nokia was launched in 1996 named Nokia Communicator 9000. A number of devices have since then been launched. Among other things the most direct competition that Nokia is giving to Blackberry is through its E- Series line of mobile sets.

The second competitor is the Apple iPhone. iPhone has been a revolutionary and has totally transformed the smart phone arena ever since its launch in 2007. The iPhone recently incorporated corporate email system through the Microsoft Exchange system and thus now poses a serious threat to the Blackberry. Moreover with its large number of application through its Appstore, the iPhone has changed the industry standard.
The third competitor for the Blackberry is the Windows Mobile. Although some claim it to be a dying platform but nonetheless it still holds a considerable user base which specifically targets the corporate class. Therefore this poses a direct threat to the Blackberry. The last significant competitor for the Blackberry is the Google Android based devices. Although launched in 2008, the android is quickly gaining market share due to its open source characteristics and more importantly with a strong backing of Google. Therefore it is safe to assume that Android is here to stay and thus Blackberry needs to pay a close check.
The most popular operating system in the smart phone market is the Symbian OS. Symbian has the largest share in most markets worldwide, but lags behind other companies in the relatively small but highly visible North American market. This OS is owned jointly by Nokia, Ericsson, Sony Ericsson, Panasonic, Siemens AG and Samsung. As of 2009 it holds 50.3 of the market share.

The Blackberry OS holds the second position in the smart phone operating system market share with 20.9 market share as of 2009. This is followed by the iPhone OS with 12.7 after that comes the Windows Mobile OS with 9 market share. Google Android has managed to grab 2.8 of the whole smart phone market share as of 2009. This OS, although very new and in its early stages promises to give developers access to different aspects of the phones operation. This basically lends many to predict that Android may very well be the most popular OS featuring in the smart phone market.

Living in such a tough environment, RIM has to keep playing its cards right in order to remain an active force and increase its market share. In order to do this it needs to capitalize on its strengths. This means that RIM should need to focus more aggressively on its corporate email package as it still is its main revenue driver in services segment. Moreover with no OS having a dominant position in the market, the coming few years are still a hot battle ground for the smart phone market. In such a scenario RIM needs to constantly invest in the
RD segment.

Innovation and leadership are the key ingredients for a successful company. Blackberry needs both of these qualities if it wants to remain a dominant force in the coming years. For this the company needs to constantly invest in the RD segment. Although RD has been a constant factor of the company but this needs to be increase if Blackberry needs to succeed in the upcoming smart phone market.

Porter Five Forces Model
The porters five forces model for the smart phone industry will give a strategic assessment of the competitive position of the industry. Using these five forces, one can get a clearer picture of the level of competitiveness that exists in the current smart phone market.

The five forces are as follows
Existing competitive rivalry between suppliers
Currently the smart phone market is experiencing intensive competition with different suppliers marketing aggressively to promote their products. Leading the way in this race is RIM with more than 42 market share. Apple comes second with 25 share with the third one being Microsoft having 19 share as of Dec, 2009. Google Android has a 5 share but this figure is set to grow huge in the coming years. The rivalry is especially more intensive with the big 2 players i.e., Blackberry and iPhone. Once Blackberry was the cornerstone of corporate emails but as soon as Apple was launched back in 2007, it quickly managed to take up the Blackberrys market.

Threat of new market entrants
The current smart phone market is already saturated with a few big players i.e., Blackberry, iPhone, Windows Mobile and Google Android (Nexus One). Moreover there is an intense competition going on between these players. Thus in such circumstances the threat of new entrants is low. This is also due to the fact that there is a high barrier to entry and thus its not easy for a new entrant to come into the market.

Bargaining power of buyers
Buyers have an immense power in the smart phone segment. The reason being that the buyers can choose from a variety of different handsets and models and thus can choose among them. Moreover the buyers have a relatively low switching cost as one buyer can switch from a blackberry to an iPhone very easily. Therefore the buyers are the king when it comes to their bargaining power.

Bargaining Power of Suppliers
Suppliers have a comparatively low bargaining power. The reason being that with an intensive competition going among the big players such as Blackberry and iPhone, the suppliers are thus left with little bargaining power and the final authority rests with the consumer on whether to buy a certain product.

Threat of Substitute Products
The threat of substitute products does exist for the smart phone market. Substitutes for the smart phone are the Tablet PCs i.e. Apple iPad, Hp Slate, the PDA i.e. Palm and the Netbooks. Of these there, the Tablet PCs and the Netbooks are likely to give a sort of a tough time for the smart phone segment in the upcoming years. The reason being that as the technology is changing so rapidly the time may not be far away when we will see smart phone and tablet PCs combined together.

Key Success Factor for RIM
14 Million Blackberry Subscriber account base (2008).
6 Billion plus annual revenue of RIM.
More than 42 share of Blackberry in the smart phone market (As of Dec, 09).
Industry leader in secure corporate email systems.
A large RD department with dedicated teams working on to develop innovative devices.
RIMs cryptographic and security systems are known in the corporate world for their stability and security.
Low employee turnover rate means dedicated and motivated teams that enable the company to attain optimum productivity level.
Large variety of Blackberry devices for every class segment of the society.

Industry Value Chain
One of the advantages to RIM that set it apart from the other Smartphone manufacturers prior to the launch of the iPhone was that it proudly made both the operating system along with the hardware of the handset in its in house facilities. This basically enabled RIM to vastly customize a design of a device according to its need. Then came Apple with the same model and things were never the same again. Apple also came up with its own OS along with its own hardware manufacturing system.

Looking from an industry point of view the overall Smartphone industry is following the same sort of approach. Most of the manufacturing of the hardware is done in house. After the manufacturing the operating system is also developed in-house e.g., RIM developed its own OS for its line of handsets and Apple developed its own OS for the iPhone. Once the handset has been manufactured plus the software installed the smart phone is sold via wireless carriers. This is sort of an industry norm and most of the smart phone manufacturers dont sell their handsets directly to the customer with the exception to Google with its Nexus One handset which it only sells via its website

Supplemental Strategies (Mergers, Acquisitions, Vertical Integration)
The company has been instrumental in adopting several supplemental strategies in order to ensure that it remains a leading force in the Smartphone arena. The first and foremost principle that RIM had adopted ever since its launch of the Blackberry device is the vertical integration. The company incorporates in-house manufacturing of the hardware plus its own brand of OS for its line of smart phones. This gives the company a vast deal of flexibility that enables it to create totally innovative devices which would be more suited to its target market. This is probably one of the reasons that Blackberry is still the market leader in its class as such domination in every aspect is difficult to challenge.

Another strategy that RIM had adopted is acquiring small startups and firms that would enable it to give more service to its clients. One example of this is its acquiring of Slangsoft, a high tech startup in Israel that was in the process of developing the code that allowed the ability to display and input Chinese characters. This would enable RIM to access the Asian and other foreign markets.

International Expansion
Until 2008, RIM had been keeping its RD operations at its main facility in Waterloo, Canada. Although some with some work being also done in the United States and UK but the company needs a more global approach if it wants to have a broader appeal. In such times of high competition, the company needs to plan out an aggressive approach in order to ensure a universal appeal. For that matter it plan to base its operations in Europe, Middle East and Africa. The same applies for the RD facilities and for that matter the company plans to adopt the same sort of rigorous skill set requirements for the induction of foreign graduates.

Going global is not easy for any company and it comes with its set of problems. Language barriers, cultural differences are just some of the issues that the company faces. For technological firms another threat is the leak of the source code to rivals. Working in countries with little or no intellectual property laws, this has become a sort of a dilemma for any company which plans to expand globally.

Therefore for RIM going global was a very serious dilemma as the blackberry source code had to be protected. Moreover the companys setup is very much centralized as most of its engineering RD teams are still based in Waterloo and going global means interacting with different teams around the world in different time zones. On the bright side, the sheer number of new users that the company to tap into once it ventures into foreign markets is also very much enticing. Therefore the company will have to eventually expand its presence globally but this process should be undertaken in a proper manner.

Future Prospects
With the smart phone wars now entering a new era with the arrival of the latest entry by Google in the shape of the Android, RIM needs to play its cards right if it wants to be the world biggest manufacturer of Smartphone and its related services. In order to do that the company should start to increase its global presence plus increasing its RD budget.

Among other things the company should venture more into the consumer market as this is the way forward for the smart phone industry. By bringing up more consumer savvy models, RIM could seal its place in the top. Touch screen technology which iPhone perfected back in 2007 is needed to be adopted in a better way as the future is in this. Apart from this the company should improve its OS and should tailor it towards the younger generation as is the case with the iPhone and Android. The online Appstore should be improved on the basis of the Apple Appstore as online apps hold a lot of potential. Lastly the company should increase its Blackberry Connect service to other devices such as Netbooks and tablet PCs as these could be a source of additional revenue for the company.

Googles Buyout of Double-click

When Google decided to buy Double-click it knew that the diversification move can back-fire. For much of the early success, that the online search titan had achieved, was because of the focus on a singular service offering which was providing users with links to popular search items. The 3.1 billion dollar deal that was struck in April of 2007 meant that Google had an entry into the lucrative advertisement and market campaign business.
   
The strategic move that Googles CEO Eric Schmidt made at the time of Double-clicks deal must be explained only after we really understand the business model that was established by Double-click (DC). DC is a market leader in digital marketing and it provides services that allow companies to have banners, adverts and other marketing tools on websites that are visited by the target audience. The reason why smart marketing was so successful at Double-click was because DC uses the DART technology which gives it the ability to send a cookie to a users computer. This cookie helps the company generate important demographic and other kinds of information about the many users.
   
Google ended up paying a bigger price tag than it was initially expected. The buyout price was 20 times more then the expected revenues of 150 million dollars at DC during that time. One wonders why Google paid so much extra money to buy this marketing business. The answer to this question lies in the diversification strategy that Google and other technology companies have accepted as the way forward if survival has to be guaranteed.
   
In terms of the potential that the company offers this was a good purchase and worth the cash considering there were other buyers such as Yahoo and Microsoft with substantial paying powers. Secondly, the deal was worth the sum because the advertising markets future was related to the technology that was being developed and used at DC. The fact of the matter is that Google had to enter this lucrative market, especially with the clientele that DC had, it was only time before one of the big three would step up and bought the company it was Google who did it. DC had Time Warners Sports Illustrated, Viacom, MTV networks and some other big name clients and that meant that for Google, which had made billions out of the small text advertising market, it was time to make the next big leap in the revenue model.

In terms of the strategic viewpoint, we must understand that in the technology sector, higher revenues are dependent on higher volumes and economies of scale. This is because the amount of money spent on research and development is only recouped over a period of time. Therefore, Googles extra billions for DC are justifiable as they were paying for the RD and the goodwill that the marketing company has built with its clients.
   
In recent times, we have seen that Google and Microsoft were vying to buy Yahoo though the deal could never materialize this gives us an important talking point i.e. is acquisition or merger the only way for technology companies to expand The answer for the time being is yes. What we mean is that in the short-run we can not expect Google or Microsoft to come out with another ground-breaking and revolutionizing technological product, therefore, to maintain market share, these companies have to buy brilliance and great ideas in the short-run and look to develop their own great ideas in the longer-run.
   
Google must understand that expansion and diversification through acquisitions might be considered a strong and aggressive way of moving forward but such steps come at a price and companies like Google must be willing to accept the disadvantages of acquisitions along with the large amounts of benefits that come with them. Google must analyze factors such as will the future cash flows justify the acquisitions of companies for billions of dollars Secondly, Google must also look at the integration aspect of an acquisition because eventually all these small companies that are being acquired today will need to be integrated later once they form an important part of Googles operations.
   
The Googles move to buy DC is an important aspect to the technology sector. It provides an exit strategy to young entrepreneurs with great ideas to move in and out of the market with the desired results. On the other hand, we also see the strength of the top three companies in the technology sector and how they can become collusive oligopolies in a few years time. In a nutshell, the Googles buyout of Double-click was seen as a necessary move so that the company could maintain its profitability because if it was not bought by Google somebody else would have done so.
   
Google must understand that just because it has got enough free cash flows and great ability to borrow from banks that does not mean it should go on and buy low value or even costly companies. The company must resort to applicative tools such as the McKinsey Pentagon. Frameworks such as the one stated above give companies a fair idea about how the company will do financially in the future for the acquirer. Google should not only go for great ideas because there are many of them around but it should also look at market practicality and the ability of an idea to be successful in the market.
   
If Google can factor in both options available to buy potential new market firms and the costs of an acquisition, then it can master the art of buying reasonable good companies, turning their ideas into as big success as Google itself did.     

Analysis of the Case  
The Googles move has long-term implications for the technology sector this is because companies in the technology sector will now be more dependent on mergers and acquisitions in a climate of great competition and cut-throat cost cutting. Companies like Yahoo, Google and Microsoft have been locked in extreme competitive battles for the past few years and they are trying their best to eat each others market share in a bid to drive the other out of the market.
   
How do companies maintain competitive edge and advantage over their competitors in such an environment One definite answer is related to buying companies that have a competitive edge or merging with those companies that can protect your market share and give you financial cover in the long-run. Although some might term Google buyout as expensive and even unethical as it tried to takeover a business just by offering irresistible amount of money, the reality is though quite opposite. The fact is that when technology companies are formed, the owners plan the exit strategy and ensure investors that large returns would be gained once the company is up and running.
   
Research and text material shows that when companies go for limited and related diversification, the financial rewards are the highest compared to any other combination of achieving expansion. The move by Google was essentially linked to diversification i.e. the company expanded by acquiring another company which had a similar consumer base but an entirely different business model. The value addition in this case is mostly on the technological and customer base level this is because the move was meant to benefit from the impressive costumer list of DoubleClick and at the same time also transfer valuable technology features from the companies marketing techniques.  
   
Another important thing to understand is that companies like Google pay such large amounts because they have a fair idea of the future potential of a company like Double-click. In terms of the finances, the deal was fairly well balanced and it had advantages for both parties. If we look at the deal from Googles stand point we realize that Google has a lot to gain from this buyout.
   
The main advantages of this takeover to Google are firstly related to the instant boost to its advertising revenue that were stagnant under the old model of simple text adverts. Secondly, the company has greatly benefited from the transfer of marketing specific technologies and developments. This gives the company an all important edge over competitors which it otherwise would have never achieved in such a small time frame. Another advantage that Google stands to gain is the potential of new products and services that can be formed through the infrastructure that it acquired along with DC. For instance, the amount of data that it can now generate through cookies can go a long way in helping provide data mining services and other important services that can enhance Googles product offering. Another potential advantage that Google had from this acquisition was that its corporate resources were upgraded so that it had access to higher management and standard operating procedures.
   
In terms of the potential disadvantages, the move was costly and Google can only expect returns once the acquisition is about 5-7 years old. One more issue that the company might face is that of integration as soon as the operations of DoubleClick are important enough to be sub-merged with other mainstream Google operations. Integration would be a major issue at both human resource level and at the operations level since there are marked differences in the way both companies used to work when Google had not acquired DC. 
   
Another key factor that must be analyzed is the fact that, strategically speaking, the move was a good one. This is because at one time Yahoo and Microsoft were also trying to buy the company and if Google had not bought it, they would have done so. In a cost benefit analysis, paying a higher price is better than losing market share in a market where costumers are using many products of the same company.
   
It is important to note that Googles buyout on a strategic level meant that a company like DC would always have an exit strategy as this firstly gives other new entrepreneurs hope and courage secondly, such a move allows Google to buy what it can not develop in-house. Not only does buying a company in the same industry reduce competition it also gives strength to the product portfolio as more successful products come in.           

Course Merger of Glaxo Wellcome Plc and SmithKilne Beecham Plc

GlaxoSmithKline (GSK) is a UK based firm and is second largest pharmaceutical and healthcare company in the world. GSK is listed on both New York Stock Exchange and London Stock Exchange. GSK is one of the leaders in pharmaceutical industry with seven percent worldwide share and is the only company that researches both medicines and vaccines for World Health Organizations three priority diseases namely HIV, tuberculosis and malaria. It has an employee base of one hundred thousand people and has operations in 37 countries with 80 manufacturing sites. Each year the company contributes four billion packs of medicines and healthcare products. GSK spends 8 million (US14 million) on research and development each day  thats around 300,000 (US562,000) every hour. In 2007 the turnover decreased from 23.2  in 2006 to 22.7 . This was a very tough year for GSK as there was a severe decline in the sales of Avandia which is the companys second largest product.

Glaxo Wellcome
Glaxo was founded  in New Zealand by Joseph Nathan in 1873. Before merging and become GSK, Glaxo was familiar with mergers as in 1995 Glaxo took over from Wellcome for 9bn to become Glaxo Wellcome. At that time this was the biggest merger in UK history.

Wellcome Foundation was established in 1936 and was financing medical research. It owned a 40 stake in Zantac. Glaxo struggled to find a replacement for its main drug whose patent has expired in the US and meanwhile Wellcomes antiherpes drug, Ziovirax, had already become available without a prescription. Wellcome has rejected this 14 billion unsolicited takeover offer before this.

SmithKline Beecham
The merger story was no different with SmithKline Beecham as  SmithKline Beckman and Beecham has already merged in late 1980. SmithKline Beckman itself was the result of the 1982 merger of SmithKline (originally Smith, Kline  French) and Beckman Instruments. This merger is categorized as Merger of Equal because both companies had equal capitalization of 3.5 billion.

SmithKline despite an aggressive and experienced sales force in the US was unable to restore the income from its core drug, Tagamet. Beecham was a consumer goods Company which attained success in its early research attempt on antibiotics, but had no competencies to become a major pharmaceutical player. This merger was inevitable and the merged resulting organization emerged with an international marketing presence. Glaxos acquisition of Wellcome produced only short-term savings but no long-term growth.

The Merger
In January 2000, Glaxo Wellcome and SmithKline Beecham announced their 75.961billion proposed merger which was approved by shareholder majority of 99 percent. This merger was expected to give GSK a global market share of 7.3 percent with an research and development budget of 4 billion. Sir Richard Sykes became the non-executive chairman, while Jean Paul Garnier became the CEO of the GlaxoSmithKline under the new corporate governance structure. Theoretically it was a horizontal merger.

In the first sentence of their famous book on merger Bauman et al. (1997) stated, When individuals seek personal change in pursuit of a higher goal, it often means they must change a particular mindset, learn from others about how they succeeded, or acquire some new skills. Many argue that mergers and acquisitions activities are as a result of the economic environment and apparently it seems that GSK merger was part of the pharmaceutical merger wave, but keeping in view future prospects and growing market potential pharmaceutical firms started looking for partners, because the growing trend in the industry could affect their future cost. RD investment was on the up with increasing proportion to sales from 20 billions in 1990s to 35 billion in 1999. Similarly huge capital expenditures like RD especially in genetic medicine have along and uncertain payback and firm believed that only large size firms can do so. Another reason was patent expiration as patent expiry can reduce innovator sale up to 80 percent, hence it was argued that merging research laboratories and product pipelines would result into added knowledge from which potential blockbuster drug could emerge (Heracleous and Murray 2001). CEOs of both companies declared that merger will improve the two groups ability to generate sustainable long-term growth and is expected to enhance shareholder value in an increasingly competitive environment. They also added that the deal will also result into a substantial operational cost savings (GlaxoSmithKline, 2000). Similarly drug companies also needed marketing muscle to sell their medicines.

Terms and Conditions of the Merger
Copeland et al. (2004) stated that the mode of payment for the target company shares may be either cash, stock or hybrid securities, however Martin (1996) found that firm with higher growth opportunities prefer stock as a mode of acquisition. Keeping in view the underlying growth, GlaxoSmithKline plc acquired the whole of the issued share capital of Glaxo Wellcome plc and SmithKline Beecham plc in exchange for shares in GlaxoSmithKline plc. Under this arrangement shareholders of Glaxo Wellcome plc and SmithKline Beecham plc received shares in GlaxoSmithKline plc as follows

For each Glaxo Wellcome share  1 GlaxoSmithKline share
For each SmithKline Beecham share- 0.4552 GlaxoSmithKline Shares

In the case of shares held as American Depository Shares (ADSs) evidenced by American Depository Receipts (ADRs), each Glaxo Wellcome ADS represented two Glaxo Wellcome shares, each SmithKline Beecham ADS represented five SmithKline Beecham shares and each GlaxoSmithKline ADS now represents two GlaxoSmithKline shares. Accordingly holders of Glaxo Wellcome ADRs and holders of SmithKline Beecham ADRs receive

for each Glaxo Wellcome ADS  1 GlaxoSmithKline ADS
for each SmithKline Beecham ADS  1.138 GlaxoSmithKline ADSs

On the merger date GlaxoSmithKline plc issued 6,222,462,894 ordinary shares of 25p each at par to acquire 3,653,435,656 ordinary shares of 25p each of Glaxo Wellcome plc and 5,643,732,950 ordinary shares of 6.25p each of SmithKline Beecham plc. The nominal value of the shares issued was 1,556 million and the market value of the shares at that date was 119 billion. (Annual report, 2000).
Financial Analysis

NPV, the simplest method of valuation is used. Under the NPV approach the present value of both firms is calculated individually before merger and it is compared with the present value of combined entity after merger. If the gain is positive the economic justification for merger exist (Myers et al, 2006)

GAIN  PV of GSK - (PV of GW  PV of SK)
PV of GSK  85,000,000,000 (1.05)3  66,599,701,000
GSK market capitalization for the year of 2003 is 85 billion.
PV of GW  Glaxo Wellcome Share price month before merger (Quoted Price)  Number
of Glaxo Wellcomes shares on December 27, 2000
 17.5  3,653,435,656
 63,935,123,980

PV of SK  SmithKline Share Price month before merger (Quoted Price)  Number of
SmithKline shares on December 27, 2000
 7.9  5,643,732,950
 44,585,490,305

COST Percentage of ownership acquired in SmithKline of total new common
stocks  PV of GSK  PV of SK  41.2566,599,701,000 - 44,585,490,305
 - 17,113,113,643 GBP

GAIN  PVof GSK - (PV of GW  PV of SK)  - 41,920,913,285 GBP
NPV  GAIN  COST
 - 41,920,913,285  (- 17,113,113,643)
 - 24,807,799,642 GBP

Even at the time of merger many analyst citizen the future prospects of Glaxo SmithKline merger as (Barrons, 2000) called this merger as a marriage of convenience  with lots of tough issues to be worked out  SmithKline is wedding itself to a slow-moving company with a lacklustre pipeline of new drugs coming to market. After two and half years cost savings had in fact amounted to 1.8 billion by 2003 and cost reductions had taken GSK trading profit margin to 35 per cent. GSK under-performed at the FTSE All-Share Index, and with the comparison from pre acquisition stock the company is not doing well.

The remuneration scheme for the CEO came under fire and the shareholders voted against it because they were not happy as most pharmaceuticals linked their CEOs pay to share-price movements they considered that short-term stock price performance was a poor reflection of management quality and ultimately. At the end of 2003, the share price was trading just above 13 per share while, at the same time, many employees were demoralized as they had found the remuneration debacle terrible.

Recent research on this mega pharmaceutical merger shows that they havent really delivered value. The stock prices under perform both in absolute and relative terms against the index. Additionally previously executive remunerations were based on stock performance, which was supporting short term-ism on the part of management. As opposed to that the company has substantially reduced the cost 1.8 a year, by of combining their RD operations, manufacturing consolidation and substantial headcount reduction. Anyhow the debate of value creation in future is still questionable.

Oracle and PeopleSoft

In this paper we will discuss the Oracle Corporation and its aggressive bid to acquire PeopleSoft and after acquiring the way it managed its software business, employees and the merger. Even before the purchase it was a known fact that Oracle intended to discontinue PeopleSoft products eventually.
Oracle wanted to get rid of the competition from PeopleSoft because customers requiring Enterprise Resource Planning Software normally negotiated with several ERP software companies before buying one of them and since each license costs a huge amount Oracle Corporation was losing huge amount of business and hence decided to buy and ease off the competition and gain a larger market share in the enterprise level softwares.
Look for a merger or an acquisition and collect information about it.

Oracle Corporation Today
Today Oracle Corporation is ranked as the third largest software company with respect to revenue generation in the world behind only Microsoft and IBM. Oracle is known for its flagship database management software but it also produces enterprise level software namely Customer relations management (CRM), Enterprise resource planning (ERP) and supply chain management (SCM).

Oracle has become a leader in the enterprise level software by several acquisitions over the past it has aggressively acquired large companies such as Siebel Systems, PeopleSoft, Portal Software, Stellent, MetaSolv Software, Hyperion Solutions Corporation and Sun Microsystems and BEA Systems.

One of the major acquisition till today that oracle has made is its acquisition of PeopleSoft. Oracle after a long battle acquired PeopleSoft and signed an agreement for 26.50 per share (10.3 billion dollars).

Until 2004, there were four large software companies that were producing enterprise level software namely Oracle Corporation, People Soft, J D Edwards and SAP AG. The first three were in the US while the last one was in Europe.

Oracle in its bid to become the largest and biggest enterprise software maker, under the aggressive management of CEO and founder Larry Ellison, showed its intent to purchase the other smaller companies of Enterprise Resource Planning software. This resulted in long tussle between Oracle and these ERP software making companies. Oracle showed interest in acquiring PeopleSoft as well as J D Edwards and approached both the companies but its offers were rejected by their boards.

PeopleSoft later acquired J D Edwards to counter the acquisition attempts of Oracle but couldnt handle the pressure and finally was bought out after the long takeover attempts starting from 7 billion, at the beginning of 2003, and finally ending at  10.3 billion, at the end of 2004, totaling approximately 2 year.

Before being taken over by the Oracle , PeopleSoft acquired J D Edwards to stay in the business and fight off the Oracle bid , therefore it is clear that Oracle not only purchased PeopleSoft but J D Edwards too in a period of two years.

Oracle Corporation is organized into several business units, none of the members of the board, which consist of 12 members, are from PeopleSoft, the largest acquisition of Oracle to date. The Oracle had to completely change its business strategy after acquiring PeopleSoft.

Out of the four main areas in which merger and acquisition could be discussed are finance, economics, organizational, and strategy, in this paper we will discuss the strategy of the Oracle Corporation, before and after acquiring PeopleSoft, to continue and in fact grow its business in ERP domain.

As stated Oracle sole aim to acquire the PeopleSoft was to extend its business horizontally and have a bigger market share in Enterprise Resource Planning and other Enterprise related softwares. Oracle planned the transition of merging the two large companies very smoothly.

Before acquiring PeopleSoft, Oracle announced that it intends to keep the PeopleSoft existing customers and was able to retain 95 of all of its customers by providing continuous support to the PeopleSoft products and by retaining the PeopleSoft existing products, although it has stopped developing the product but the support to the PeopleSoft product has continued, Oracle though has announced in the same connection that it will fuse the PeopleSoft and Oracle ERP with a slow transitional process by introducing fusion products in 2 years time frame, Oracle is successfully following this path right now. Look at the picture 2 to have a deeper insight into the merger of Oracle and PeopleSoft businesses.
Choose one field of the four ones in the course.

Oracle after the Acquisition of PeopleSoft
After the merger the Oracle moved aggressively to integrate the PeopleSoft business with its own and not only had that Oracle emerged successfully in satisfying the customers of PeopleSoft and retaining them. Oracle was able to do this successful merger by several difficult decisions.

Change in Management
Oracle had to shuffle the whole board over the period of time as well as the management of the PeopleSoft to get rid of the competition arising within the company, this was necessary because the managers of the PeopleSoft would never be able to work in a peaceful manner with the Oracle manager, hence for the smooth running of the company this was an essential step. The reason given was the fact that PeopleSoft board fiercely fought this takeover battle

Oracle cut jobs
As a result of the merger, Oracle had to cut at least 6000 employments, mainly from People soft. At the merger the combined work force of the two companies was 55000 and hence a 9 overall reduction in employees took place. Oracle kept the engineers of PeopleSoft and J D Edwards but laid off most of the other supporting employees, it should be note that People Soft had 11,255 employees just before the acquisition by Oracle took place.

The acquisition had brought resentment among the employees of the newly acquired company because several of their co-workers had lost jobs and the co-workers feared that they would also be laid off once the transition of the two companies is complete this is a common fact and has been observed in several other mergers in the past but Oracle was able to deal professionally with it and kept the PeopleSoft and J D Edwards support and development engineers and awarded ones who were performing exceptionally hence buying their loyalty.

Change in corporate environmenIt is a known fact that PeopleSoft had an easy going and a friendly corporate environment and Oracle had a hostile and an aggressive environment. Oracle had to change its corporate strategy in the light of the new employees and the acquisition and hence it was able to complete the merger in deeper terms and brought harmony among its workforce.
Write a brief case trying to tell a story about the field you chose.

Why was the merger necessary
Both the companies had related business and hence with the merger the Oracle was able to capture a larger market in enterprise levels software and expanded into the database markets.

The aim of the merger was to give the joint company larger consumer base, extended brand reach, critical mass in more industries, and be able to provide considerable business support which has definitely been achieved.

It is of interest to note that Oracle had to buy the PeopleSoft not because it had access of cast but its power increased within the market and it controlled it in a such a way that it could dictate the cost of the product as the price of deployment of such a ERP product and its development is very cost intensive.

Analysis of the acquisition of PeopleSoft
Oracle made it clear during its bid to purchase of PeopleSoft that the PeopleSoft software products would end eventually and only the Oracle developed softwares would remain but this was to phase out at a long period of time. This was helpful for the existing customers of the PeopleSoft and J D Edwards and helped Oracle in maintaining the trust of the customers because the way the PeopleSoft was purchased scared investors, stockholders and customers and they thought that right after the purchase the product support would end but nothing like that happened and hence Oracle gained market credibility.

Before the acquisition Oracle explained in detail to the customers and the stockholders that this buy out will cause Oracle  to have operational skills with increased distribution channel and enhanced technology and it would be benefit of the customer and in the long run increase the worth of the companys stock.

The studies show the Oracle had a very detailed plan on how to integrate the engineers of the new company with its own and how to develop products so that the PeopleSoft product is phased out but at the same time the customers are not affected this was a very vital part of the merger as the engineers were to be trained to develop the code for the Oracle who came from PeopleSoft and at the same time keep the company integrated, as there was a chance of old engineers vs. new engineers battle and hence a complete collapse of the company was possible.

Since there was no other bidder for PeopleSoft and the full intention was to end the business of PeopleSoft and the bid to acquire was hostile, Oracle received much criticism and got defame but it quickly gained it back and gained the confidence of the customers by adopting the strategy of providing continuous support to the PeopleSoft customers.

This acquisition provided expansion possibilities for the Oracle by removing a large competitor and letting the Oracle maintain a large market and enabled it to dictate the prices.
During the legal takeover battle, SAP, the second largest Enterprise Software maker, successfully gained importance and took advantage of the situation and was able to convince the PeopleSoft and J D Edwards customers to migrate to the SAP with financial incentive as Oracle was suppose to push for its own software and may have caused these customers to spend millions of dollars.

The transitional process of the merger of two companies is important and we will relate one of the slides used in the class with it and explain accordingly that how did the transition worked with respect to the product as well as the employees.

Figure 1 companys merger and then integration
Then write analysis using the models and theories in the course
Figure 1 explains how the integration of two companies take place , After the takeover the PeopleSofts was completely absorbed in Oracle with reference of manufacture, marketing and financial control, though there was overlapping manufacturing taking place to support the existing business of PeopleSoft and this corresponds to the right most and top most potion of this graph.

This merger was very complex it involved the regulatory policy makers from US and EU which monitored the transition in the light of antitrust laws. Both the companies had large number of customers with multinational businesses hence the negative impact to the joint company could have affected these businesses. Further the transition was of very importance as this affected the economy of the world on a large scale and there was much speculation. Oracle utilized the merger and acquire polices to effectively channel the integration and growth of the Enterprise Resource Planning

This acquisition benefited Oracles shareholders and increased the economies of scale as well as economies of scope and today, after 5 years the company is doing very well and its future is very promising.

Figure 2 A timeline displaying Oracle Corporations acquisition of PeopleSoft, Inc, software product release dates and maintenance support for ERP applications through 2013.

The merger has lead to the emergence of one ERP company and now the customers no longer have to look at several options to choose one, this has ended the options for the customers but it is also good for them, the single vendor has resulted in better products and customers can now purchase newer modules and build upon their existing database and ERP with their growing needs.

The reporting structure within the Oracle has been simplified too the main arms of Oracle today are Marketing, Support, Research and Development. The simplified structure has lead to more concrete efforts on building systems that can help the large as well as small companies.

At this point we can look at another slide from the course and can relate very well to our case study, as you can see the merger has resulted in common product and process technology and there is a central R  D now which can focus more.

The best of the two design teams have now come together to give customers a product that is very user friendly , other items from the list can also be easily related to the Oracle- PeopleSoft merger case.

If you relate to the slide from the course it is clear that the merger has further resulted in unified strategy of the company in terms of shareholders, accounting,  , management style, Legislation, governmental relations etc.

The corporate value of the Oracle after merging with the PeopleSoft has also increased, as you can see that the two companies had their own worth but when combined together their value has increased even more because of the corporate membership benefits. Utilizing the concept of Corporate Value formula we can demonstrate that this merger has caused in increase in the value of the two businesses combined.

Mcor  value resulting as a result of combing all these entities as their  combined technical and marketing and support departments can better serve the customers and help increase in the business of Oracle Corporation

Future of Oracle
With this acquisition and series of others Oracle Corporation has become a leading Enterprise Resource Planning and Database management company. Gartner in its 2008 report mentioned that Oracle had a share of 48.9 in the Worldwide RDBMS Market Share 48.9.

Oracle became a leading supplier and of Enterprise Resource Planning Software with several acquisitions one of the largest acquisitions it has done to date is of PeopleSoft, the bid was hostile and PeopleSoft rejected and tried to stop the acquisition for at least two years but later couldnt hold and the company was sold to Oracle at a price of 10.3 billion US dollars.

The acquisition made the Oracle third largest software revenue maker in the world and increased its market share, Oracle due to this merger holds more market share then 6 of its closest competitors, To manage the acquisition and merger of the product, the Oracle management had devised a detailed plan and one main way to integrate the two companies and save the business was by continued support of the PeopleSoft products for a long period of time, this helped retained the customers of the acquired company and fulfilled the purpose of the merger.

Merger Acquisition Tata Steel UK Ltd Corus Group Plc Acquisition Strategy.

Tata Steel, Indias leading steel maker acquired UK based Anglo Dutch steel maker Corus group for 4.3 billion. The Boards of Directors of both the companies approved the acquisition of Corus at a price of 455p per share in cash resulting in the worlds fifth largest entity with a capacity of 23.05 million tonnes per year. Tata Steel in a vertically integrated manufacturer and is one of the worlds most profitable and value creating steel companies whereas Corus is Europes largest steel producer with 9.2 billion revenues in 2005 and 18.02 million of crude steel production. (Pratiyogita Darpan, 2006) The PHD Chamber of Commerce and Industry stated that the acquisition of Corus by Tata was the first by any Indian company which placed India on the global scenario from Tata Steel ranked 56th before the deal became the fifth largest producer of steel. (Mahendra Gaur,2005)  The process of bid went through nine rounds along with the other contender CSN from Brazil, which increased the price 34 above Tata Steels initial offer to 11.3 billion. Tata Steel proposed to finance the deal using debt approach and the decision resulted in 11 fall in shares.

The costliest bid, as agreed by analyst, led to re-rating and valuation of the other industries in the Indian market. However, Tata Steel was able to clinch the deal from Brazilian Steel giant CSN that forced Tata Steel to increase its bid by 33.6 from its initial bid of 455 pence to 608 pence, 5 pence more than CSNs bid. (Pankaj Hambarde) According to analysts, Tata was paying too much for the Corus and that debt incurred to acquire the company would affect companys performance and future earnings. (Micheal A.H et al, 2008) Pratap G. (2008) states that Tata Steel adopted an LBO route to finance the acquisition and planned to raise over 10 billion for financing the deal. The entire financing structure was broken into two parts - 3.5 billion raised from Tata Steel and the remaining amount to be raised through LBO structure. The financial statement for both the companies shows that revenues of Corus were three and half times higher than Tata Steel in the year 2006 and will similar net income rate. The deal was financed through equity contributions from Tata Steels 3.88 billion, the consortium was lead by Credit Suisse which financed 45 further joined by ABN AMRO and Deutsche Bank each financing 27.5 of the required 8.12 billion to complete the entire process.(Pankaj Hambarde)
   
The Tata takeover marked the beginning of the growth of manufacturing sector, providing the industry with necessary push which was essential to facilitate a sustaine GDP growth. Amit Mishra, Secretary General, Federation of Indian Chambers of Commerce and Industry said that the acquisition was a milestone marking the beginning of realization of Indias dream of becoming the third largest economy in the 21st century. (Mahendra Gaur, 2005) The acquisition offered Tata Steels the opportunity for taking advantage of synergies and doubling the present national average earnings before interest, taxation, depreciation and amortization of the new company to about 25. (Great Britain, Parliament, House of Commons, Welsh Affairs Committee, 2009) Adrian and Alison (2008) mentioned that firms can take advantage of synergies between their different operations and product lines. The acquisition fits in with the Tata Steels strategy of achieving global reach in Europe and synergies with low cost intermediaries in India. (Brian and Nandini, Business Week) Through acquisition of Corus in 2007, Tata Steel was able to gain access to Corus Rolling Mills and distribution channels in Europe, while Corus gained access to Tata Steels in house sources of iron ore. The takeover by Tata Steel has led to its prominence in the global steel industry in terms of reach and production. 

A senior analyst tracking the group said that the acquisition process is safe at least in terms of investment as Corus was six times bigger than Tata Steel, ranked ninth in the world before acquisition and three times bigger than Tata Steel in production. (Justin and Ramneek, 2008) But due to the recent slowdown or credit crisis, the industry experts viewed the timing of acquisition turning out to be wrong and most of them opined that deal was done at the peak valuation as almost all asset classes started declining from late 2007 onwards.
The acquisition was the biggest by any Indian company of the overseas industry. This placed Indian industry on the global arena with Tata Steel ranking 5th in the list of worlds largest steel manufacturers. Tata Steel with the acquisition of Corus got entry into European market and other synergies also.

Part II
Acquisition is the process when one company takes over another and clearly establishes as the new owner. Legally, the target company ceases to exist the buyers swallows the business and the buyers stock continues to be traded. The process includes purchase of asset, business, share and apportionment of risks. The process of acquisition starts with finding a target company, appointing advisors, negotiating terms, due diligence, exchange of contracts and completion. While finding a new target business, synergy operations, entry into new markets, vertical integration and achieving the strategic objectives of the organization are the important points to consider.  (Pankaj Hambarde) Merger and Acquisition perspectives are based on economics, organizational theory, finance and strategy. According to Jensen (1987) market for corporate control is benefiting shareholders, society and the corporate form for organization. Corporate control transactions and the restructuring accompanying the merger and acquisition can be wrenching events in the lives of those involved in organizations managers, employees, customers, suppliers and residents of surrounding communities.

Jensen (1987) states that many factors force the process of acquisition which include deregulation, synergies, economies of scale, and scope taxes, managerial incompetence, and increasing globalization.  It is further mentioned that the agency costs associated with conflicts between managers and shareholders over the payout of free cash flow, which is one of the major cause for acquisition, has received little attention. Agency costs are the total costs that arise during the process of corporate strategy which include the costs of monitoring the managerial behavior and other inevitable costs incurred due to the conflicts. Myers and Majluf (1984) argue that financial flexibility can be achieved when a firms manager have better information than the outside investors. The theory explains how debts for stock exchanges reduce the organizational inefficiencies fostered by substantial cash flow how debt can substitute dividend why diversification programs are in the same line of business, why mergers with in an industry and liquidation motivated takeovers will generally create larger gains etc. (Jensen, 1987)

Jensen (1993) mentioned that cash flow in excess of that required funding all projects that have a positive that have a positive net value when discounted at the relevant cost of all, the amount should be returned to shareholders for maximum efficiency instead the managers prefer to fund increased growth through expansion or diversification. The Free Cash Flow theory as mentioned by Jensen (1987) assumes that managers of the firms with unused borrowing power and large free cash flows are more likely to undertake low  benefit or even value destroying mergers. Diversification programs generally fit this category, and the theory predicts that they will generate lower gains. Merger and Acquisition benefits shareholders of target companies like premiums in hostile offers exceed 30 on average, in past and presently 50. The acquiring firm shareholders on average earn about 4 in hostile takeovers.
   
Further it is also reported that managers receive handsome incentives for investing free cash flow for growth diversification in form of increased power, compensation and firm size positively correlated, promotion opportunities are greater in bigger companies, social prestige, diversifying employment risk, management entrenchment. It is further mentioned that firms with positive free cash flow, the theory predicts that stock prices will increase with unexpected increase in payouts to shareholders and decrease with unexpected decreases in payouts.
   
Coase (1992716) states that businessmen have to take into account the transaction costs while deciding on their ways of doing business. It is also stated transaction costs may prevent large part of economic activity. The various types of transaction costs include negotiating, writing and enforcing agreements contracts costs of opportunistic behavior preventing the same measurement, haggling, search, coordination, checking, etc. The advisors were involved in negotiating terms related to financial strength, nature of the fit, strategic intent, sharing of resources and legal documentation regarding transfer of shares, employees, tangible and intangible assets, liabilities, etc. (Pankaj Hembarde) Transaction costs are favorable in alliances if they involve impediments, are complex, non routine, excessively costly for one party to do it themselves, market opportunity is transitory or uncertain in duration, etc. (Chris Smith)
   
It is important to mention here that holdup between the negotiations can result in more difficult negotiations and more frequent negotiation, as in case of Tata Steel, investments to improve ex post bargaining positions, distrust and reduced investments in relation specific assets. (Chris Smith)     It is further stated that if acquisitions are well planned, executed and necessary precautions are taken for the deal a company can achieve its strategic objective and ensure its continuous growth. Thus, Tata Steel, through acquiring Corus, can confidently target becoming one of the top 3 steel makers in the world by 2015.