A Merger is merely the coming together of two companies to form one entity for a specific purpose. In other words, for company merger to be successful, the companies in question must share a common goal that will spar the new entity to prosperity. In this form of ownership, the two existing companies cease to exist, and only the new company which has new structures comes alive. Acquisition on the other hand, is the buying of a particular company whereby the acquiring company manages a higher stake. In this situation, the company from whom stakes are bought will neither be required to change its name nor legal structures. Merging and Acquisition are mainly done to protect and improve the strength of the dominant company either by acquiring new markets or developing a financial position. Van and Leuween, (2001, Pg 40) note that mergers and acquisitions are essential as they provide a sense of continuity during post-merger.
Types of mergers and acquisitions
There are different ways in which companies acquire ownership either through acquisition and merger. This include conglomerate where businesses which do not share a common interest merge to form an entity Jeffrey (2008). This mainly occurs when different companies are looking to spread themselves better in the market with the sole aim of increasing market share, synergy and cross-selling Lewellen, (1971 Pg 522). The other form of merging is Vertical merger which occurs when two companies which provide different goods come together to produce one product. This can well be explained through the partnership between Japanese firm Honda and British's Leyland. Honda had entered into an agreement with Leyland which saw the Japanese firm supply engines to the British Leyland company for the production of cars. This type of merger is thus mutually beneficial to both the companies Pilkington (1996 Pg 93). A horizontal merger is also another common type of alliance whereby firms operating in a similar environment come together to beat the competition.
Background information on the 1994 acquisition of Rover
Before the merger between BMW and Rover, both companies were facing challenges that needed to be addressed. BMW was facing a production problem; the company couldn't afford to produce its cars in large scale, and for that reason, it feared that other companies such as Ford, which was its main competitor, could take it over Gomes et al., (2007 pg31). The firm, therefore, needed to find a company with whom they could merge in a bid to increase its production and venture into new markets. The Rover on the other hand, had been embroiled in financial problems that had initially, made the company join forces with the British Leyland to improve its investment. The company had struggled in production and its market share was reducing gradually Whisler (1994 Pg 5). The two companies thus thought merging was going to be mutually beneficial despite the challenges the two they were facing at that time. Having been non-competitors, the merger was seen as a perfect one as it was touted to help both companies acquire new markets both in Europe and overseas in a bid to rival American multinationals. This, however, was not to see the light of the day as Rover had already entered into a conglomerate with Honda which was to examine the latter supply the firm with engines and designs that would make the brand a competitive one. The deal made it difficult for both companies to run their way to profitability but instead, BMW's market share started to dip. This led to the two companies parting ways in 2000 a move that BMW blamed on high sterling, declining brand image, delay by the European Union in approving a UK government aid package and the threat that a weakening Rover posed to BMW's long-term survival.
The relationship between marketing and operations
Marketing is just the buying and selling of a product or service by an organization. The American Marketing Association has however updated this definition including value for customers and customer relationship in the new meaning Ballantyne (2003 pg 1242). Marketing thus can be seen as the process of not only buying and selling of products and services but also the impact to the products being sold has to the consumer. Marketers have derived ways in which they can be able to sell their products and services. They have developed a theory dubbed the marketing mix that define how a product's value should be determined Jerome (1960). Marketing mix can thus be explained as 4P's, i.e., a product which is the primary output of the organization that is expected to be sold to the consumer. Place; this defines the location where a specific product is supposed to be sold taking into account the target audience. Price; This is the cost of the product and service, how much the consumer is expected to pay for it. Promotion; this explains the marketing avenues, i.e., how will the outcome be marketed to the consumer describing the different platforms that will be used for instance the internet and types of media.
An operation, on the other hand, is a process that entails running of daily activities that occur in a business environment that involve the production, marketing, and sale of a particular product or service. Operations usually require human resource as they are generally at the center of the day to day running of an organization. The process often determines the productivity of that particular company for instance if a company's operations are smooth, production is likely to increase thus guiding the organization to profitability. As explained by the Systems Theory, managers who understand how different organization systems work and how employees are affected by those systems are likely to get maximum productivity from their employees compared to those who don't. The theory dictates that different parts of an organization must work coherently to produce the desired output. Thus a good manager must ensure that all subunits in the company work closely to ensure that the company achieves maximum profits.
How the merger affected the relationship between operations and marketing
The alliance between UK Company Rover and Germany's BMW was at first touted to be a mutually beneficial one. The decision by BMW to merge with Rover, despite failing to understand the existing deal between Rover and Honda was a gaffe in itself. Honda had signed an agreement that would see it produce engines and designs for the UK Company which meant that many operations were being done by the Japanese firm. The entrant of BMW to the deal said that despite their excellent engines, they couldn't produce engines for Rover since there was already a company commissioned to do that. This meant that their dream to boost their production and increase their economies of scale was becoming increasingly frustrated.
Secondly following the merger of BMW with Rover, the operations of individual production plants were in doubt despite assurances by the British government. This meant that production of individual units was going to be affected because BMW didn't have the resources or the capability to develop the new units and deliver them to their respective markets on time. The effects on production were thus seen to have caused a slump in the market share with other automobile companies being on the forefront of production. The dwindling in the number of vehicles produced by the existing plants following the closure of individual plants in the UK, rendered the company unable to compete with other organizations.
Thirdly, the termination of the deal between Honda and Rover was a blow to BMW because BMW management had hoped that the Japanese firm would have continued with the production of engines and designs as had earlier been agreed but Honda backed out of the deal. This meant that the two firms would go back to the drawing board to come up with their new designs and engines. Rover having been said to have reduced model development by Lord Ryder, who had been appointed by the UK government to investigate why the company was performing dismally, it meant that the new owners, BMW, had to derive ways of coping with that challenge despite them having not planned for it.
Lastly, BMW allowed Rover to initially operate under its UK management a move that was said to be detrimental to the company. Through the current administration, it was clear that production cost was rising, there was poor scheduling, appalling build quality, falling market share and a growing weakening of the brand image which led to radical changes in the company. As dictated by contingency theory, the BMW management had to make changes based on the situation which had seen their production value reduce. The company managers thus came up with new organizational structures that were aimed to impact the company positively. These changes which were aimed at steering the company to profitability meant left many employees disgruntled. The firm embarked on changes that would see a new operation plant built to realize its full potential but all was in vain. This made the market share of the company to drop to below 10 percent and exports values deepening.
How the merger affected marketing
Marketing as explained earlier is a vital function in an organization cycle as it enables the products or services reach the intended consumer. Many automobile companies rely on this function to woo consumers why they need to buy their products. It is thus essential for an organization to build trust with the consumers to ensure that their products are accepted once they are released to the market. Following the merger of BMW and Rover, both companies were optimistic that they would be able to increase their economies of scale as well as increase their market share by venturing into new markets. However, this couldn't be achieved following the premature ending of the deal after BMW decided to quit owing to numerous challenges.
The production of 200/400 and 800 series which were left over from Honda and the lack of a clear strategy to produce the said series by 2002 meant that consumers had to shift to alternative units that were available in the market. It meant that consumers who truly believed in the brand couldn't access it anymore and were thus forced to buying other products.
Another gaffe that affected the merger was the merger itself. Both companies albeit having similar interest, they were targeting different customers. BMW was targeting high-end consumer with their sedans before the deal while Rover mainly focused on off-road vehicles. This meant that both companies lost the sense of identity.
In conclusion, it is clear that mergers and acquisitions are usually done to achieve certain companies that either one or both companies lack. Some of the intended purpose of alliances includes increasing economy of scale, gaining access to new markets or at times for a company to expand its assets.
It is also evident that for mergers to be successful certain aspects must be considered before the process is initiated. Both companies must fully understand the other company's deals and how the said contracts are going to affect them once they decide to enter into a merger. From the above, it is clear that the alliance between BMW and Rover became unsuccessful owing to challenges in production, which was occasioned by the closure of production plants which in turn affected marketing in that the desired models couldn't reach the market on time thus allowing other companies to eat into BMW's market share.
It is also crucial for companies to investigate and have a deeper understanding of the other company. The organization must entirely get the nitty-g...
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