MERGER AND ACQUISITION:

Mergers and acquisitions (M&A) are transactions in which the ownership of

companies, other business organizations, or their operating units are transferred or
consolidated with other entities. As an aspect of strategic management, M&A can
allow enterprises to grow or downsize, and change the nature of their business or
competitive position.

From a legal point of view, a merger is a legal consolidation of two entities into
one entity, whereas an acquisition occurs when one entity takes ownership of
another entity's stock, equity interests or assets. From a commercial and economic
point of view, both types of transactions generally result in the consolidation of
assets and liabilities under one entity, and the distinction between a "merger" and
an "acquisition" is less clear. A transaction legally structured as an acquisition may
have the effect of placing one party's business under the indirect ownership of the
other party's shareholders, while a transaction legally structured as a merger may
give each party's shareholders partial ownership and control of the combined
enterprise. A deal may be euphemistically called a merger of equals if both CEOs
agree that joining together is in the best interest of both of their companies, while
when the deal is unfriendly (that is, when the management of the target company
opposes the deal) it may be regarded as an "acquisition".

Acquisition:

An acquisition/takeover is the purchase of one business or company by another

company or other business entity. Specific acquisition targets can be identified
through myriad avenues including market research, trade expos, sent up from
internal business units, or supply chain analysis. Such purchase may be of 100%,
or nearly 100%, of the assets or ownership equity of the acquired entity.
Consolidation/amalgamation occurs when two companies combine to form a new
enterprise altogether and neither of the previous companies remains independently.
Acquisitions are divided into "private" and "public" acquisitions, depending on
whether the acquire or merging company (also termed a target) is or is not listed on
a public stock market. Some public companies rely on acquisitions as an important
value creation strategy. An additional dimension or categorization consists of
whether an acquisition is friendly or hostile.
Corporate Politics and Use of Power:

Power and politics in organizations are a reality that no organization can ignore.
Though the evolution of the modern corporation and the concomitant rise of the
managerial class with a professional way of running the firms is touted to be one of
the contributory factors for the decline on power politics in organizations, one
cannot just simply say that there are no power centers or people with vested
interests even in the most professionally run and managed firms. The reason for
this is that power and politics are as old as human nature and recorded history and
hence, one cannot simply wish away the primal urge to resist those in power and in
turn, try an impose the will by those in power. This is the interplay of forces within
organizations wherein the top management and the senior leadership often tries to
have it their way whereas those in the middle and those who have been passed over
for promotion as CEOs and other C level positions try to resist such power moves.

THE MCKINSEY 7-S FRAMEWORK

The 7-S model can be used in a wide variety of situations where an alignment
perspective is useful, for example, to help you:

• Improve the performance of a company.

• Examine the likely effects of future changes within a company.
• Align departments and processes during a merger or acquisition.
• Determine how best to implement a proposed strategy.

The McKinsey 7-S model can be applied to elements of a team or a project as well.
The alignment issues apply, regardless of how you decide to define the scope of
the areas you study.

The Seven Elements

The McKinsey 7-S model involves seven interdependent factors which are
categorized as either "hard" or "soft" elements:
 Hard Elements Soft Elements

Shared Values

Strategy Skills

Structure Style

Systems Staff

Let's look at each of the elements specifically:

Strategy:

The plan devised to maintain and build competitive advantage over the
competition.

Structure:

The way the organization is structured and who reports to whom.

Systems:

The daily activities and procedures that staff members engage in to get the job
done.

Shared Values:

Also called "superordinate goals" when the model was first developed, these are
the core values of the company that are evidenced in the corporate culture and the
general work ethic.

Style:

The style of leadership adopted.

Staff:

The employees and their general capabilities.

Skills:

The actual skills and competencies of the employees working for the company.

Usage:

The model is based on the theory that, for an organization to perform well, these
seven elements need to be aligned and mutually reinforcing. So, the model can be
used to help identify what needs to be realigned to improve performance, or to
maintain alignment (and performance) during other types of change.

Whatever the type of change – restructuring, new processes, organizational merger,

new systems, change of leadership, and so on – the model can be used to
understand how the organizational elements are interrelated, and so ensure that the
wider impact of changes made in one area is taken into consideration.

You can use the 7-S model to help analyze the current situation (Point A), a
proposed future situation (Point B) and to identify gaps and inconsistencies
between them. It's then a question of adjusting and tuning the elements of the 7-S
model to ensure that your organization works effectively and well once you reach
the desired endpoint.

BCG Matrix:

The growth–share matrix (aka the product portfolio matrix, Boston Box, BCG-
matrix, Boston matrix, Boston Consulting Group analysis, portfolio diagram) is a
chart that was created by Bruce D. Henderson for the Boston Consulting Group in
1970 to help corporations to analyze their business units, that is, their product
lines. This helps the company allocate resources and is used as an analytical tool in
brand marketing, product management, strategic management, and portfolio
analysis. Some analysis of market performance by firms using its principles has
called its usefulness into question.

To use the chart, analysts plot a scatter graph to rank the business units (or
products) on the basis of their relative market shares and growth rates.
A cash cow is where a company has high market share in a slow-growing industry.
These units typically generate cash in excess of the amount of cash needed to
maintain the business. They are regarded as staid and boring, in a "mature" market,
yet corporations value owning them due to their cash-generating qualities. They
are to be "milked" continuously with as little investment as possible, since such
investment would be wasted in an industry with low growth.

Dogs, more charitably called pets, are units with low market share in a mature,
slow-growing industry. These units typically "break even", generating barely
enough cash to maintain the business's market share. Though owning a break-even
unit provides the social benefit of providing jobs and possible synergies that assist
other business units, from an accounting point of view such a unit is worthless, not
generating cash for the company. They depress a profitable company's return on
assets ratio, used by many investors to judge how well a company is being
managed. Dogs, it is thought, should be sold off.

Question marks (also known as adopted children or Wild dogs) are businesses
operating with a low market share in a high-growth market. They are a starting
point for most businesses. Question marks have a potential to gain market share
and become stars, and eventually cash cows when market growth slows. If
question marks do not succeed in becoming a market leader, then after perhaps
years of cash consumption, they will degenerate into dogs when market growth
declines. Question marks must be analyzed carefully in order to determine whether
they are worth the investment required to grow market share.

Stars are units with a high market share in a fast-growing industry. They are
graduated question marks with a market- or niche-leading trajectory, for example:
amongst market share front-runners in a high-growth sector, and/or having a
monopolistic or increasingly dominant unique selling proposition with
burgeoning/fortuitous proposition drive(s) from: novelty, fashion/promotion (e.g.
newly prestigious celebrity-branded fragrances), customer loyalty (e.g. greenfield
or military/gang enforcement backed, and/or innovative, grey-market/illicit retail
of addictive drugs, for instance the British East India Company's, late-1700s
opium-based Qianlong Emperor embargo-busting, Canton System), goodwill (e.g.
monopsonies) and/or gearing (e.g. oligopolies, for instance Portland cement
producers near boomtowns),[citation needed] etc. The hope is that stars become
next cash cows.

TOWS MATRIX

TOWS analysis is a tool which is used to generate, compare and select strategies.
Strictly speaking it is not the same as SWOT analysis, and it is certainly not a
SWOT analysis which focuses on threats and opportunities. This is a popular
misconception. TOWS may have similar roots. TOWS is a tool for strategy
generation and selection; SWOT analysis is a tool for audit and analysis. One
would use a SWOT at the beginning of the planning process, and a TOWS later as
you decide upon ways forward.

There is a trade-off between internal and external factors. Strengths and

weaknesses are internal factors and opportunities and threats are external factors.
This is where our four potential strategies derive their importance. The four TOWS
strategies are Strength/Opportunity (SO), Weakness/Opportunity (WO),
Strength/Threat (ST) and Weakness/Threat (WT).

Four TOWS strategies

Strength/Opportunity (SO)
Here you would use your strengths to exploit opportunities.

Weakness/Opportunity (WO)

Indicates that you would find options that overcome weaknesses, and then take
advantage of opportunities. So, you mitigate weaknesses, to exploit opportunities.

Strength/Threat (ST)

One would exploit strengths to overcome any potential threats.

Weakness/Threat (WT)

The final option looks least appealing; after all, would relish using a weakness to
overcome a threat? With Weakness/Threat (WT) strategies one is attempting to
minimize any weaknesses to avoid possible threat.

COMPONENTS OF STRATEGIC STATEMENT:

The strategy statement of a firm sets the firm’s long-term strategic direction and
broad policy directions. It gives the firm a clear sense of direction and a blueprint
for the firm’s activities for the upcoming years. The main constituents of a
strategic statement are as follows:

Strategic Intent

An organization’s strategic intent is the purpose that it exists and why it will
continue to exist, providing it maintains a competitive advantage. Strategic intent
gives a picture about what an organization must get into immediately in order to
achieve the company’s vision. It motivates the people. It clarifies the vision of the
vision of the company.

Mission Statement

Mission statement is the statement of the role by which an organization intends to

serve it’s stakeholders. It describes why an organization is operating and thus
provides a framework within which strategies are formulated. It describes what the
organization does (i.e., present capabilities), who all it serves (i.e., stakeholders)
and what makes an organization unique (i.e., reason for existence).

Vision
A vision statement identifies where the organization wants or intends to be in
future or where it should be to best meet the needs of the stakeholders. It describes
dreams and aspirations for future. For instance, Microsoft’s vision is “to empower
people through great software, any time, any place, or any device.” Wal-Mart’s
vision is to become worldwide leader in retailing.

Goals and Objectives

A goal is a desired future state or objective that an organization tries to achieve.

Goals specify in particular what must be done if an organization is to attain
mission or vision. Goals make mission more prominent and concrete. They co-
ordinate and integrate various functional and departmental areas in an organization.

STRATEGIC MANAGEMENT, STRATEGIC MANAGEMENT PROCESS,

AND IMPORTANCE OF STRATEGIC MANAGEMENT:

Strategic Management

The term ‘strategic management’ is used to denote a branch of management that is

concerned with the development of strategic vision, setting out objectives,
formulating and implementing strategies and introducing corrective measures for
the deviations (if any) to reach the organization’s strategic intent. It has two-fold
objectives:

To gain competitive advantage, with an aim of outperforming the competitors, to

achieve dominance over the market.

To act as a guide to the organization to help in surviving the changes in the

business environment.

Strategic Management Process

 1. Defining the levels of strategic intent of the business:

Establishing vision

Designing mission

Setting objectives

2. Formulation of strategy

Performing environmental and organizational appraisal

Considering strategies

Carrying out strategic analysis

Making strategies

Preparing strategic plan

3. Implementation of strategy

Putting strategies into practice

Developing structures and systems

Managing behavioral and functional implementation

4. Strategic Evaluation and Control

Performing evaluation

Exercising control

Recreating strategies

Importance of Strategic Management

• It guides the company to move in a specific direction. It defines

organization’s goals and fixes realistic objectives, which are in alignment
with the company’s vision.
• It assists the firm in becoming proactive, rather than reactive, to make it
analyse the actions of the competitors and take necessary steps to compete in
the market, instead of becoming spectators.
• It acts as a foundation for all key decisions of the firm.
• It attempts to prepare the organization for future challenges and play the role
of pioneer in exploring opportunities and also helps in identifying ways to
reach those opportunities.
• It ensures the long-term survival of the firm while coping with competition
and surviving the dynamic environment.
• It assists in the development of core competencies and competitive
advantage, that helps in the business survival and growth.

MANAGEMENT BY OBJECTIVES (MBO)

Management by objectives (MBO) is a strategic management model that aims to

improve the performance of an organization by clearly defining objectives that are
agreed to by both management and employees. According to the theory, having a
say in goal setting and action plans encourages participation and commitment
among employees, as well as aligning objectives across the organization.

Hierarchy of Objectives: How it work in Organizations

Hierarchy of objectives indicates that managers at different levels in the hierarchy

of the organization are concerned with different kinds of objectives according to
the authority they are delegated with.
As the figure below indicates, managers at different levels in the hierarchy are
concerned with different kinds of objectives.

The directors and managers at the top level are involved in determining the
purpose, the mission and the overall objectives of the company, as well.

Middle-level managers are involved in the setting of key-result-area objectives and

division objectives.

The concern of lower-level managers is setting objectives of departments and units

as well as of their subordinates (i.e., individual objectives).

There is a controversy about whether the top down or the bottom-up approach in
setting objectives should be followed.

Proponents of the top-down approach suggest that the total organization needs
direction through corporate objectives provided by the top-level managers.

Advocates of the bottom-up approach, on the other hand, argue that top
management needs to have information, from lower levels in the form of
objectives.
In addition, subordinates are likely to be highly motivated by and committed to,
goals that they initiate. However, the approach to be followed depends on the
situation, the size of the organization, the organizational culture, and the leadership
style followed.

SMART Goal

Goals are part of every aspect of business/life and provide a sense of direction,
motivation, a clear focus, and clarify importance. By setting goals for yourself, you
are providing yourself with a target to aim for. A SMART goal is used to help
guide goal setting. SMART is an acronym that stands for Specific, Measurable,
Achievable, Realistic, and Timely. Therefore, a SMART goal incorporates all of
these criteria to help focus your efforts and increase the chances of achieving that
goal.

SMART goals are:

Specific: Well defined, clear, and unambiguous

Measurable: With specific criteria that measure your progress towards the
accomplishment of the goal

Achievable: Attainable and not impossible to achieve

Realistic: Within reach, realistic, and relevant to your life purpose

Timely: With a clearly defined timeline, including a starting date and a target date.
The purpose is to create urgency.

SMART Goal – Specific

Goals that are specific have a significantly greater chance of being accomplished.
To make a goal specific, the five “W” questions must be considered:

Who: Who is involved in this goal?

What: What do I want to accomplish?

Where: Where is this goal to be achieved?

When: When do I want to achieve this goal?

Why: Why do I want to achieve this goal?

SMART Goal – Measurable

A SMART goal must have criteria for measuring progress. If there are no criteria,
you will not be able to determine your progress and if you are on track to reach
your goal.

SMART Goal – Achievable

A SMART goal must be achievable and attainable. This will help you figure out
ways you can realize that goal and work towards it. The achievability of the goal
should be stretched to make you feel challenged, but defined well enough that you
can actually achieve it.

SMART Goal – Realistic

A SMART goal must be realistic in that the goal can be realistically achieved
given the available resources and time. A SMART goal is likely realistic if you
believe that it can be accomplished.

SMART Goal – Timely

A SMART goal must be time-bound in that it has a start and finish date. If the goal
is not time constrained, there will be no sense of urgency and motivation to achieve
the goal.