Notes
This preview shows page 1 - 3 out of 5 pages. Chapter 7: Strategy Formulation: Corporate Str…Study this set online at: flashcards/chapter-7-strategy-formula…corporate strategythe choice of direction of the firm as awhole and the management of itsbusiness or product portfolio andconcernsdirectional strategythe firm's overall strategytoward growth, stability, orretrenchmentgrowth strategythe two basic growth strategies areconcentration on the current product lines inone industry and diversification into otherproduct lines in other industriesmergertransaction involving two or morecorporations in which stock is exchangedbut in which only one corporationsurvivesacquisitionthe purchase of a company that scompletely absorbed as an operatingsubsidiary or division of the acquiringcorporationcorporate strategythe choice of direction of the firm as awhole and the management of itsbusiness or product portfolio andconcernsdirectional strategythe firm's overall strategytoward growth, stability, orretrenchmentgrowth strategythe two basic growth strategies areconcentration on the current product lines inone industry and diversification into otherproduct lines in other industries Chapter 7: Strategy Formulation: Corporate Str…Study this set online at: flashcards/chapter-7-strategy-formula…merger Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document End of preview. Want to read all 5 pages? Upload your study docs or become a Course Hero member to access this document Tags retail store, franchiser, Franchisers As many companies evolve, they see potential for growth or improved operations by combining their efforts with other businesses. In some instances, seizing these opportunities invokes a legal requirement to spin off certain productive assets. Mergers, acquisitions and divestitures all involve a structural change to an underlying business form of at least one company through the purchase or sale of an entire company or its parts. These procedures may occur with the acquiescence of both parties or may involve the absorption of an unwilling business. In either case, federal law governs transactions that affect public shareholders’ interests. In a merger, one corporation acquires another corporation in such a way that the acquired company is extinguished as a legal entity. The purchasing corporation assumes all of the rights, privileges and obligations of the merged company. Acquisitions are any combination of two companies in which one corporation is completely absorbed by another. The acquired company ceases to exist independently, and becomes part of the acquiring corporation. A hostile takeover is a type of merger in which one corporation acquires a publicly held corporation against the wishes of the acquired company’s management. Typically, the acquisition occurs through a cash offer by the bidding company (sometimes called a “raider”). In some states, stringent regulations require disclosures by any company making a cash bid for more than five percent of another company’s shares, and would-be bidders must disclose the source of the funds and the purpose of the purchase. These regulations aim to balance the interests of bidders, shareholders and management by making larger transactions as transparent as possible. Federal and state laws govern companies involved in mergers and acquisitions. Since corporate consolidation means that consumers end up with fewer choices in the marketplace, many of these laws seek to limit anticompetitive effects and monopolies. Proposed mergers and acquisitions receive careful review by the government to guard against increased prices or decreased quality due to reduced competition. Typically, the boards of directors and shareholders of both corporations must approve the merger. The Securities and Exchange Commission (SEC) may also play a role in overseeing the process. If a merger or acquisition will have more anticompetitive effects than benefits, then the merging corporations may face antitrust obstacles. Divestitures are the flip side of corporate growth involving mergers and acquisitions. Divestiture involves a corporation’s sale of one or more of its constituent parts (i.e., a branch, subsidiary or facility) or some or all of its productive assets in an effort to reduce its size. A court may require a divestiture in a merger to avoid monopolization or other antitrust violations. Likewise, court-ordered divestitures may arise when a corporation is a sole defendant in an antitrust suit. The corporate changes that result from mergers and acquisitions involve complex issues of state and federal law and regulation; therefore, businesses should not proceed without legal assistance from an experienced attorney. Preparing to Meet With Your Business Law AttorneyTo read and print out a copy of the checklist, please follow the link below. Preparing to Meet With Your Business Law Attorney You can download a free copy of Adobe Acrobat Reader here Copyright © 2008 FindLaw, a Thomson Reuters business DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent counsel for advice on any legal matter. Back to Main Is an option that involves the purchase of a company then completely absorbed as an operating subsidiary or division of the acquiring corporation?Growth Strategy Options Merger- Involves a transaction involving two or more corporations in which a stock is exchanged or swapped among independent business organizations from which only one company services Acquisition- Is an option that involves the purchase of a company then completely absorbed as in operating ...
Is another corporate option where the firm engages in business activities in the area of distribution and retailing of the product or service directly to the customers?Forward integration is a business strategy that involves expanding a company's activities to include the direct distribution of its products.
What is concentric diversification?a growth strategy in which a company seeks to grow and develop by adding new products to its existing product lines to attract new customers; also called convergent diversification. See: Conglomerate Diversification Horizontal Diversification.
What is retrenchment strategy?Definition: A retrenchment strategy helps an organization reduce its operations or cut expenses to achieve a financially stable position. Businesses adopt retrenchment strategies due to economic downfall, losses, or legal issues. A retrenchment strategy can be used to downsize or restructure the business.
|
