MAF 640 (DEC 13

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NAME: 1 . A M I N A H B I N T I M O H D FA I Z O L 2.AZEIRA BINTI AHMAD 3 . N U R H I D AYA H B T. Z A I N U D I N 4 . WA N M O H D N A Z R I B I N W. A . M A J I D ID NO: 2 0 11 8 6 7 7 4 8 2 0 11 6 9 1 8 3 4 2 0 11 4 1 8 7 2 6 2 0 11 2 1 3 3 9 2

Question 2 a) Do you think it is good idea for Z’ House of Fashion to employ the horizontal acquisition strategy in order to become a market leader in the fashion industry? Support your answer with three (3) reasons. .

Exxon with Mobile (oil production. skills.  Competitors lack of some capabilities.g.Horizontal Acquisition Acquisition of a company competing in the same line of industry.  The organization has sufficient resources to manage acquisition . Disney with Pixar (movie production). Effective strategy when:  Organization competes in growing industry. refining and distribution). competencies. e. or resources that the company already possesses.

The larger company has more power over its suppliers and distributors/customers. it’s good idea for Z’ House of Fashion to employ horizontal acquisition strategy because: Increased differentiation. Increased market power. managerial styles and allocator of resources. The results of industry consolidation is fewer companies operating in the industry and less intense competition. They have the similar types of characteristics such as strategy. New markets and distribution channels can be accessed by integrating with a company that produces the same goods but operates in different region or serves different market segment. Reduced competition. . The combined company can offer more product or service features. Access to new markets.Yes. Result in higher performance.

b) Explain three (3) attributes of successful acquisitions that Z’ House of Fashion should be consistent with in order to increase the probability of success of the unrelated diversification strategy. .

High probability of synergy and competitive advantage by maintaining strengths. Faster and more effective integration and possibly lower premiums. Acquired firm has assets/resources that are complementary to the acquiring firm’s core business.Acquisition is friendly. Faster and more effective integration facilities achievement of synergy. . Acquiring firms manages change well and is flexible and adaptable.

c) Explain two (2) potential problems Zurina may encounter that may hinder successful acquisitions. .

Reduced flexibility. . Acquisition rarely add value to the companies. which is highly discouraged by many governments due to lack of competition. Legal repercussions. Therefore governments usually have to approve any larger acquisition before they can happen. Horizontal acquisition can lead to a monopoly. Large organizations are harder to manage and they are less flexible in introducing innovations to the market. Destroyed value. More often acquisition fail and destroy the value of the companies involved in it because expected synergies never materialized.