Project Topics
Get Complete Project Material File(s) Now! »
Theoretical Framework
This section will concentrate on the underlying theories, models and literature of this thesis. It will present a reflection of the existing organizational culture literature as introduction to the topic in the first part, followed by acquisition literature and integration literature as main topics.
An introduction to culture within organizations
Hofstede (1984) describes that society is built of values, institutions and organizations. While organizations are created by values of the people who started and led them (Hofstede, 1984). One definition of culture is, the way that one group differs from another, in the setting of the mind of the members within that group. It collects the values and beliefs that are shared within that group, what is accepted as “good” and “evil”, seen as “beautiful” and “ugly” in an artistic expression and what is normatively and morally considered as “right” and “wrong” (Hofstede, 1984; Sarala & Vaara, 2010).
Cultural patterns, within an organization, can be split into two main categories: national culture and organizational culture (Park & Ungson, 1997; Pothukuchi, Damanpour, Choi, Chen & Ho Park, 2002; Sarala and Vaara, 2010; Naor, Linderman & Schroeder, 2010). Sarala and Vaara (2010) explicate that, national culture is the set of mind with values and beliefs that exist in a country, while organizational culture reflects the procedures and values that exist and are shared within an organization. Further, Hofstede (1984) argues that management of an organization could be considered as nearly impossible without an underlying understanding of the expressions and beliefs that are shared by its members, as those are the tools that can be used to motivate and explain the legitimacy of decisions. Moreover, it is also considered that both national and organizational culture within an organization have an influence on how the response of employees will form, regarding different management practices (Park & Ungson, 1997; Pothukuchi et al., 2002; Sarala and Vaara, 2010; Naor et al., 2010)
An Overview of Acquisitions
The topic mergers and acquisitions (M&A) has been explored and investigated by a number of researchers (Bower, 2001; Cartwright & Schoenberg, 2006). Cartwright and Schoenberg (2006) and Bower (2001) explain that, despite the fact that M&A is a frequently researched topic, much is yet undiscovered. Larsson and Finkelstein (1999) elaborate that, the lack of some fields within the M&A literature, is due to the fact that researchers have chosen to mainly focus upon the same parts of research within the field.
Mergers and Acquisitions
According to the Online Business Dictionary (2017) Mergers are defined as two firms that together build one new legal business entity. Furthermore, they continue to define acquisitions as the possession of an asset, thus in the context of a firm, taking over at least 51% or more of a firms voting shares. Where one reason for organizations to use M&A’s as strategy, is according to Lin, Chen and Chu (2015) because, firms can use both Mergers and Acquisitions to gain efficiency, market power and more resources in different and new areas of interest.
Moreover, Bower (2001) makes a clear difference between a merger and an acquisition where he defines acquisitions as an event that occurs for five different reasons. The process of acquisition can be undertaken for to:
- Handle an overcapacity in a mature industry
- Gain new product possibilities and market entrances
- Eliminate competitors existing in the same industry, situated within the same geographical region.
- To replace R&D investment
- To expand the boundaries of an industry, by creating a new industry.
In comparison, Johnson, Whittington, & Scholes (2011) define an acquisition as the event of one organization taking over another organization or more specifically when there is a shift in the ownership from the acquired party to the acquiring party. Furthermore, they continue, even though the original owner of the acquired party still might be apparent within the organization, strategy decisions are taken over by one of the organizations. Additionally, to differentiate the event of mergers, Johnson et al., (2011) describe mergers as a joint ownership that has been mutually decided by two organizations. It is added that even though mergers are a joint ownership, most often the case of, one of the owners having a larger influence on strategic and business decisions than the other one occurs
Why use Acquisitions as Growth Strategy?
According to Steinberger (2016) M&A’s are considered to be one among different tools to gain firm growth. In frequent cases firm growth is measured in terms of assets, such as employees, which for example generate increased sales volume, but it can also be measured in profit, new extensions of product lines and services, and development of the economic system (Peng & Heath, 1996). Further, Peng & Heath (1996) mention that the three major growth strategies or decisions that can be identified in business literature are networks, generic expansion and acquisitions.
According to Delmar, Davidsson & Gartner (2003), different patterns of growth can be identified among high-growth firms (high-growth firms in this case according to the definition of Delmar et al. (2003)). This can be important to consider for practitioners who are deciding on their growth strategy, as the outcome of a growth strategy and the definition of growth may be one of the decisive factors, argues Delmar et al. (2003). The results of the investigation were determining that 13, 5% of all high-growth firms were categorised as Super absolute growers, where those firms exhibit a very high growth rate in both employment and sales. Acquisition growers represented 10% of the total high-growth firms and those 10% also resemble the first mentioned group (Delmar et al., 2003). Furthermore, it is presented in the same study that the difference between acquisition growers and super absolute growers is within employment, where the section of new job creation was negative within acquisition growers in comparison to super absolute growers. The total employment growth, is high due to acquisition and the takeover of its employees, while sales growth is high in absolute sales, both new and more sales (Delmar et al., 2003). In the decision making process, of strategy choice, an acquisition strategy should be considered as choice of growth strategy if the firm strives to achieve high absolute sales and total employment (Delmar et al., 2003).
Continuously Hennart and Park (1993) state that the choice of using acquisition as growth strategy is mostly made as the value of the purchased assets through the acquisition is beneath the cost of a direct investment, such as a subsidiary, to gain an asset of equal worth. Another reason that could be detected is if the firm’s advantages can be utilized better through an acquisition than through a green-field investment, but more common acquisitions are used if benefits can be perceived through acquiring that cannot be delivered through another type of investment (Hennart & Park, 1993). Specifically, Hennart and Park (1993) list those benefits in the following way:
- Market power gained through out setting a rival in a concentrated industry. This reduces competition and ads market share.
- Faster entrance into a new market. Implementing a new subsidiary from the bottom, is time-consuming.
- Not adding capacity into an industry characterized with high concentration and economies of scale. Creating a new firm ads components into a market, which decreases prices, while an acquisition does not increase capacity.
Furthermore, Peng & Heath (1996), as mentioned above, motivate that there are three different strategies that a firm can chose between to generate growth (network, generic expansion or acquisition). For to be able to generate growth, independent of which method is chosen Peng & Heath (1996) present some propositions that have to be fulfilled. Firstly, the top manager needs to adopt the strategic choice of firm growth. Additionally, there should be a need to fully employ resources that are underutilized. Lastly, Peng & Heath (1996) mention that a limitation for firm growth through one of the strategies of growth is that there has to exist the ability to transmit information and codified organizational structures and routines to the employees and members of the organization as well as the ability to overcome transaction and bureaucracy cost that appear due to the growth strategy.
The Acquisition Process and its Stages
Acquisitions are considered as a useful tool for firms to adjust to a fast changing environment and to gain and behold market power (Haleblian, Devers, McNamara, Carpenter & Davidson, 2009; Bower, 2001; Caiazza & Volpe, 2015); for to create value, acquisition should be considered as a process (Jemison & Sitkin, 1986) and factors within the process should be reconsidered in regard of the time and place of the acquisition (Caiazza & Volpe, 2015).
According to Haspeslagh and Jemison (1991) there are two main parts that the acquisition process can be divided into, the first is defined as the pre-acquisition phase and the second as the post-acquisition phase. Jemison and Sitkin (1986) elaborate that the process of acquisition is built through distinctive parts which possibly can affect the outcome and activities of the acquisition. Haspeslagh and Jemison (1991) explain that the pre-acquisition phase consists out of the decision making process and the post-acquisition phase consists out of the integration process. Furthermore, Caiazza and Volpe (2015) divide the phases of the M&A process into three stages
1Introduction
1.1Background
1.2Problem Formulation
1.3Purpose
1.4Research Questions
1.5Limitations
2Theoretical Framework
2.1An Introduction to Culture within Organizations
2.2An Overview of Acquisitions
2.3Organizational Culture in Acquisitions
2.4Integration of Organizational Culture in the Post-Acquisitions
2.5Integration Management of Organizational Culture in The Post-Acquisition Phase
3Method
3.1Research Paradigm
3.2Research Design
3.3Data Collection
3.4Data Analysis
3.5Quality and Ethics of Research
4Empirical Findings
4.1The History of a Swedish business consulting firm
4.2The choice of Acquisitions
4.3Acquisitions in our Company so far
5Analysis
5.1Growth through Acquisitions
5.2Integration Management in Acquisitions
5.3Integration Management of Organizational Culture in The Post-Acquisition Phase
6Conclusion
7Discussion
7.1Limitations
7.2For Practitioners
7.3Theoretical Contribution
8References
GET THE COMPLETE PROJECT
