Effect of MA Strategy on Shareholder Value

Effect of MA Strategy on Shareholder Value The aim of this project is to examine whether the decision of large UK companies looking to pursue a merger/acquisition strategy will affect shareholder value. The data analyzed in this study will determine if there is a positive or negative correlation in shareholder wealth when a merger/acquisition occurs. The research for this project will be conducted through the analysis of 40 different large UK companies that were merged or acquired by other UK based firms prior to 2002. The data will be obtained from the Bloomberg website. Further research and analysis on the topic will include information obtained from books, journals and reliable internet sources. To test the value of shareholder wealth when a merger/acquisition is pursued, different models will be used which includes Capital Asset Pricing Model, Efficient Capital Markets, Equilibrium Models, and Market Model (Event Studies and Abnormal Returns Methodology). The hypothesis that will be tested in this study is: H0 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will increase. H1 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will remain unchanged or will decrease. The first chapter will give a brief overview of mergers and acquisitions and introduce the reader to recent merger trends in the UK and different types of takeovers. The second chapter will be an in-depth analysis of past research studies which includes: examining different ways a company pays for a bid in a merger, exploring shareholder and managerial wealth perspectives, and analyzing long term post-merger performance of target and bidder firms. Chapter three presents the research methodology used in wealth gain studies and also states the methodology adopted for this dissertation. Chapter four analyzes and discusses the findings in context to wealth gain effects of mergers and acquisitions among the large UK companies chosen for this study. Chapter five concludes this research and highlights possible areas that may require further investigation. EXECUTIVE SUMMARY Mergers and acquisitions have become important events in todays rapidly changing business environment and have been the subject of many research studies. Reasons as to why companies may pursue a merger or acquisition strategy could be to reduce costs to achieve economies of scale or to reduce competition due to increased market power. Mergers and acquisitions have also been known to facilitate entry into new markets or industries and increase the level of effectiveness in a company by eliminating inefficient management. Mergers and acquisitions worldwide have tended to follow a pattern of waves, with there being periods of frantic takeover activity followed by relatively calmer periods. The main objective of financial theory is to maximize shareholder wealth therefore all decisions are taken with the aim of maximizing shareholder value. The purpose of this research is to re-examine the shareholder wealth gain criterion with regards to mergers and acquisitions within the United Kingdom. The objective of this study is to find out if shareholders of large UK companies benefit from the acquisition decisions made by the managers. Past research studies on post-acquisition performance of acquiring and target firms have mixed results. To determine if there is an increase or decrease in shareholder value from corporate takeovers, the Market Model and Event Study Methodology will be used in this study. The hypothesis developed in this study aims to support the argument that mergers and acquisitions are profitable events and lead to an increase in shareholder value. This study however concluded that merger and acquisitions among the large UK organizations chosen did not lead to an increase of shareholder value for both target and bidder firms. These results might not be entirely accurate due to various reasons such as size effects and the firms chosen in this study are from different industries. Other factors such as acquisition financing and acquisition motives also may have an effect on shareholder value however the testing of these factors is outside the scope of the following study. CHAPTER 1: OVERVIEW OF MERGERS AND ACQUISTIONS The following chapter briefly examines the benefits that a merger is expected to generate for both the target firm and the acquiring firm. The historical pattern of takeover activity in the UK from 1964-1992 is discussed to show merger and acquisition (MA) trends and recent MA activity abroad and within the UK will also be highlighted among large UK companies in 2008. In addition, the definition of mergers and acquisitions is provided and the second part of chapter one introduces the reader to different types of mergers used to create value for an organization. 1.1 Benefits to Mergers and Acquisitions Activity The main objective for an acquiring firm is to grow and expand its assets, sales and market shares. Other specific reasons for entering into a merger bid are reflected in the benefits that are expected to be generated which include: Exploiting scale economies Obtain synergy Enter into new markets To restore growth impetus To acquire market power To reduce dependence on existing or perhaps risky activities With the above mentioned benefits to MA activity, it should also be noted that takeovers most likely to succeed are those approached with a strategic focus, incorporating a detailed analysis of the objectives of the takeover, the possible alternatives and how the acquired company can be integrated in the new parent (Pike and Neale). 1.2 Trends in UK Merger Activity There has been an increasing trend of MA activity in the UK over the past few decades, with there being periods of high takeover activity followed by relatively slower periods as can be seen by the graph below. Figure 1.0 History of UK MA Activity Source: National Statistics, 2002 The highest peaks in takeovers are during the period 1984-1989. During this time, the average size of an acquisition had grown significantly from 9.64 million to 20.38 million. As per Sudarsanam (1995) the main reason for this was because the stock market in the UK, along with the harmony with the rest of the world stock markets experienced a strong bull phase which culminated in the October 1987 crash. Furthermore, the 1980s also experienced divestments on a large scale which meant companies would sell off divisions or subsidiaries to other firms of the divested parts in a management buyout. This increase in acquisitions and divestments had shown significant amount of corporate restructuring in the UK and thus led to new organizational innovations such as management buyouts and management buyins, as well as by financial innovations like high-leverage buyouts and mezzanine finance (Sudarsanam, 1995).As can be seen from the graph above, the UK MA market has experienced a relatively le aner period, which has continued till date. The main reasons that can be attributed to this are the various world catastrophes and the overall global economic slowdown. As per the office of National Statistics, the largest significant transaction recorded during the first quarter of 2008 was the acquisition by Imperial Tobacco Group Plc of Altadis S.A. for a press reported value of 9.3 billion. Another significant transaction was the acquisition by Carillion Plc of Alfred McAlpine Plc for a reported value of approximately 0.5 billion. For quarter one in 2008, the number of transactions reported for acquisitions in the UK by UK companies has been the lowest reported since quarter one 2003. Other recent major UK mergers acquisitions (2008) are as follows: Table 1.0 Recent Acquisitions in the UK by UK Companies Company Value in million Carillion Plc acquiring Alfred McAlpine Plc 554 Willmott Dixon Ltd acquiring Inspace Plc 133 easyJet Plc acquiring GB Airways Ltd 104 iimia MitonOptimal Plc acquiring Midas Capital Partners Ltd 100 Source: National Statistics, 2008 Table 2.0 Recent Acquisitions abroad by UK Companies Company Value in million Imperial Tobacco Group Plc acquiring Altadis S.A. 9339 Reckitt Benckiser Group Plc acquiring Adams Respiratory Therapeutics 1100 Scottish and Southern Energy Plc acquiring Airtricity Holdings Ltd 808 SABMiller Plc acquiring Koninklijke Grolsch N.V 606 Ineos Group Ltd acquiring Kerling AS 429 429 Standard Chartered Plc acquiring American Express Bank Ltd 413 Kesa Electricals Plc disposing of BUT SAS 389 Source: National Statistics, 2008 1.3 Definitions and Different Types of Mergers and Acquisitions Although the terms merger, acquisition and takeover are used interchangeably, technical differences do exist. A merger is when corporations come together to combine and share their resources to achieve a common set of objectives (Sudarsanam, 1995). The shareholders of the two combined corporations will continue to be joint owners. An acquisition is when one firm purchases the assets or shares of another firm however the shareholders of the acquired firm continue being owners of that firm. A takeover is the acquisition by one company of the share capital of another in exchange for cash, ordinary shares, loan stock or a combination of these (Pike and Neale). This distinction between the three terms is important in certain contexts however they are used by researchers and authors interchangeably. In the following dissertation, I too will use these three terms interchangeably. There are different types of mergers that exist to create value and are classified into three main categories: horizontal, vertical and conglomerate (Pike and Neale). Horizontal integration: this is when a company takes over the target firm from the same industry and at the same stage of the production process. Vertical integration: where the target is in the same industry as the acquirer however is operating at a different stage in the production process. This can be either close to the source of materials (backward integration) or close to the final customer (forward integration). Conglomerate integration: occurs when the target is in a business that is different to the acquirer. The reasons a firm may undergo a conglomerate merger is to reduce risk through diversification, opportunities for cost reduction and improving internal and external efficiencies. In order to understand whether mergers and acquisitions create or destroy shareholder value, it is important to appreciate and understand few critical aspects of the complex MA theory. The three areas in helping to answer this question with respects to the impact of shareholder value in my opinion are different modes of financing mergers and acquisitions, motives for MA activity and post-merger performance. Various researchers in the finance field have conducted a great amount of research on the above mentioned areas and this dissertation will help put into perspective mergers and acquisitions impact on shareholder value currently in the UK. CHAPTER 2: BACKGROUND OF STUDY Mergers and acquisitions are undertaken as a means of corporate growth and expansion but are also an alternative to growth through internal or organic capital investment. The immediate objective of an acquisition is self-evidently growth and expansion of the acquirers assets, sales and market share (Sudarsanam, 1995). Another objective of acquisitions would be to increase the growth of shareholders wealth aimed at creating a strong competitive advantage for the acquirer. In modern finance theory, shareholder wealth maximization is a strong rational for financing and investment decisions made by management. This leads to the question of wealth gain effects of mergers and acquisitions, specifically among large UK companies. The following chapter introduces various literature regarding wealth gain effects of mergers and acquisitions and highlights the various aspects of mergers and acquisitions which may have an effect on the shareholder value within large UK corporations. 2.1 Modes of Acquisition Financing There are various modes of financing a takeover which includes: cash (preferred method), issuing of ordinary shares and fixed interest securities (loan stock, convertibles, and preference shares). The way in which a merger and acquisition is financed has different benefits to the target shareholders and bidder shareholders. In addition, cash takeovers may be sufficiently different from non-cash acquisitions and failure to distinguish between them may lead to inappropriate generalizations (Carleton et al, 1983). As per Sudarsanam (1995), there are various ways a firm can bid an acquisition, which is shown in Table 3.0. Table 3.0 Bid Financing Bidder Offers Target shareholders receive Cash Cash in exchange for their shares Share Exchange A specified number of bidder s shares for each target share Cash underwritten share offer (vendor placing) Bidders shares, then sell them to a merchant bank for cash Loan stock A loan stock/debenture in exchange for their shares Convertible loan or preferred shares Loan stock or preferred shares convertible into ordinary shares at a predetermined conversion rate over a specified period Deferred payment Part of consideration after a specified period, subject to performance criteria Source: Sudarsanam (1995, p.177) In addition, a bidder making cash offer can finance it from one or more of the following sources (Sudarsanam, 1995): Internal operating cash flow A pre-bid rights issue A cash underwritten offer, e.g. vendor placing or vendor rights A pre-bid loan stock issue Bank Credit A cash offer has two advantages from the point of view to both the target and acquiring shareholders which includes (Pike Neale, 1999): The amount is certain; there is no exposure to the risk of adverse movement in share price during the course of the bid. The targeted shareholder is more easily able to adjust his or her portfolio than if he or she receives shares, which involve dealing costs when sold. Because no new shares are issued, there is no dilution of earnings or change in the balance of control of the bidder. In terms of shares being used as a medium of exchange again there are some advantages to both target as well as acquiring shareholders (Arnold, 2002) which are: For target shareholders use of shares helps avoid capital gains tax. Target shareholders maintain an interest in the combine entity thus helping preserve as well as increase shareholders value. Acquiring shareholders gain from the fact that there is no immediate cash outflow. Nickolaos Travlos (1987) study titled Corporate Takeover Bids, Method of Payment, and Bidding Firms Stock Returns was to examine the role of the method of payment in determining common stock returns of bidding firms at the announcement of takeover bids. The analysis in the study was to show the valuation effects on two common methods of payment which are common stock exchanges and cash offers. The results showed that bidding firms had normal returns in cash offers however experienced significant losses in pure stock exchange acquisitions. Other literature studied by Asquith and Mullins (1986), Kalay and Shimrat (1987), Masulis and Korwar (1986) and Mikkelson and Partch ( 1986) show that common stock issues have negative stock price when there are new common stock offerings. These results were supported by various other studies such as Henri Servaess (1991) study titled Tobins Q and gains from takeovers. Agrawal, Jaffe and Mandelkar (1992) found post-acquisition returns to be lower fo r share-financed acquisitions in comparison to cash-financed acquisitions. They further went on to prove that shareholders of acquiring firms suffered a statistically significant loss of about 10% over the five-year merger period. The bidding firms method of payment provides valuable insight to the market. If the bidding firms managers possess information about the intrinsic value of their firm, independent of the acquisition, which is not fully reflected in the pre-acquisition stock price, they will finance the acquisition in the most profitable way for the existing stockholders (Travlos, 1987). Myers and Majluf (1984) model states that management will prefer cash offerings if they believe their firm is under-valued however a common stock exchange offer will be preferred if they believe their firm is over-valued. In addition, market participants will strongly favor a cash offer as good news while the opposite holds true for a common stock exchange about the bidding firms true value. If such information is important in the market, then the bidding firms stock price change at the proposals announcement will reflect both the gain from the takeover (weighted by the probability that the takeover bid will go throug h) and the information effects (Nickolaos, 1987). Jensen and Ruback (1983) state that most tender offers are financed by cash however merger proposals are financed by the exchange of common stock therefore the information argument states that larger target residuals occur in tender offers rather than in mergers. In their study conducted, they determined that for mergers, the weighted abnormal target firm return is 16.3% over the month before announcement however for tender offers; the weighted target return is 30.9% over the two-month period surrounding the announcement dates. Cash is by far the most widely used form of payment in mergers and acquisitions. There are many reasons as to why there is an increased use of cash in financing mergers. One possible explanation for the increasing use of cash depends on market imperfections and/or agency considerations (Carleton et al, 1983). Another reason for why bidding firms use cash in financing mergers is the increase in the number of hostile mergers. Cash not only signals a high value for the target, but also preempts other firms from bidding (Martin, 1996). These findings were also found in the literature of Eckbo, Giammarino and Heinkel (1990) which include a role for mixed financings in which higher-valued bidders are more likely to use more cash to finance the acquisition. As can be seen from the literature above the mode of payment in an acquisition may be driven by various motives and can have various effects on the bidders and acquirers stock price. This can have a major impact on shareholder value during corporate acquisitions as well as value gain studies. A study by Loughran and Vijh (1997) formed an association between the mode of acquisition (merger and tender offer) and the method of payment (cash or stock). They studied this relationship in the context of wealth gains from acquisitions and concluded that the post-acquisition returns of acquirers are related to both the mode of acquisition as well as form of payment. This was also proved by various other researchers (mentioned above) thus making the method of payment during an acquisition all the more important. Reason being, post-acquisition returns are what tend to effect shareholder value the most therefore the knowledge and distinction of the various modes of financing an acquisition is ve ry relevant and essential. 2.2 Motives for Mergers Acquisitions A Dual Perspective Tender offers allow for an in-depth analysis of agency relationships since the best interests of the principal (target firm shareholders) and agent (target firm managers) are often in conflict. Managers of the target firm are often in conflict of interest between their fiduciary responsibilities to the shareholders and their own personal wealth. For this reason, tender offers allow for the analysis of agency conflicts between shareholders and management of the target firm. According to Sudarsanam (1995) there are two main perspectives for acquisition motives which are: Shareholder wealth maximization perspective Under the shareholder wealth maximization perspective, all firms decisions including acquisitions are made with the objective of maximizing the wealth of the shareholders of the firm. In mergers and acquisitions, management of the target firm will oppose bidding firms to takeover if they believe this action would not be in the best interest of its shareholders. Target managers that oppose a bid defend their reasoning by claiming that the bid price is not adequate enough. Managerial wealth perspective Under the managerial wealth perspective, target managers may face an uneasy choice between obligations to current shareholders and those who aspire to such a position (Walkling and Long, 1984). For many target managers, if they sense a possibility of a loss in compensation from the merger or acquisition, conflict of interest will then increase. If self interest is pursued by target managers, there is a possibility that a bad acquisition may occur and/or a loss of shareholder wealth. According to Sudarsanam (1995), managers may undertake acquisitions for the following reasons: To pursue growth in size of their firm, since their salary, prerequisites, status and power are a function of firm size. (Empire-building syndrome) In order to deploy their currently underused managerial skills. (self-fulfillment motive) To diversify risk and minimize costs of financial distress and bankruptcy. (job security motive) To avoid being taken over. (job security motive) The managerial wealth perspective motive is one of survival. Not only do managers tend to seek motivation from sustained growth but also seek job security. Managers unlike shareholders cannot diversify to spread their risks since they are tied to one company. If that company is acquired, managers have a high probability of losing their jobs. A study conducted by Firth (1991) tests to see if executive reward increases when an acquisition takes place. In a sample of 254 UK takeover offers during 1974-1980 found that the acquisition process leads to an increase in managerial remuneration, and that this is predicated on the increased size of the acquirer and concludes that the evidence is consistent with takeovers being motivated by managers wanting to maximize their own welfare'(Firth, 1991). Agency conflicts arise whenever differing incentives cause managers to take actions that benefit themselves but harm shareholders. In the context of acquisitions, agency conflicts may lead to a reduction in shareholder wealth if managers pursue expansion for nonprofit-maximizing reasons. According to past literature, large target shareholder wealth gains are experienced during the announcement of a takeover and large shareholder wealth losses occur when a takeover bid fails (Jensen and Ruback, 1983). This implies that target management interests are not always achieved by accepting bid offers. In addition, target managers may lose compensation and other perks if they are replaced after a successful bid offer. These findings are also confirmed by Walkling and Long (1984) and Martin and McConnell (1991), all of whom reported above-average managerial turnover after a successful takeover bid. The study findings show that in addition to lost compensation, managerial turnover may also be a ssociated with loss of status. Martin and McConnell (1991) further go on to say that the mergers and acquisitions market plays an important role in controlling the non-value maximizing behavior of managers of large corporations. As shown from the literature above, the shareholder wealth perspective and managerial wealth perspective may conflict with one another. With respects to mergers and acquisitions, the managerial motives and a mangers reaction to a takeover bid may have an impact on the shareholder wealth maximization criterion. The extent to which it would impact shareholder value will be decided by the amount of control managers have within the organization. 2.3 Post Merger Performance Debate (Targets and Bidders) There has been considerable interest in the post merger performance on shareholders returns in the target and bidder firms. Typical findings by researchers show three patterns: (1) target shareholders earn significantly positive abnormal returns from all acquisitions, (2) acquiring shareholders earn little or no abnormal returns from tender offers and (3) acquiring shareholders earn negative abnormal returns from mergers. Overall, the results of post merger performance have been mixed. According to Langetieg (1978) and Asquith (1983), their research concluded that acquired firms experience significantly negative abnormal returns over one to three years after the merger. In the research study conducted by Agrawal, Jaffe and Mandelker (1992) titled The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly found that stockholders of acquiring firms experience a statistically significant wealth loss of approximately 10% over five years after the merger completion date. Research conducted by Franks, Harris and Titman (1991) found that no significant underperformance of stockholders returns exist over a three year period after the acquisition. Franks et al concluded that the previous findings of poor performance post-acquisition were likely to be due to benchmark errors rather than inconsistencies with the Efficient Market Theory (EMH) or mis-pricing at the time of the takeover. Similar results that underperformance of stockholders returns do not exist over a three year period after acquisition is also concluded by Bradley and Jarrell (1988). A few studies have analyzed value gains during merger and acquisitions with respect to various classes of merging firms security holders. A study was carried out by Dennis and McConnell (1986) namely, Corporate Mergers and Security Returns and their results indicated mergers on average to be value creating activities for the acquired and the acquiring company individually. They found by other previous studies that on average common stockholders of acquiring firms earn positive returns but are usually not statistically significant. Their results also indicated that convertible preferred stockholders (of acquiring firm) received positive and statistically significant returns post-merger; however, non-convertible preferred stockholders received positive but not statistically significant returns post-merger. The combination of the above mentioned results lead to an overall increase in the value of the firm therefore presenting us with the reason as to why corporations go ahead with merge rs which do not earn statistically significant returns to common stockholders of the acquiring firms. Research results by Asquith and Kim (1982) also confirm what other investigators found for mergers: abnormal returns to the common stocks of acquired firms are positive and statistically significant; abnormal returns to the common stock of acquiring firms are not significantly different from zero. In the study Do Long-term Shareholders Benefit Corporate Acquisitions? by Loughran and Vijh (1997), found that post acquisition returns of acquirers stock are related to both the form of payment as well as the mode of acquisition. They concluded in the overall sample of 947 cases, acquirers that make merger bids earn, on average, 15.9 percent less than matching firms whereas acquirers that make tender offers earn 43.0 percent more than matching firms during a five-year period after acquisition. In addition, stock acquirers earned 24.2 percent less however cash acquirers earn 18.5 percent more with respects to matching firms. Furthermore, conclusions show that during a five year period following the acquisition, on average, firms t Effect of MA Strategy on Shareholder Value Effect of MA Strategy on Shareholder Value The aim of this project is to examine whether the decision of large UK companies looking to pursue a merger/acquisition strategy will affect shareholder value. The data analyzed in this study will determine if there is a positive or negative correlation in shareholder wealth when a merger/acquisition occurs. The research for this project will be conducted through the analysis of 40 different large UK companies that were merged or acquired by other UK based firms prior to 2002. The data will be obtained from the Bloomberg website. Further research and analysis on the topic will include information obtained from books, journals and reliable internet sources. To test the value of shareholder wealth when a merger/acquisition is pursued, different models will be used which includes Capital Asset Pricing Model, Efficient Capital Markets, Equilibrium Models, and Market Model (Event Studies and Abnormal Returns Methodology). The hypothesis that will be tested in this study is: H0 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will increase. H1 = If managers of large sized UK companies pursue a merger and acquisition strategy then shareholder wealth (value) will remain unchanged or will decrease. The first chapter will give a brief overview of mergers and acquisitions and introduce the reader to recent merger trends in the UK and different types of takeovers. The second chapter will be an in-depth analysis of past research studies which includes: examining different ways a company pays for a bid in a merger, exploring shareholder and managerial wealth perspectives, and analyzing long term post-merger performance of target and bidder firms. Chapter three presents the research methodology used in wealth gain studies and also states the methodology adopted for this dissertation. Chapter four analyzes and discusses the findings in context to wealth gain effects of mergers and acquisitions among the large UK companies chosen for this study. Chapter five concludes this research and highlights possible areas that may require further investigation. EXECUTIVE SUMMARY Mergers and acquisitions have become important events in todays rapidly changing business environment and have been the subject of many research studies. Reasons as to why companies may pursue a merger or acquisition strategy could be to reduce costs to achieve economies of scale or to reduce competition due to increased market power. Mergers and acquisitions have also been known to facilitate entry into new markets or industries and increase the level of effectiveness in a company by eliminating inefficient management. Mergers and acquisitions worldwide have tended to follow a pattern of waves, with there being periods of frantic takeover activity followed by relatively calmer periods. The main objective of financial theory is to maximize shareholder wealth therefore all decisions are taken with the aim of maximizing shareholder value. The purpose of this research is to re-examine the shareholder wealth gain criterion with regards to mergers and acquisitions within the United Kingdom. The objective of this study is to find out if shareholders of large UK companies benefit from the acquisition decisions made by the managers. Past research studies on post-acquisition performance of acquiring and target firms have mixed results. To determine if there is an increase or decrease in shareholder value from corporate takeovers, the Market Model and Event Study Methodology will be used in this study. The hypothesis developed in this study aims to support the argument that mergers and acquisitions are profitable events and lead to an increase in shareholder value. This study however concluded that merger and acquisitions among the large UK organizations chosen did not lead to an increase of shareholder value for both target and bidder firms. These results might not be entirely accurate due to various reasons such as size effects and the firms chosen in this study are from different industries. Other factors such as acquisition financing and acquisition motives also may have an effect on shareholder value however the testing of these factors is outside the scope of the following study. CHAPTER 1: OVERVIEW OF MERGERS AND ACQUISTIONS The following chapter briefly examines the benefits that a merger is expected to generate for both the target firm and the acquiring firm. The historical pattern of takeover activity in the UK from 1964-1992 is discussed to show merger and acquisition (MA) trends and recent MA activity abroad and within the UK will also be highlighted among large UK companies in 2008. In addition, the definition of mergers and acquisitions is provided and the second part of chapter one introduces the reader to different types of mergers used to create value for an organization. 1.1 Benefits to Mergers and Acquisitions Activity The main objective for an acquiring firm is to grow and expand its assets, sales and market shares. Other specific reasons for entering into a merger bid are reflected in the benefits that are expected to be generated which include: Exploiting scale economies Obtain synergy Enter into new markets To restore growth impetus To acquire market power To reduce dependence on existing or perhaps risky activities With the above mentioned benefits to MA activity, it should also be noted that takeovers most likely to succeed are those approached with a strategic focus, incorporating a detailed analysis of the objectives of the takeover, the possible alternatives and how the acquired company can be integrated in the new parent (Pike and Neale). 1.2 Trends in UK Merger Activity There has been an increasing trend of MA activity in the UK over the past few decades, with there being periods of high takeover activity followed by relatively slower periods as can be seen by the graph below. Figure 1.0 History of UK MA Activity Source: National Statistics, 2002 The highest peaks in takeovers are during the period 1984-1989. During this time, the average size of an acquisition had grown significantly from 9.64 million to 20.38 million. As per Sudarsanam (1995) the main reason for this was because the stock market in the UK, along with the harmony with the rest of the world stock markets experienced a strong bull phase which culminated in the October 1987 crash. Furthermore, the 1980s also experienced divestments on a large scale which meant companies would sell off divisions or subsidiaries to other firms of the divested parts in a management buyout. This increase in acquisitions and divestments had shown significant amount of corporate restructuring in the UK and thus led to new organizational innovations such as management buyouts and management buyins, as well as by financial innovations like high-leverage buyouts and mezzanine finance (Sudarsanam, 1995).As can be seen from the graph above, the UK MA market has experienced a relatively le aner period, which has continued till date. The main reasons that can be attributed to this are the various world catastrophes and the overall global economic slowdown. As per the office of National Statistics, the largest significant transaction recorded during the first quarter of 2008 was the acquisition by Imperial Tobacco Group Plc of Altadis S.A. for a press reported value of 9.3 billion. Another significant transaction was the acquisition by Carillion Plc of Alfred McAlpine Plc for a reported value of approximately 0.5 billion. For quarter one in 2008, the number of transactions reported for acquisitions in the UK by UK companies has been the lowest reported since quarter one 2003. Other recent major UK mergers acquisitions (2008) are as follows: Table 1.0 Recent Acquisitions in the UK by UK Companies Company Value in million Carillion Plc acquiring Alfred McAlpine Plc 554 Willmott Dixon Ltd acquiring Inspace Plc 133 easyJet Plc acquiring GB Airways Ltd 104 iimia MitonOptimal Plc acquiring Midas Capital Partners Ltd 100 Source: National Statistics, 2008 Table 2.0 Recent Acquisitions abroad by UK Companies Company Value in million Imperial Tobacco Group Plc acquiring Altadis S.A. 9339 Reckitt Benckiser Group Plc acquiring Adams Respiratory Therapeutics 1100 Scottish and Southern Energy Plc acquiring Airtricity Holdings Ltd 808 SABMiller Plc acquiring Koninklijke Grolsch N.V 606 Ineos Group Ltd acquiring Kerling AS 429 429 Standard Chartered Plc acquiring American Express Bank Ltd 413 Kesa Electricals Plc disposing of BUT SAS 389 Source: National Statistics, 2008 1.3 Definitions and Different Types of Mergers and Acquisitions Although the terms merger, acquisition and takeover are used interchangeably, technical differences do exist. A merger is when corporations come together to combine and share their resources to achieve a common set of objectives (Sudarsanam, 1995). The shareholders of the two combined corporations will continue to be joint owners. An acquisition is when one firm purchases the assets or shares of another firm however the shareholders of the acquired firm continue being owners of that firm. A takeover is the acquisition by one company of the share capital of another in exchange for cash, ordinary shares, loan stock or a combination of these (Pike and Neale). This distinction between the three terms is important in certain contexts however they are used by researchers and authors interchangeably. In the following dissertation, I too will use these three terms interchangeably. There are different types of mergers that exist to create value and are classified into three main categories: horizontal, vertical and conglomerate (Pike and Neale). Horizontal integration: this is when a company takes over the target firm from the same industry and at the same stage of the production process. Vertical integration: where the target is in the same industry as the acquirer however is operating at a different stage in the production process. This can be either close to the source of materials (backward integration) or close to the final customer (forward integration). Conglomerate integration: occurs when the target is in a business that is different to the acquirer. The reasons a firm may undergo a conglomerate merger is to reduce risk through diversification, opportunities for cost reduction and improving internal and external efficiencies. In order to understand whether mergers and acquisitions create or destroy shareholder value, it is important to appreciate and understand few critical aspects of the complex MA theory. The three areas in helping to answer this question with respects to the impact of shareholder value in my opinion are different modes of financing mergers and acquisitions, motives for MA activity and post-merger performance. Various researchers in the finance field have conducted a great amount of research on the above mentioned areas and this dissertation will help put into perspective mergers and acquisitions impact on shareholder value currently in the UK. CHAPTER 2: BACKGROUND OF STUDY Mergers and acquisitions are undertaken as a means of corporate growth and expansion but are also an alternative to growth through internal or organic capital investment. The immediate objective of an acquisition is self-evidently growth and expansion of the acquirers assets, sales and market share (Sudarsanam, 1995). Another objective of acquisitions would be to increase the growth of shareholders wealth aimed at creating a strong competitive advantage for the acquirer. In modern finance theory, shareholder wealth maximization is a strong rational for financing and investment decisions made by management. This leads to the question of wealth gain effects of mergers and acquisitions, specifically among large UK companies. The following chapter introduces various literature regarding wealth gain effects of mergers and acquisitions and highlights the various aspects of mergers and acquisitions which may have an effect on the shareholder value within large UK corporations. 2.1 Modes of Acquisition Financing There are various modes of financing a takeover which includes: cash (preferred method), issuing of ordinary shares and fixed interest securities (loan stock, convertibles, and preference shares). The way in which a merger and acquisition is financed has different benefits to the target shareholders and bidder shareholders. In addition, cash takeovers may be sufficiently different from non-cash acquisitions and failure to distinguish between them may lead to inappropriate generalizations (Carleton et al, 1983). As per Sudarsanam (1995), there are various ways a firm can bid an acquisition, which is shown in Table 3.0. Table 3.0 Bid Financing Bidder Offers Target shareholders receive Cash Cash in exchange for their shares Share Exchange A specified number of bidder s shares for each target share Cash underwritten share offer (vendor placing) Bidders shares, then sell them to a merchant bank for cash Loan stock A loan stock/debenture in exchange for their shares Convertible loan or preferred shares Loan stock or preferred shares convertible into ordinary shares at a predetermined conversion rate over a specified period Deferred payment Part of consideration after a specified period, subject to performance criteria Source: Sudarsanam (1995, p.177) In addition, a bidder making cash offer can finance it from one or more of the following sources (Sudarsanam, 1995): Internal operating cash flow A pre-bid rights issue A cash underwritten offer, e.g. vendor placing or vendor rights A pre-bid loan stock issue Bank Credit A cash offer has two advantages from the point of view to both the target and acquiring shareholders which includes (Pike Neale, 1999): The amount is certain; there is no exposure to the risk of adverse movement in share price during the course of the bid. The targeted shareholder is more easily able to adjust his or her portfolio than if he or she receives shares, which involve dealing costs when sold. Because no new shares are issued, there is no dilution of earnings or change in the balance of control of the bidder. In terms of shares being used as a medium of exchange again there are some advantages to both target as well as acquiring shareholders (Arnold, 2002) which are: For target shareholders use of shares helps avoid capital gains tax. Target shareholders maintain an interest in the combine entity thus helping preserve as well as increase shareholders value. Acquiring shareholders gain from the fact that there is no immediate cash outflow. Nickolaos Travlos (1987) study titled Corporate Takeover Bids, Method of Payment, and Bidding Firms Stock Returns was to examine the role of the method of payment in determining common stock returns of bidding firms at the announcement of takeover bids. The analysis in the study was to show the valuation effects on two common methods of payment which are common stock exchanges and cash offers. The results showed that bidding firms had normal returns in cash offers however experienced significant losses in pure stock exchange acquisitions. Other literature studied by Asquith and Mullins (1986), Kalay and Shimrat (1987), Masulis and Korwar (1986) and Mikkelson and Partch ( 1986) show that common stock issues have negative stock price when there are new common stock offerings. These results were supported by various other studies such as Henri Servaess (1991) study titled Tobins Q and gains from takeovers. Agrawal, Jaffe and Mandelkar (1992) found post-acquisition returns to be lower fo r share-financed acquisitions in comparison to cash-financed acquisitions. They further went on to prove that shareholders of acquiring firms suffered a statistically significant loss of about 10% over the five-year merger period. The bidding firms method of payment provides valuable insight to the market. If the bidding firms managers possess information about the intrinsic value of their firm, independent of the acquisition, which is not fully reflected in the pre-acquisition stock price, they will finance the acquisition in the most profitable way for the existing stockholders (Travlos, 1987). Myers and Majluf (1984) model states that management will prefer cash offerings if they believe their firm is under-valued however a common stock exchange offer will be preferred if they believe their firm is over-valued. In addition, market participants will strongly favor a cash offer as good news while the opposite holds true for a common stock exchange about the bidding firms true value. If such information is important in the market, then the bidding firms stock price change at the proposals announcement will reflect both the gain from the takeover (weighted by the probability that the takeover bid will go throug h) and the information effects (Nickolaos, 1987). Jensen and Ruback (1983) state that most tender offers are financed by cash however merger proposals are financed by the exchange of common stock therefore the information argument states that larger target residuals occur in tender offers rather than in mergers. In their study conducted, they determined that for mergers, the weighted abnormal target firm return is 16.3% over the month before announcement however for tender offers; the weighted target return is 30.9% over the two-month period surrounding the announcement dates. Cash is by far the most widely used form of payment in mergers and acquisitions. There are many reasons as to why there is an increased use of cash in financing mergers. One possible explanation for the increasing use of cash depends on market imperfections and/or agency considerations (Carleton et al, 1983). Another reason for why bidding firms use cash in financing mergers is the increase in the number of hostile mergers. Cash not only signals a high value for the target, but also preempts other firms from bidding (Martin, 1996). These findings were also found in the literature of Eckbo, Giammarino and Heinkel (1990) which include a role for mixed financings in which higher-valued bidders are more likely to use more cash to finance the acquisition. As can be seen from the literature above the mode of payment in an acquisition may be driven by various motives and can have various effects on the bidders and acquirers stock price. This can have a major impact on shareholder value during corporate acquisitions as well as value gain studies. A study by Loughran and Vijh (1997) formed an association between the mode of acquisition (merger and tender offer) and the method of payment (cash or stock). They studied this relationship in the context of wealth gains from acquisitions and concluded that the post-acquisition returns of acquirers are related to both the mode of acquisition as well as form of payment. This was also proved by various other researchers (mentioned above) thus making the method of payment during an acquisition all the more important. Reason being, post-acquisition returns are what tend to effect shareholder value the most therefore the knowledge and distinction of the various modes of financing an acquisition is ve ry relevant and essential. 2.2 Motives for Mergers Acquisitions A Dual Perspective Tender offers allow for an in-depth analysis of agency relationships since the best interests of the principal (target firm shareholders) and agent (target firm managers) are often in conflict. Managers of the target firm are often in conflict of interest between their fiduciary responsibilities to the shareholders and their own personal wealth. For this reason, tender offers allow for the analysis of agency conflicts between shareholders and management of the target firm. According to Sudarsanam (1995) there are two main perspectives for acquisition motives which are: Shareholder wealth maximization perspective Under the shareholder wealth maximization perspective, all firms decisions including acquisitions are made with the objective of maximizing the wealth of the shareholders of the firm. In mergers and acquisitions, management of the target firm will oppose bidding firms to takeover if they believe this action would not be in the best interest of its shareholders. Target managers that oppose a bid defend their reasoning by claiming that the bid price is not adequate enough. Managerial wealth perspective Under the managerial wealth perspective, target managers may face an uneasy choice between obligations to current shareholders and those who aspire to such a position (Walkling and Long, 1984). For many target managers, if they sense a possibility of a loss in compensation from the merger or acquisition, conflict of interest will then increase. If self interest is pursued by target managers, there is a possibility that a bad acquisition may occur and/or a loss of shareholder wealth. According to Sudarsanam (1995), managers may undertake acquisitions for the following reasons: To pursue growth in size of their firm, since their salary, prerequisites, status and power are a function of firm size. (Empire-building syndrome) In order to deploy their currently underused managerial skills. (self-fulfillment motive) To diversify risk and minimize costs of financial distress and bankruptcy. (job security motive) To avoid being taken over. (job security motive) The managerial wealth perspective motive is one of survival. Not only do managers tend to seek motivation from sustained growth but also seek job security. Managers unlike shareholders cannot diversify to spread their risks since they are tied to one company. If that company is acquired, managers have a high probability of losing their jobs. A study conducted by Firth (1991) tests to see if executive reward increases when an acquisition takes place. In a sample of 254 UK takeover offers during 1974-1980 found that the acquisition process leads to an increase in managerial remuneration, and that this is predicated on the increased size of the acquirer and concludes that the evidence is consistent with takeovers being motivated by managers wanting to maximize their own welfare'(Firth, 1991). Agency conflicts arise whenever differing incentives cause managers to take actions that benefit themselves but harm shareholders. In the context of acquisitions, agency conflicts may lead to a reduction in shareholder wealth if managers pursue expansion for nonprofit-maximizing reasons. According to past literature, large target shareholder wealth gains are experienced during the announcement of a takeover and large shareholder wealth losses occur when a takeover bid fails (Jensen and Ruback, 1983). This implies that target management interests are not always achieved by accepting bid offers. In addition, target managers may lose compensation and other perks if they are replaced after a successful bid offer. These findings are also confirmed by Walkling and Long (1984) and Martin and McConnell (1991), all of whom reported above-average managerial turnover after a successful takeover bid. The study findings show that in addition to lost compensation, managerial turnover may also be a ssociated with loss of status. Martin and McConnell (1991) further go on to say that the mergers and acquisitions market plays an important role in controlling the non-value maximizing behavior of managers of large corporations. As shown from the literature above, the shareholder wealth perspective and managerial wealth perspective may conflict with one another. With respects to mergers and acquisitions, the managerial motives and a mangers reaction to a takeover bid may have an impact on the shareholder wealth maximization criterion. The extent to which it would impact shareholder value will be decided by the amount of control managers have within the organization. 2.3 Post Merger Performance Debate (Targets and Bidders) There has been considerable interest in the post merger performance on shareholders returns in the target and bidder firms. Typical findings by researchers show three patterns: (1) target shareholders earn significantly positive abnormal returns from all acquisitions, (2) acquiring shareholders earn little or no abnormal returns from tender offers and (3) acquiring shareholders earn negative abnormal returns from mergers. Overall, the results of post merger performance have been mixed. According to Langetieg (1978) and Asquith (1983), their research concluded that acquired firms experience significantly negative abnormal returns over one to three years after the merger. In the research study conducted by Agrawal, Jaffe and Mandelker (1992) titled The Post-Merger Performance of Acquiring Firms: A Re-examination of an Anomaly found that stockholders of acquiring firms experience a statistically significant wealth loss of approximately 10% over five years after the merger completion date. Research conducted by Franks, Harris and Titman (1991) found that no significant underperformance of stockholders returns exist over a three year period after the acquisition. Franks et al concluded that the previous findings of poor performance post-acquisition were likely to be due to benchmark errors rather than inconsistencies with the Efficient Market Theory (EMH) or mis-pricing at the time of the takeover. Similar results that underperformance of stockholders returns do not exist over a three year period after acquisition is also concluded by Bradley and Jarrell (1988). A few studies have analyzed value gains during merger and acquisitions with respect to various classes of merging firms security holders. A study was carried out by Dennis and McConnell (1986) namely, Corporate Mergers and Security Returns and their results indicated mergers on average to be value creating activities for the acquired and the acquiring company individually. They found by other previous studies that on average common stockholders of acquiring firms earn positive returns but are usually not statistically significant. Their results also indicated that convertible preferred stockholders (of acquiring firm) received positive and statistically significant returns post-merger; however, non-convertible preferred stockholders received positive but not statistically significant returns post-merger. The combination of the above mentioned results lead to an overall increase in the value of the firm therefore presenting us with the reason as to why corporations go ahead with merge rs which do not earn statistically significant returns to common stockholders of the acquiring firms. Research results by Asquith and Kim (1982) also confirm what other investigators found for mergers: abnormal returns to the common stocks of acquired firms are positive and statistically significant; abnormal returns to the common stock of acquiring firms are not significantly different from zero. In the study Do Long-term Shareholders Benefit Corporate Acquisitions? by Loughran and Vijh (1997), found that post acquisition returns of acquirers stock are related to both the form of payment as well as the mode of acquisition. They concluded in the overall sample of 947 cases, acquirers that make merger bids earn, on average, 15.9 percent less than matching firms whereas acquirers that make tender offers earn 43.0 percent more than matching firms during a five-year period after acquisition. In addition, stock acquirers earned 24.2 percent less however cash acquirers earn 18.5 percent more with respects to matching firms. Furthermore, conclusions show that during a five year period following the acquisition, on average, firms t

Kudler’s Human Resource Information System: Case Study

Kudler’s Human Resource Information Systems (HRIS) System is not efficient. Kudler does use Intuit which is one of the best payroll processing software to have. Intuit stores the basic information needed for payroll: personal information, pay rate, tax exemptions, hire date, seniority date and organizational information. In addition to Intuit storing information, the store manager keeps an Excel spreadsheet that displays job analyses, salary surveys and individual compensation decisions (HRIS System, n.d., para 6). All this information is needed the purposes of processing payroll correctly and making sure Kudler is in line with the guidelines given the IRS. In order to change any information within Intuit, a written document must be provided to the accounting clerk. Then the clerk will manually enter the changes into the system. The clerk also maintains a paper file with the tax forms for each employee. This file contains all the original forms for the employee data. Workers’ compensation is managed by a third party company that keeps their own records decisions (HRIS System, n.d., para 6). Employees must manually fill out timesheets each week. This paper document is then approved by the store manager and then is faxed to the accounting department decisions (HRIS System, n.d., para 6). Any corrections made to the timesheets must be approved by the employee’s direct supervisor and store manager. The store manager has the employee files for all employees that work in the store instead of having a central filing area. These paper documents are stored in a locked filing cabinet. The documents that are stored in this filing cabinet consist of: job application/resume, performance reviews, I-9 forms and any disciplinary memos or performance management issues decisions (HRIS System, n.d., para 6). These types of files should not all be contained in one area by the store manager. In order for an employee to ask for time off they must speak with their managers verbally. The managers are then responsible for tracking for any requests since there is no automated system decisions (HRIS System, n.d., para 6). Therefore, depending on the manager dictates what of method they use. Store managers are mostly in charge of hiring new employees with the assistance of the HR recruiter. Then after interviews are done and individuals are hired, the applications of the ones not hired are stored by the HR department. The HR assistants keeps all information about complaints, grievances, etc locked in a file at the HR headquarters. In reviewing the above information about Kudler their overall HRIS is doing more work than necessary. As previously stated Kudler does not have any automated systems to complete any of the work aside from Intuit. Kudler is still using paper documents to store sensitive information. SolutionsKudler will incorporate Accero Cyborg Self Service which consists of three modules: Employee Self-Service, Benefits Self-Service and Manager Self-Service (Empower Employees and Managers with Accero Self Service, n.d., para 2). This product is completely online and will greatly decrease the need for paper documentation.With the introduction of Accero it will alleviate a lot work that the HR department handles (Empower Employees and Managers with Accero Self Service, n.d., para 2). All information that is stored in files on paper will be put input into the system. This will allow for HR to not have to continually fill out paperwork whenever there are any changes within the department.Employee and Benefits Self-Service will allow for employees to update and view their personal information (Empower Employees and Managers with Accero Self Service, n.d., para 2). They will also be able to view paychecks and manage payroll options. Employees will also be able to see their benefits information and update if necessary.Manager Self-Service allows for managers to quickly view employee profiles, access to HR data 24x7x365, access handbooks and procedure manuals (Empower Employees and Managers with Accero Self Service, n.d., para 2).Kudler will also incorporate a new online recruiting system call Kenexa 2x BrassRing. The software will allow Kudler to post jobs and maintain resumes within the system. Applicants will be able to create a profile and apply to jobs. HR will view the applications submitted and contact the appropriate manager. Managers will be able to view the subm itted resumes as well if needed. If the applicant is not chosen, their resume will stay in the system for up to 90 days. Then the applicant will need to resubmit their resume.To help with the vast transition from paper to online Kudler will also incorporate a new online training course system call WebCourse. This will allow for all employees of Kudler to be trained per the specific department they work in.Reference http://www.webcourse.com/elearning.html

Marketing Planning Essay

INTRODUCTION Unilever started its operations in Vietnam in 1995 and do business in fast moving consumer goods area. It has developed an extensive local network of distributors and retailers with commit to â€Å"make Vietnamese lives better† through the provision of a wide range of international quality and affordable priced products in health, hygiene and nutrition. Unilever Vietnam was developed the wide range of business services and products, with more than 20 brands name, Unilever has become one of the biggest multinational in Vietnam and South-East Asia. 1.1 Review the changing perspective in Unilever marketing planning Nowadays, when demand and customer satisfaction are foundation of business, there are more companies follow the market – led orientation strategy instead of product orientation. In this task, we will learn about some reason why many companies had changed product orientation to market – led orientation. Product orientation: Few years ago, when product orientation strategy was popular, the companies choose to ignore their customer’s needs and focus only on efficiently building a quality product. This type of company believes that if they can make the best product their customers will come to them. The basic focus of a company with a production orientation is toward maximizing production output. They want to produce as many products as possible to reduce the price without caring about customer needs. Market – led orientation: Currently, product orientation strategy is not popular anymore. It was replaced by market – led orientation strategy which is squarely foc used on the consumer. For the company to follow this strategy effectively, they have to approach to customer and approach to advertising. In addition for market led orientation, every employee of all the departments will be responsible for marketing the products. The main purposes of changing product orientation to market – led orientation are: * Making a long term relationship with customers: the product which is satisfy customer needs will belong to them in a long term. Thus, it is important for company to do surveys carefully so that they can know exactly what customer want and start the production. * Building brand awareness and customer‘s loyalty: a market-oriented company carefully cultivates a brand in the minds of potential customers through advertising activities in an attempt to influence them to buy its products instead of a competitor’s products. * Bring customer the value of product: If the company can understand the customer needs and meet their dem and, it is easier for company to bring customer not only the quality of product but also the intangible value. For example: Unilever Vietnam towards market – led orientation strategy by doing surveys about customer needs, produce good quality products and invest on promotional activities. This strategy is the most suitable with the company doing business in fast moving consumer goods in branded home & personal care and food categories. They do surveys on a regular basis to make sure that the product launch on time and satisfy customer needs. Besides that, Unilever spends a great deal of money on advertising to build awareness of customer about the product and they will come to buy it. 1.2 Evaluate Unilever capability for planning its future market activity. As you know, Unilever is one of the world’s leading suppliers of fast moving consumer goods in branded home & personal care and food categories and its products touch the lives of over 2 billion people every day – whether that’s through feeling great because they’ve got beautiful hair and a radiant smile, take care of their home, or by enjoying a great cup of tea or healthy snack. But whether they can do more than that in the future? This task will evaluate Unilever’s capability for planning its future marketing activities. The product innovation: Look at the selection Unilever’s top brands; we can see the company’s efforts in creating new products over 18 years. They not only create pioneering products but also bring the quality and make their customer’s life better (For example: Sunlight, Cif, Knor, Lifebuoy, etc. That the reason why the most of their br ands become popular brand in Vietnam. So we can certain about their capability for producing outstanding products. The vision of leaders and activity oriented: This is one of important factors that affect to Unilever’s capability for planning future marketing activities. The great vision of leader will lead to great future for Unilever. ‘’ We work to create a better future every day† (Unilever, 2013). They recognize that global challenges such as climate change concern us all, so in the future they will not only focus on double the size of their business but also reducing their environmental footprint and increasing their positive social impact. Potential Human resource: Unilever has more than 1600 employees who are carefully selected. Moreover, they offer their employees many ways to take advantage of development opportunities, they encourage creativity with attractive reward, benefits packages and many others so that we can always attract and retain the b est talents to work for them. By owning many talents in the company, it is easy for them to make more pioneering products in the future. After analyzing every related aspect, we can see that Unilever has the capacity to develop their products and overtake their competitors. We can know that not only through their current efforts but also their purpose of protecting environment in the future. 1.3 Examine technique for Unilever auditing and analysis of external factors that affecting the marketing planning in Vietnam Unilever makes a number of different products in Vietnam so it is very important to determining and recognize problem areas, opportunities so that the company can offer solutions and rational decisions for next step. In this task, we will examine 3 techniques for Unilever auditing and analyzing external factors that affect marketing planning including: the product life cycle (PLC), the Porter Five Forces and BCG Matrix. The product life cycle (PLC) Lifebuoy soap: Lifebuoy Royal Disinfectant Soap was launched in 1894 as an affordable new product in the UK and it is one of Unilever’s oldest brands. Lifebuoy witnessed a steady decline in market share at 15% (www.articles.economictimes.indiatimes.com). Because of its long appear on the market with the low market share so Lifebuoy is in Decline stage. Wall’s Ice cream: In 1997, Wall’s Ice Cream was a famous brand name (Unilever’s own) in Vietnam with 52% market share and annual turnover of â‚ ¬5 billion (www.webcache.googleusercontent.com). But in 2004, after realizing the economy as well as the situation of that moment is not consistent with the development of Wall’s Ice Cream, Unilever decided to let Kinh Do company to own this brand within 5 years. Then, the brand name Wall’s Ice Cream came back in an unexpected way after 5 years absence in 2009. Since that, Wall’s Ice Cream warmly welcome by customer. In addition, it also expanded distribution network with 130 distributors and 4,000 retail outlets (www.cyvee.com). Wall’s is an international brand of ice cream and is one of the most profitable units of Unilever (www.commerceplus.blogspot.com). Thus, Wall’s Ice Cream could be considered in the stage of Maturity from product life cycle. Lipton ice tea: Lipton ice tea has become a famous brand in Vietnam and wants to make a big splash in the global beverages market. They not only produce tea but also help customer to improve vascular function, combat fatigue, reduce cholesterol levels and increase feelings of vitality. Moreover, Lipton is the global market leader in both leaf and ready-to-drink tea, with a global market share nearly three times larger than its nearest rival. Thus, Lipton ice tea is in the stage of Maturity. BCG Matrix: Lifebuoy soap: Lifebuoy soap is lying in BCG Matrix at Question Mark point. The market share value of Lifebuoy is low at 15% (www.articles.economictimes.indiatimes.com) and its market growth rate is high at 85.03%. Nowadays, there are more kind of soaps come into the market and they are not only protect users to bacteria but also bring intangible value to customers. However, the market that Lifebuoy doing business in is a potential market. At this point, company makes their investment on this product to get the point of cash cow and star in BCG matrix. Wall’s Ice cream: Wall’s Ice cream was come back to Vietnam market with an unexpected success. They have a big distribution network with 130 distributors and 4,000 retail outlets (www.cyvee.com) to meet the demand of customer in Vietnam. Moreover, ice cream market is a potential market in Vietnam so it is great opportunities for Wall to expand its market. According to Euromonitor, Vietnam cream industry value will reach $125 million this year. Thus, with high market share and high market growth, Wall is lying in Cash Cow. Lipton ice tea: Lipton Ice tea is the world’s leading brand of tea with high market share by occupying a half of the global market (www.strategy.vn). About the market growth, Mr. Kamimura Yosuke ( NGK Kirin Company’s head of Marketing) said that for 2004-2010, the beverage market Vietnam has very few brand to create explosive opportunities for green tea market. At that time, with the introduction of many new products, green tea seems to have the market saturation point. However, this market has yet to step into the setbacks and has even been considered as a potential market in the future. Thus, Lipton Ice tea is lying in Cash Cow. Porter Five Forces Brand / Force| Lifebuoy soap| Wall’s ice cream| Lipton Tea| Bargaining of Buyer| HighAlthough Lifebuoy bringscustomer some benefits to protect their health with the low price, there are many its competitors that not only brings health benefit but also intangible value to customer. Moreover, it does not require the switching cost when customer change using Lifebuoy to another one| HighRecent, there are many cafà © shop that offer ice cream in menu or ice cream specialty shops (ex: Baskin Robbins) indirect compete with Wall. Moreover, the switching cost is low and the young customers have trend to eat ice cream outside in the crowded places with music and their friends instead of staying at home with popsicles. | High The competitor of Lipton such as Nestle and THP seem to have a better marketing strategy than Lipton so these competitors will build the image of brand in customer mind. Besides, customer will find easy to change to Nestle or THP if Lipton can not satisfy their de mand with low switching cost.| Bargaining of Supplier| HighLifebuoy focus on accessible hygiene and health solutions for customer on production line that makes its difference. Thus, it will effect to product’s quality if Lifebuoy change to another supplier. Besides, the leak risk about the way to make product and the switching cost are high. Moreover, the supplier may produce and sale their own product directly to consumer and ignore Lifebuoy. | HighIf Wall change to another supplier, they will not sure about the quality of the new one. It will lead to losing customer if the quality is worst. In addition, risk and switching cost is high. Moreover, the supplier may produce and sale their own product directly to consumer and ignore Wall. | High In order to compete with Nestle and THP, Unilever has decided to use the tea leaf from Europe to produce the Lipton tea so they cannot change to other supplier. Risk and switching cost are high. Moreover, the supplier may produce tea and sale their own product directly to consumer and ignore Lipton. | Rivalry of existing competitor| MediumIt is different than other products in area by protect customer’s health with the low price. Besides, this area is potential, and its market growth rate is high at 85.03%. There are a lot of competitor which provide the same product of Lifebouy.| MediumAlthough Wall has some of direct competitor such as Kido and indirect competitor such as cafà © shop and ice cream specialty shops, this area is very potential because of the demand of customer is higher. Thus, Wall still has opportunities to win the market.| MediumLipton Tea has certain competitors in Vietnam such as Nestea and O Degree. On the other hand, the soft drink industry is reputation industry so Lipton still has a lot of opportunities to reach to customer.| Threats of new entrants| LowTo compete with Lifebuoy, it requires lots of things like finance, production, human resource and the distribution as well. Government barriers are high for products in soap area. Unilever can apply economic of scales to produce costs and create barriers for new firms. Without these of support above, it seems so hard to join the market and compete with Lifebuoy. | LowTo launch a new brand in this area, the company has to have finance, big distribution network, create new flavor and the reasonable price strategy to compete with Wall. High barriers from existing rivals: Wall’s, Kido are very famous and strong brands for a long time with a large of loyal customer. | LowIf a company wants to come and compete with Unilever in the Tea market, it requires of having the better flavor, better quality of tea-leaf and doing well p romotion like Unilever has done. Strong capital is required in investigate and manufacturing. Accessibility to distribution channels is low because it is hard to built good relationship with the consumers like 0 Degree tea and Lipton tea| Threats of substitutes| LowThe customer might use instant sanitizer gel instead of Lifebuoy but it is not very popular. | HighThere are some substitute products such as cocktail, yogurt or soft-drink with the same available and cost to Wall’s. | HighIn current scenario, the Lipton Tea has so many substitute products, such as the soft-drink from Pepsi, Coca-Cola, or even the energize water | 1.4 Carry out Unilever auditing and analysis of external factors that affecting the marketing planning in Vietnam Doing SWOT analysis on Unilever’s business is an essential step in the process of branding and marketing its product or service. It also helps the company come up with business strategies. Moreover, SWOT analyses help the company to identify and capitalize on strengths. In addition, it makes awareness and protects Unilever to avoid the threats. Strength: * Unilever has own a strong financial so they can expand the market in nearly 190 countries in the world. Besides, they also have 270 manufacturing sites worldwide (www.ukessays.com) that is how they can achieve economy of scale easily. It gives competitive advantage to company. * Unilever has own many famous brand name in fast moving consumer goods area such as: Surf, Dove, Ponds, Sunsilk, Knorr, Wall’s ice cream, P/S, Close up, etc (www.unilever.com.vn). All of these brand names known as multinational brands with affordable price and good quality. * Dynamic work environment, staff and intellectuals have responsibility for the company’s overall objective (www.unilever.com.vn). Besides, policies to attract talent of Unilever are effective so they can get more ideas for the company development. * Modern technology inherited from the global Unilever, delivered quickly and remarkably effective. Weakness: * Lack of direct connection with final consumers because of dependence on retailers and wholesalers. * There are some technology are not applied to Unilever Vietnam because of high cost. Besides, they have to import the machine from abroad so it is not take advantages of abundant labor resources and capacity in Vietnam. * As a company with European roots, promotional strategy of Unilever products is not suitable for Asian culture. * Unilever have a huge number of product brands (over 1600 brands) but 400 brands make up over 90% of Unilever’s total sales (www.zimbio.com) good. As a consequence, the ineffective brands make them money but not very profitable and become one of their weakness point Opportunities: * The domestic market (wholesale, retail, goods flow †¦) has a bigger change compared with several years ago. Besides, politics of Vietnam is considered stable so Unilever will get more opportunities to develop the business. * Vietnam has abundant and cheap human resources (http://www.goinglobal.com) so that the company can reduce the cost. * Vietnam is a country of religious freedom to the distribution; promotional products are not subject to more stringent constraints than many other Asian countries. * Vietnam has a young population structure and popular model extended family. Moreover, the fast moving consumer goods market is the potential market in Vietnam so it will bring Unilever high market growth to develop. Threat: * Unilever has many strong competitors such as: Nestle, P&G, etc. These competitors have their own famous brand name with big market shares, huge product line and millions of customers. * There are a lot of substitutes product in fast moving consumer’s goods markets today is a big threat of company. * Commercial law also has many disadvantages for foreign investors, especially tariff policy and high taxes levied on goods considered â€Å"luxury†. * In the context of supply is bigger than demand, many new companies invest on the market and fierce competition with Unilever. . 2.1, 2.2 Assess the main barrier in marketing planning and how Unilever may overcome * Confusing marketing tactics and strategy: In fact, ‘tactics and strategy’ is two word that easily make people confuse about them, even some managers in big company, who face with them every day without meaning to, may be Unilever’s managers have the same problem. Because the content of them is abundant, thus sometimes strategies and tactics are discussed as they are the same. The common reasons that people are usually confused, firstly managers may make mistake about the purpose of using of them, such as they are confused between the long-term and short-term of tactics and strategy when they make plans. Finally, sometimes they may even think they are still able to get their targets if miss one of them. Solution: The manager of Unilever must make sure that they understand clearly about tactics and strategies. For example, in usually strategy is term use for long-term plans (3 – 5 years plans), and tactics is short-term plans (1-2 years plans). Besides that, they must ensure that they can able to make good strategies and tactics to achieve the target of company. To create a good tactic, they have to answer the question â€Å"how†: How are you going to get the job done? Who is going to do it? When? To make a good strategy they must answer the â€Å"what†: â€Å". (And sometimes the â€Å"what not†.) What exactly needs to be done? Moreover, they should communicate the importance of making strategies and tactics to employees, from that employee can have a clear understanding, then they can provide right information or their idea to make best strategies and tactics together to develop Unilever. * Confusing marketing ‘function’ with ‘concept’: In this barrier, it arise when a firm attempts to introduce a marketing orientation but thinks this can be done simply by creating a marketing department. For Unilever, to achieve satisfaction of customers, the company needs to do some changes of their mode of operation. In addition, there are some general misunderstandings about what marketing really is. Without a corporate driving force centre on customer satisfaction, arguments about where to put marketing are of course pointless. Even when top management of Unilever is joined a realization of the need to take account of the customer, they also take mistake about this. So they usually receive complaints from customers and the company needs to give them a reasonable explains. Solution: To bring the real value to customer, quality must be available in all process. For example, Knorr has advertises that not reflect the product quality so either product quality improvement or they lose their customer. * Lack of Knowledge and Skills: For a company that enters to new market, this barrier is very common. For perennial problems, they have always focused around customer behavior and market segmentation. So this may be difficult concepts to grasp even at the cognitive level. For Unilever, knowledge and skills are very important. The company needs to train a good staffs who can enough knowled ge and skills to meet all demands of customers. Because without an understanding of at least some of the basic tools of marketing, the chance of coming up with strategies based on sustainable competitive advantage for Unilever is small. Solution: To overcome this barrier, Unilever has to ensure all those responsible for marketing in the organisation have the necessary marketing knowledge and skills for the job. In particular, ensure they understand and know how to use the more importance tools of marketing effectively. * Lack of a systematic approach: At times lack of data or information and inappropriate systems may greatly impede marketing plans. For instance, lack of a market survey forces the marketing team to rely on guesswork to determine the best marketing approach for the targeted market. Solution: Before decided to do advertise, Unilever should research information about the culture, behavior or customer needs to make sure that the advertisement is appropriate for each market segment. CONCLUSION Through the analysis of this report, Unilever can have a clear overview about Vietnam market, then analyzing external factors or barriers that affect marketing planning. Based on that, Unilever can identify capability and have solutions for planning its future market activity to make their business more and more developed and become the winner in Vietnam market. REFERENCES 1. â€Å"Capacity management† (2013). [Online] Wikipedia the free Encyclopedia. Available at . [Retrieved 13.8.2013] 2. â€Å"Capacity Planning† (2010). [Online] Slide share present yourself. Available at . [Retrieved 12.8.2013] 3. â€Å"Differences Between Marketing Orientation & Production Orientation†. N.d [Online] Small business. Available at . [Retrieved 12.8.2013] 4. ‘’Growth-share matrix’’ (2013). [Online] Wikipedia the free Encyclopedia. Available at .[Retrieved 14.8.2013] 5. Kalsoom, K (2013) â€Å"SWOT analysis for Unilever†. [Online] Blog spot. Available at . [Retrieved 16.08.2013] 6. Lynch, Richard (2009). [Book] Strategic Management. Fifth Edition, Page 97, Pearson Education. [Retrieved 14.8.2013] 7. McLaughlin, J â€Å"Production Orientation: Definition, Examples & Quiz†. N.d [Online] Education Portal. Available at < http://education-portal.com/academy/lesson/production-orientation-definition-examples-quiz.html>. [Retrieved 12.8.2013] 8. â€Å"Power of suppliers analysis†.N.d [ Online] Oxbridge writers. Available at . [Retrieved 15.8.2013] 9. â€Å"Strategy capacity for planning†.N.d [Online] Operation management. Available at . [Retrieved 13.8.2013] 10. â€Å"The BCG Matrix/ma trá º ­n quá º £n là ½ há º ¡ng má » ¥c kinh doanh cá » §a Boston Consulting Group† (2008). [Online] Cyvee connecting professional. Available at . [Retrieved 14.8.2013] 11. N Nayab â€Å"Isolation of marketing function†(2011). Bright hub. [Online] Available at

Mental Health History Of Schizophrenia - 2288 Words

â€Å"God must have been having a bad day,† a father recently wrote me, â€Å"when He allowed schizophrenia to come into existence.† E. Fuller Torrey, M.D. (Walsh, 1985) 1. History of schizophrenic theory Accounts of schizophrenia have been recorded all throughout human history. From Mesopotamia, ancient Greece, Rome and India, all the way through the 15th and 17th centuries (Walker, 2003). It is difficult to truly ascertain whether or not this was schizophrenia or other psychotic illnesses. My guess is it was probably both. Throughout mental health history, theory on schizophrenia has changed in every aspect possible. Etiology, age of onset and even the disorder’s name has been changed, questioned, and changed yet again. The highly insightful†¦show more content†¦Bleuler was an advocate for the psychoanalytic movement which had strong traction during his time. Hafner (2014) writes that Bleuler classified the now hallmark symptoms of delusions and hallucinations as â€Å"accessory symptoms†, since they were common in other psychotic disorders as well. The basic symptoms, Bleuler argued, were the four A’s, which stood fo r ambivalence, autism, affective congruity and association disturbances. This is not surprising, since Bleuler was an advocate of the psychoanalytic movement, so to Bleuler, emotional disturbances were obviously the cause of a schizophrenic disturbance. The differing early views of Kraeplin and Bleuler are significantly important to our current understanding of schizophrenia in the fact that both could be considered partially correct. Kraeplin’s claims could be, in today’s terms, highlighting the neurobiological deficits (such as gradual overall volumetric loss of key neuronal structures and genetic predispositions towards structural deficits occurring during crucial developmental periods) that current researchers are investigating as contributing causes of schizophrenia. On the other hand, Bleuler’s claims of emotional disturbances probably are not one of the primary causes of developing schizophrenia, but schizophrenia’s symptoms and comorbid disorders can be exacerbated by the schizophrenic individual’s