Business (Mergers/Acquisitions/Takeovers Effects of Multinationals on Host Countries)

What is a merger

This is an external growth method that takes place when two or more firms agree to create a new company with its own legal identity

Advantage of being a merger

1. Increased market share

2. Diversification

3. Synergy- when the combined merge is greater than individual companies

4. Combine resources, technologies and expertise.

Disadvantage of being a merger

1. Job loses due to redundancies

2. Different organisational cultures may clash

3. Regulatory problems

4. Loss of control and management

What is an acquisition

An external growth method when the company buys a controlling interest in another firm with permission from the BOD (Board of Directors)

Advantage of having an acquisition

1. Quickly entering new markets

2. Increased market share

3. Gain existing customers

Disadvantage of having an acquisition

1. Can be very expensive

2. Possible cultural conflict

3. Employees may resist change

4. Integration problems

What is a takeover

An external growth method where a one business gains control over another business by purchasing a controlling stake/ enough of its shares.

Types of takeovers

1. Friendly- the target company’s management agrees

2. Hostile- the target company’s management does not agree but the attempting company still tries to gain contol

Advantages of takeovers

Disadvantages of takeovers

What is a Multi national corporation

Organisation that operates in one or multiple countries usually with its head office based in the home country

What is a host country

The country where the multinational corporation set up its operations

Why would a business want to become a MNC

1. Increased number of bases

2. Cheaper production cost

3. Brand development

4. Ability to spread risks

Advantage of MNC on a host country

1. Job creation

2. Higher national income

3. Increased competition

4. Knowledge and technology transfer

Disadvantages of MNC on a host country

1. Job losses for other companies

2. Reparation of profits

3. Vunlerability

4. Social responsibilities

5. Competitive pressures