In the modern world, mergers and acquisitions and corporate restructuring have become a large part of the corporate finance. Every now and then, financial institutions are arranging mergers and acquisitions, which are meant to bring together different companies with an aim of forming a larger entity. The essence of coming together for such companies is to try and dominate the market in their field of specialization. Although some of these deals have ended up being successful, there are some mergers that dis not work, and in most cases the companies were sold out to another investor to manage. This paper will look at the merger involving two oil companies, namely: Exxon and Mobil that merged and formed the largest oil company called Exxon-Mobil.
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1. The strategy that led to the merger of Exxon-Mobil
According to Gaughan (2013), the acquisition of Mobil Corporation by Exxon Corporation has been perceived as the largest merge in the history of the oil and energy industry. He has observed that the merger was believed to be in excess of $77 billion. One of the strategies that contributed to the merger of these two corporations was the need to be more efficient. Prior to the merger, Exxon had been extremely efficient and effective in reducing wastes and streamlining its operations. In addition, Exxon Corporation enjoyed economies of scale compared to other competitors in the oil industry. Mobil Corporation, being the main rival in the industry, was perceived as the ideal company to merge with in order to form a formidable company that would enjoy more scale economies.
Furthermore, Exxon was not as advanced as Mobil in the research and development of many areas. Therefore, Mobil being the better-placed corporation proved to be the ideal company to merge with. For instance, Exxon had fallen behind Mobil in its upstream processes for extracting oil from the lower grade oil field and was also behind Mobil in the manufacture of lubricants. It was Mobil Corporation that came up with the idea of using carbon dioxide in order to extend the life of existing oil fields. Without the incorporation of carbon dioxide, the process of oil fields would not be profitable at all. Other areas that Mobil had an upper hand than Exxon was the development of groundbreaking lubricants such as the Mobil 1, which enhanced the life of industrial equipment by lubricating the parts to reduce wear and tear in them.
Metcalf (2001) argues that the decision to merge was informed by the fact it had been envisaged that Saudi Arabia would reopen its oil fields to foreign companies. This was informed by the fact that, though the country had the most productive wells in the world, it still lagged behind in terms of technological advances. The officials of Exxon had opinion that if they merged with Mobil, they would form a large corporation that would be able to convince the Saudi Arabian government to be allowed to partner with their companies in oil exploration. The fact that Mobil had entered into a working relationship with Saudi Oil Ministry, and that some of its top executives had close ties in Saudi Arabia was enough to convince Exxon Corporation to merge with Mobil.
The merger between Exxon Corporation and Mobil Corporation can be recognized as a wise choice. From the analysis, it has been observed that each of the companies had its own deficiencies. Therefore, when the two merged and formed one entity, they not only made history by being the most expensive mergers to take place, but also continuously dominated the oil industry since they came together. The two companies complemented each other, what is the reason why they have remained together up to date.
2. Identify one company that would be a profitable candidate for the corporation to acquire or merge with and explain why this company would be a profitable target.
Since its inception in 1976, Apple Inc. has been specializing in the production and selling of consumer electronic goods. Some of the notable goods on the market from Apple Inc. include the iPhone smartphones, iPad tablets, and iPod media player. However, in spite of its success, the company has not merged with other organizations in its field of operations. Instead, the company has been acquiring other smaller companies to supplement its software development. This is also done to make sure that the company remains competitive in the market, whose industry players are increasing day by day.
Therefore, for an organization willing to acquire or merge with Apple Inc., it will be merging with one of the best companies in the world today. The merger with Apple Inc. would be a profitable venture because the company has diversified its operations in terms of consumer goods it avails on the market. Apple has not only created a brand reputation, but also has an extremely strong marketing and advertising teams. Apple Inc. has become synonymous with high quality products. Its browser called Safari has been rated highly due to its compatibility with other operating systems, such as Windows and Ubuntu. Apple has maintained a steady growth over the years of operation.
It is a company with a strong financial base and therefore, any company willing to go into a merger with Apple will find it easy to continue doing business. Its research and development sector has been strong in understanding the market demands, in order to come up with a state of art products. This has made Apple to be the leading innovator in mobile device technology. For instance, iPhone 5 became an instant heat when it was released to the market. This was because prior to its release, the company with a help of Steve Jobs had understood what other mobile devices lacked. Therefore, he took advantage of these and introduced a mobile phone that had more features than phones from other companies.
In addition, merging with Apple would make the other company reputation increase, as well as its revenue. The demand for iPads and tablets is on the rise and therefore, there is a prospect that the company will have increased sales in the future in spite of increased competition with Samsung and Nokia. The launch of iTV is also working to boost revenue from advertisers across the world. This means that there are no prospects that Apple Inc. will cease from expanding.
3. For the corporation that operates internationally, briefly evaluate its international business-level strategy and international corporate-level strategy.
According to Ireland (2012), since the merge between Exxon Corporation and Mobil Corporation, there have been numerous policies implemented to make sure that the company remains ahead of their competitors. He points out that one of these business level strategies is to consistently zero in on delivering operational excellence. Exxon Mobil realizes the fact that strong business strategies work well if they are carried out in a professional manner. For this reason the company has been working towards increasing its productivity and efficiency while at the same time maintaining and preserving its reputation of being a high quality goods producer. Another business level strategy has been building technology leadership. This has been achieved through the development of new and unique products in the market. In order to achieve this, the company has been improving its levels of technology to maintain its premier industry position. Investing with intelligence and discipline has also been another business level strategy adopted by this company. This has been done by assessing the market trends and establishing which areas need to be concentrated on based on market demands.
The international corporate-level strategy adopted by Exxon-Mobil is mainly meant to increase its market dominance in the oil and energy sector in the world. One of these strategies is the multi domestic strategy that tends to emphasize market responsiveness to local requirements around the areas of operation, at the expense of efficiency. Furthermore, it is the global strategy that focuses on efficiency at the expense of sacrificing responsiveness to the local market. This means that the company produces similar goods in the global market, but may adjust some of them to suit certain markets. Lastly, it is the transnational strategy that seeks to accommodate both the multi domestic and global strategy.
4. For the corporation that does not operate internationally, propose one business-level strategy and one corporate-level strategy that you would suggest the corporation consider.
In order to attract new and retain old clients, the company should have a business-level strategy that seeks to have unique and high products on the market. The packaging of the products being produced is extremely important. For example, mobile phones attract clients based on the shape and the packaging of the product. Therefore, as the company seeks to attract more customers, it should do a thorough market research to be able to come up with unique products on the market.
On the corporate level strategy, the company should seek to use the value creating strategy, which works well when a company aims to edge out rivals, in order to have a larger market share. One of the key ideas behind value creating strategy is having more products in the market in order to dominate the market from different fronts.
Before a company decides to merge or acquire another company, there should be a thorough understanding of what to expect in case the deal goes through. Although Exxon and Mobil merger was successful, there are other companies that have found it tough after the merger has been completed. As a result, most of such companies end up being sold to another investor who brings in new concept of management. Nevertheless, investors should learn that every business has to have a strategy through which it is going to operate. No matter what is the financial base of a company, without business ideas it may collapse due to lack of customers.