Discuss: Mergers and Acquisition Strategy

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Discuss: Mergers and Acquisition Strategy
1 Why are merger and acquisition(M&A) strategies popular in many firms competing in the global economy?
Mergers and acquisitions are very common business practices all around the world. Businesses can choose to come together to create more value for business stakeholders. The M&A strategy can help a firm to generate higher returns on investment. When competing firms merge, they pull their resources together, developing a strong financial base. The strategy reduces unnecessary competition in the market and allows firms to increase sales margins. The M&A strategy is also common in an unfavorable business environment, initiating an M&A to take control of the market and improving returns in an already tight operating margin.
2 What reasons account for firms' decisions to use acquisition strategies as a means to achieving strategic competitiveness
The acquisition strategy can help a firm gain 100 percent control of a subsidiary firm. The strategy can help a firm to achieve greater market power, giving them a competitive advantage in the market. This strategy helps in overcoming the barrier of entry into a particular market. It can help a firm to gain access to new products and cut the cost of new product development, increase ease of learning, and develop a new product, and catalyze the speed of such products entering the market. The strategy helps a firm diversify expanding its operation margins thus reshaping the firm's competitive scope.
3 What are the seven primary problems that affect a firm's efforts to successfully use an acquisition strategy?
The acquisition strategy has associated problems that make it difficult to achieve. Firms may face difficulty in post-acquisition integrations which are often more complex and challenging. Inadequate evaluation of the target firm, the due diligence evaluation process should be thoroughly done required standards of a successful acquisition. Without an effective due diligence process, the target firm may significantly increase their debt levels, therefore proper verification is necessary before purchase to make sure that the firm does not carry a huge debt load that can overpower their ability to vibrant in the market. The strategy m...