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Literature Review on Mergers And Acquisitions

1. Benefits:

Mergers and Acquisitions refer to buying; offering and mingling of different companies that can help an evergrowing company in confirmed industry grow quickly without having to create another business entity (Virani, 2007). Traditionally, exploiting economies of scope and size or taking advantage of market imperfections has been a dominant way of increasing competitive advantage by companies. However, as economies are becoming increasingly more integrated because of the makes of globalisation, there can be an increasing realisation these means of competition offer limited profitability for firms. As a result, mergers and acquisitions have become ever more popular as companies look for higher returns and prominent market position in the global market. Mergers and acquisitions provide methods to acquire know-how, technology and products. Within the last two decades, mergers and acquisitions have become a global trend and a favorite proper choice for company development and expansion (Hansen and Nohria, 2004).

Despite the increasing level of popularity of mergers and acquisitions, sadly, the performance of merger and acquisitions has not been satisfactory. Clinical tests reported that more than two-thirds of large merger and acquisition bargains fail to create value for shareholders. Mergers and acquisitions fail to meet the anticipated goals, as stated by Carleton (1997), who noted that the pace of mergers and acquisitions inability range between 55 to 70 percent. These failed mergers constitute a waste products of individuals and money. Given the attractiveness of this proper alternative, there's a strong need to learn how to control mergers better also to make them more successful (Gopinath, 2003). Numbers of studies are quick to indicate numerous reasons for this poor performance of mergers and acquisitions and specifically assert that lack of proper fit and poor management of the integrative process seem to be the main factors behind unsatisfactory performance. Infect, an exhaustive list made up of possible factors behind poor performance, can be produced with regards to the numerous research studies conducted over the last two decades (Epstein, 2004).

These research studies have evaluated the bad performance of the mergers and acquisitions from various aspects. The very observable aspects like funding, currency markets and legal issues were given importance and were considered the most sensitive areas for mergers. However, with the growing rates of failure, researchers and business experts started acknowledging the actual fact that poor performance of mergers and acquisitions does not simply has its roots in financial and functional issues or other legal conflicts. The study was then diverted to verify human and social aspects of M&As and it was mentioned that the real problem is not financial however the insufficient intercultural synergy between your organizations. The organizational social issues create communication breakdowns and therefore act as a hurdle for successful integration of the two organizations. On the other hand, Cartwright & Cooper (1993) strengthened the previous findings by stating that the financial and other proper benefits expected from mergers and acquisitions are undermined by the ethnical conflicts. Moreover, the business who addressed ethnic issues properly during merger and acquisitions experienced great results as compare to other business who neglected this aspect (Epstein, 2004). Hence there is a strong need to consider the ethnic issues as critical during the mergers and acquisitions and solve them properly.

The focus of the research is to explore and analyse the organizational cultural issues as the major potential hazard for the success of mergers and acquisitions. In other words, to point out the ethnic issues as the utmost import among all other possible causes that affect the performance of mergers and acquisitions. The conversation will cover the consequences of cultural issues on the performance of mergers and acquisitions.

2. Literature Review:

Growth is an important aspect of organizational success. It really is something that most of the firms strive for. It really is discovered commonly that small companies want to develop big and big firms want to develop bigger. Indeed companies have to increase and the reason why behind are almost same for each and every firm. However, different companies take up different approaches for this purpose and the most suitable strategy is the the one which supports the company to move steadily towards completing its explained goals (Greiner, 1991). The ultimate objective of all companies is profit, therefore whatever strategy is used, profit remains in the centre.

Although, growth is considered to be one of the main element points of reference of success by business experts which is mandated by traders. However, researchers also have argued that, although, growth is essential for organizations, but every growth strategy is not successful in terms of value creation. Not all the progress strategies are principles adding, which could result in an improved performance of a company (Olsen & Chathoth, 2007; Slevin & Covin 1997). Olsen & Chathoth (2007) further argued that it's the firm's performance over a long-term basis that establishes the sustainability of the progress strategy that was executed to begin with. Companies choose development strategies that suits better to them in a frame work of market and competition. The best route to growth varies with respect to the market and the type of business (Churchill &Lewis, 1983).

2. 1 Organisational Culture:

The concept of culture is generally being employed by the experts in organizational behavior field to describe how people of categories understand their world and their place in it. Organizational culture can be better understood as the design of actions, words, beliefs and behaviours that users of any business organization share (Able, 2007). Soroghan et al (1998) discussed culture as a distinctive set of prices, attitudes and values that creates a shared sense of truth and it has a powerful affect on company and staff behaviour. Convenient C (1993) has put forwarded a simplified definition of organizational cultural which suits best to just how this work is focused. The writer has provided a number of aspects that shape the culture of a business. Regarding to Handy (1993), organizations have deepest group of beliefs about just how work should be structured, the power should be exercised, people rewarded and folks controlled. Similarly, other activities like the amount of formalization required, how much planning and what lengths ahead? Amount of obedience expected from subordinates, do work time matter or dress or personal eccentricities? Although, these explanations have provided a theoretical framework work to understand the organizational culture itself but the varied meanings have managed to get somehow difficult to comprehend the consequences of culture on the organizational Performance (Weber & Schweiger, 1992).

2. 2 Impact of Culture on Organizational Performance:

A highly profitable business always has a high performing organizational culture that aligns well both internally and externally to support the overall objectives of the business enterprise. This organizational culture shapes the worker experience, which in turn impacts customer experience, business partner relationships and, in the end shareholder value (Able, 2007 p11). Schraeder & Home (2003), aptly put forward that the corporate culture can have a substantial impact on a firms long-term economic performance and can probably be an even more important factor in deciding the success or failure of firms within the next 10 years (Schraeder & Home (2003) Offer and Kennedy (1982) asserts that culture is the single the very first thing accountable for success or failure in organizations. Kilman et al. (1985) needed it further by confirming that strong culture can have an integral effect on the success of the business due to its pervasive affect throughout any organization.

In order to check on the partnership between culture and performance, Denison (1984) researched a suitable test of 34 companies representing 25 different market sectors. To validate the study the author used more sophisticated sampling strategies not only for organizations but also for the content within the organizations. According to him, two indices 'firm of work' and 'decision making' were found to be significantly correlated with financial performance. Furthermore, the author also discovered that the strength of the culture was predictive of short-term performance, when performance was identified with broad indicators like return on assets, profits on return and return on sales etc.

Mergers and acquisitions are a popular strategy for progress and expansion. The mergers and acquisition activity is increasing and companies are joining together as never before. Also that this enlargement process is hampered by certain obstacles and companies have problems with not controlling those issues effectively. Among those problems, having less intercultural synergy between your two organizations has been reported as the main issue which is affecting the M&A performance greatly (Cartwright & Cooper 1993). It really is a new obstacle for companies working throughout the world to understand the organizational culture and its own effects on the organizational performance (Fralicx & Bolster, 1997).

Mergers and acquisitions are effected critically by the ethnical issues and many studies have been conducted till date to investigate culture and people issues as a reason of merger and acquisition failing. The results have shown that up to 65% of failed mergers and acquisitions are anticipated to cultural and folks issues. Studies explored that the intercultural differences cause communication breakdowns which affect the efficiency of the whole group (Chatterje et al 1992). Other research workers also reinforced this line of reasoning and recommended that incompatible ethnicities are the key causes of M&As inability. Considering cultural issue as a reason of poor success rates, Cartwright and cooper (1993) mentioned that the financial benefits that companies expect from mergers and acquisition\s tend to be unrealized because of incompatible organizational civilizations of the merging organizations. Lodorfos & Boateng (2006) have offered a comprehensive overview of the role of culture in the merger and acquisition process. They have got provided a listing of previous research upon this issue by concluding that having less intercultural synergy is at the heart of M&A failure. According to them, "Cultural fit is merely as important as structural fit in the analysis and analysis of potential associates and this poor ethnic fit has contributed to the failing of several mergers and acquisitions that appeared to be suitable strategic partners". Huang & Kleiner (2004) have talked about that companies can't be integrated effectively if there exits a ethnical incompatibility between your two lovers and that the ethnical incompatibility is consistently rated as the greatest barrier to success of mergers.

2. 4 Conclusion:

It can be concluded from the above made dialogue that social problems lie in the centre of merger and acquisition failing. The management and control spend time and do attempts to make mergers work. Most of the time, they are occupied with planning the tactical and financial aspects, that show neglectfulness to the ethnical and people issues. Conversely, in the log run, the ethnic issues not only create trouble for the management however the financial benefits are also undermined by ethnic clashes in the recently born business (Cartwright & Cooper 1993). The prior areas have provided enough evidence to consider cultural issues as one of the basic reasons for the failing of M&As. Now it becomes rather necessary to explain a few of the ethnic related problems that M&As face and which can be responsible for the value devastation in this business activity.

3. Research Theme:

This research will explore the consequences of ethnic issues on the performance of merger and acquisitions on organizations throughout the world.

4. Research Goals:

This research work gets the following individual aims:

To explore the strategic motives behind the mergers and acquisitions

To evaluate the performance of mergers and acquisitions and identify the major factors affecting the performance.

To analyse the effects of ethnic issues on the performance of mergers and acquisitions.

5. Research Strategy:

The main suggested research technique is supplementary research which is based on the critical and complete analysis of the existing published literature related to the specific portion of research. Books, printed journal articles, published research reports, surveys, organizational information, qualitative research and internet will be used to collect secondary sources data. The extra research method is very needed for my research work, just because a lot of options are there like books, journals and analysis articles, websites etc. Some se's are incredibly popular such as Google, Athens, Yahoo, etc. I think these sources will help me to complete my research work.

I use all the above mentioned secondary research options for my research work and I am highly interested to use the deductive method because it is more reasonable and traditional way to demonstrate your research. Furthermore I will use both quantitative and qualitative ways to critically examine my collected data and to reach the final outcome. However in this research work, I'll want to use more qualitative approach to data collection. Because, matching to Lincoln and Guba (1985) a qualitative method captures a far more complete picture of individual lived experience instead of a narrow perspective of generalizations. Therefore, the study will be based on experience wealthy participants, who can offer perception a quantitative study would struggle to get. The qualitative data provide me an opportunity to study the materials of the recent or more distant past to gain the greater insights information for methodological and theoretical purposes.

5. 1 Benefits of secondary research strategy:

This kind of research assists with examining large level trend.

It is easy to accessible so researcher can consume the majority of its amount of time in critically analysing data rather than collecting it.

Sometime major data collection is not necessary for the study, because of the available supplementary data is completely suitable to draw a conclusions and answers of the questions and sufficient for dealing with problem.

The assortment of supplementary data is very good cheaper than the collection of main data. For the same level of research budget supplementary research definitely offers relatively more info than the primary research can provide.

The time intake is a lot less in the assortment of data and conducting results in comparison with the principal research.

The results obtain from secondary way to obtain information may more correct than the result obtain from the primary data collection. It might not exactly happens constantly but if research is approximately at large level for example data extracted from the surveys obtain by the federal government census division on large level, this is likely yield more precise results than custom designed research weather these are predicated on the comparatively small size of test.

5. 2 Problems of Secondary Research:

In secondary research the researches have to be careful about authenticity of secondary resources. Because at the same type of data or idea two different types of division or folks have different kind of point of view, for example if researcher consult the info about losing to the overall economy from the function of terrorism than their must two different type of responses available from the federal government prospective and non federal interpreters.

Some time material available for research is too old and outdated, so that it may difficult for researcher to interpret results.

The source of the info and material may well not reliable each and every time, so it may impact the trustworthiness and authenticity of results of the study.

Sometimes secondary research has lack of firmness of perspective.

If data and material accumulated from non authentic resources it is difficult to check on its biasness and inaccuracies.

The published material and statistics often increase more questions than answers.

5. 3 Limitations:

There are some constraints the data may have and the problems that could arise if these constraints are overlooked. The verification of existing data is difficult. Supplementary data can be standard and vague and sometimes it could cause challenges in decision making. It is possible that data could be outdated and the sample used to generate the secondary data maybe small. The info publisher company might not be reputable. While remember those limits of supplementary data, the info taken for this research is taken from reputable academic websites.

5. 4 Realization:

A use and search of extra data should be preceding any most important research activity. Secondary data definitely helps to solve and understand the condition and gives valid answers. The procedure of collecting supplementary data for research is very good cheaper and quicker in equate to most important data at sometimes it could be more accurate. There's always a need of evaluation about data and its source before using it for research. Where possible it is better to use same data from different sources so the biasness and mistakes can be check for the more correct results.

6. Research Ethics:

While undertaking the research, the most crucial thing to keep in mind and practice is the ethical considerations. And in my own research work this is critical and of leading consideration. I am going to follow all the honest considerations and recommendations. As my research work is based on secondary research, so what ever the secondary data I'll use to achieve my research targets, I'll follow the all conditions and conditions of honest considerations.

Throughout my research I'll practice credibility in processing and reporting all the info, this will be my own work and I will not replicate the other researcher data or work, I will not be bias in my own research while collecting or digesting the data. I am going to try my maximum to all the omissions and errors while analysing the info and can keep all the record of the info and their valid options. I am fully aware that the plagiarism is a significant academic crime, therefore i will not plagiarise my research. I am going to offer all the citations and which will be fully referenced. I'll not duplicate other researcher's work.

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