Strategic Moves Read the overview below and complete the activities that follow.
ID: 366159 • Letter: S
Question
Strategic Moves
Read the overview below and complete the activities that follow.
Once a company has settled on which of the five generic competitive strategies to employ, attention turns to what other strategic actions it can take to complement its competitive approach and maximize the power of its overall strategy. One such decision is whether to bolster the company’s market position by merging with or acquiring another company in the same industry. In this activity you will examine the merger and acquisition strategy of Live Nation, a live entertainment and e-commerce company.
Mergers and acquisitions are much-used strategic options to strengthen a company’s market position. A merger is the combining of two or more companies into a single corporate entity, with the newly created company often taking on a new name. An acquisition is a combination in which one company, the acquirer, purchases and absorbs the operations of another, the acquired. The difference between a merger and an acquisition relates more to the details of ownership, management control, and financial arrangements than to strategy and competitive advantage. The resources and competitive capabilities of the newly created enterprise end up much the same whether the combination is the result of an acquisition or merger.
Merger and acquisition strategies typically set sights on achieving any of five objectives:
1. Extending the company’s business into new product categories.
2. Creating a more cost-efficient operation out of the combined companies.
3. Expanding a company’s geographic coverage.
4. Gaining quick access to new technologies or complementary resources and capabilities.
5. Leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities.
Case:
Before beginning this activity, review the textbook information in Chapter 6 on horizontal merger and acquisition strategies. Read the information below about Live Nation, and respond to the questions.
Live Nation (http://www.livenation.com/) operates music venues, provides management services to music artists, and promotes more than 23,000 live music events annually. The company merged with Ticketmaster and acquired concert and festival promoters in the United States, Australia, and Great Britain.
1. How has the company used horizontal mergers and acquisitions to strengthen its competitive position? Are these moves primarily offensive or defensive? Explain.
2. Has either Live Nation or Ticketmaster achieved any type of advantage based on the timing of its strategic moves? Explain.
Explanation / Answer
Ans: The Horizontal merger strategies are the one in which the players in the same industry join hands to create a more powerful, competitive and resourceful entity that gives them strategic competitive advantage.
Livenation which manages to organize over 22000 events through regional promoters, by merging with Ticketmaster augmented its capability by taking advantage of its expertise and market share of over 70% of the concert ticket market in the U.S. The new entity which is a powerhouse in live concert industry, riding on technological capability to sell tickets and global resources and associates promoting company's business in the U.S. ,Great Britain and Australia among the others, inspired fear in the live concert market is lobbied against by consumer groups and independent promoters who fear that it may dictate the terms in the industry by driving ticket prizes and reducing competition.
The moves are defensive and collaborative, as the merger is a friendly one, and aims to combine the respective expertises of both companies to create a powerful organization and gain competitive advantage in live concert market.
Ans 2 : Livenation, which was under a debt of $800 million and its shares plunging to $3, was in a financial soup and fearing a takeover if it did not merge with Ticketmaster, which saw a win win situation in the deal. The merger acted as a saviour for the Livenation, while it gave strategic advantage to Ticktmaster.