Growing A Company By International Acquisition

1053 words - 4 pages

For growth, businesses should know when and how to introduce change, usually by acquiring business operating over and beyond the borders. That is, at that point where they reach maturity, meaning that they have tackled all the possibilities of growth and there exists no more opportunities where they are currently based.
The two major ways in which a company can grow are:-
• Organic growth
• Inorganic growth
Organic growth comprises of increasing new sales and new customers for the existing business to improve in terms of profit. The company grows within itself and improves its existing affairs, as opposed to inorganic growth which involves expanding the business from outside into other regions or countries. In organic growth, a company can be through a merger where two firms join by agreement or via takeover where one company buys at least 51% of the shares of another company. Therefore, the company with the majority of the shares has control of the business and chooses which activities to keep.
Under inorganic growth, integration happens in two ways;
• Horizontal integration is a situation where two firms operating in the same business sector or does the same business enters into an agreement in equal statue, as this will give them an advantage of a large customer base and also enables them to have economies of scale. The economies of scale arises due to cost sharing for example, managerial services, deliveries are made at the same time etcetera.
• Vertical integration where a company joins businesses when they are at different stages of production. The purpose of the integration could be to supply them with goods or buy goods from them. This way, the company has a huge control over the process of production.
The acquisition of Berendsen provided such a good opportunity for the Davis Service Group as Berendsen was the market leader in providing textile services in Denmark, Sweden, Norway, Austria, and the Netherlands. Its position in the market made integration easy in terms of established networks and customer relationships. By taking over Brendsen Davis Service Group was able to exercise its authority fully by reducing the overall cost of running the business, for example, closing down shops in areas where Brendsen had more than two outlets in the same region, strengthening the management of the two companies, taking care of the fixed costs (the costs that remain unchanged over time), for example, repaying the debts hence cutting out on the interest rates, permanent salary of the closed firms, bills on electricity rent etcetera.
Aspects of the European Union markets that have particularly encouraged horizontal growth of the Davis Service Group includes the fact that the EU has 27 countries under its name, that means, a ready market of over 500million customers who are ready to consume the goods and services proposed to them. That coupled with free flow of goods and services, a fact that has been supported by the infrastructure, the...

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