Strategy under merger and acqusition

The Plan for the Merger or Acquisition. A company’s ability to combine or be merged is one of the most important determinants of its success or failure. Corporations can increase their earnings by acquiring or merging with other companies in their industry, which has a number of advantages beyond just financial gain (Corporation, 2017). When businesses start forming alliances with major organizations, they have the potential to grow through acquisitions or mergers with other businesses. They can frequently expand their services internationally in order to increase profits and strengthen their brands. A company like McDonald’s Corporation has been able to benefit from acquisitions in various ways that a corporation like Sonic Corporation has not (Cooper & Finkelstein, 2014). By evaluating the strategies that McDonald’s Corporation used to acquire Boston Market, its impacts on the company, and its international business-level and corporate-level strategies, an individual will be able to better appreciate the policies that Sonic Corporation may perhaps set up to upturn its profits by means of acquisition and mergers plus the various business-level and corporate-level strategies it can set up to expand its operations globally.

McDonald’s Corporation has had to enjoy greater success as one of the leading foodservice trade chains in the globe, with 30,000 eateries that run in close to 200 nations on six continents (Gerhardt, Hazen, & Lewis, 2014). Established in San Bernardino, California in 1948, McDonald’s Corporation has progressed from relatively smaller burger joint that makes and sells hamburgers for 15 cents to a restaurant empire having system-extensive sales that have scaled to over $30 billion. The corporation had undergone a quick expansion in its sales from the late 1990s to 2000 and tried to use other acquisitions such as “Donatos Pizzeria” and ”Chipotle Mexican Grille” chains to increase its assets and generate higher profits.

McDonald’s wanted to carry on with its success through making the most of the benefits realized from earlier acquisitions with the purchase of ”Boston Market Corporation” in 2000 (Ravenscraft & Scherer, 2009). Boston Market Corporation did file for ”Chapter 11 Bankruptcy” in 1998, and was gradually on the road to recovery from the lack of sales through the high sales of ”Boston Market Home Style Meals” in grocery stores in various regions of the U.S (Loftsdóttir, 2014). McDonald’s saw an opportunity to utilize their resources to raise their proceeds as well as the feat of the Boston Market brands. When it was being acquired, Boston Market still did retain close to 860 outlets and the organization engendered revenues totaling to $670 million, something that proved to be a wise acquisition for McDonald’s at that moment. Although McDonald’s managed to experience success with Boston Market Corporation as an acquisition, McDonald’s was not able to generate the profits it had projected.

McDonald’s ”Made for You” system did provide customers with made-to-order sandwiches, besides succeeding in increasing the quality of the food served to the customers, but it is worth mentioning that it as well ended up increasing the time required to provide services and turned to be labor demanding. This decreased sales and McDonald’s started experiencing more hitches that were evidenced when it was revealed that the company was adding beef extracts to the vegetable oils that it was using to cook fries, even though it had earlier been broadcasted that McDonald’s was using 100% vegetable oil (Gerhardt, Dudley, & Hazen, 2012). With legal action intensifying as a result of the dishonesty, McDonald’s was forced to close more businesses as they got pinned as an unhealthy restaurant, something that made them reshuffle their menu to mirror a relatively more health-cognizant consumer population. McDonald’s was compelled to cut back ”Chipotle Mexican Grille” and ”Donatos Pizzeria in an attempt to center their efforts on safeguarding the intercontinental success of the restaurant (Gerhardt, Hazen, & Lewis, 2014).

By 2007, ”Boston Market” had $179 million in accrued assets and $90 million in liabilities. It did become more beneficial at this point for McDonald’s to sell Boston Market Corporation to ”Sun Capital Partners.” Following the sale of Boston Market Corporation and other acquisitions, McDonald’s started regaining profits, a move that saw it retain its position as the leading foodservice merchandising chain in the globe by way of an invigorated focus on improving its brand, instead of trying to expand its services.

A Company that would be a Profitable Candidate for the Corporation to Acquire

Although it appeared to be an astute choice for McDonald’s Corporation to acquire Boston Market Corporation, the decision came to be less helpful since they began experiencing too many problems when it came to holding onto the success, an issue that could have been easily attained from the earlier acquisitions (Datta, 2011). For an organization that is as big as McDonald’s, the primary challenge for the firm ought to have been the changeover period when the workforces adjust to new management and strategies. The concerns that transpired after McDonald’s chose to acquire Boston Market Corporation did not allow the company to succeed, in that way proving to be a rather bad undertaking. Noting the struggles McDonald’s underwent following its acquisitions of other firms for increased profits, it is easy for a person to understand better the strategies that a company like Sonic Corporation that presently functions solely in the U.S and has not acquired other corporations should employ.

”Sonic Corporation” originated as a root beer stand referred to as ”Top Hat Restaurant” and was started in 1953 by Troy Smith. Ever since it was found, Sonic Corporation has accumulated $257.61 million in total sales and is regarded as the fifth most successful hamburger chain. The corporation has been able to enjoy numerous years of success mainly due to the fact that it has channeled its efforts on plummeting turnover rates by crafting atmospheres where employees feel appreciated. For instance, Sonic Corporation does give managers based in different locations the chance to be minority partners rather than legion leaders for their respective localities, and this is what tends to allow the managers to come up with appropriate schedules that are best fitting for them and even carry out their duties better. The past couple of years have brought about struggles that have made the establishment to set up the ”Repurchasing Program,” which would let a huge number of investors to repurchase shares in the establishment (“Investor Relations”, 2017).

Despite the fact that it has enjoyed great achievement with the 2,172 restaurants in 27 countries, there still exist greater opportunities for this business firm to make more profits by way of acquisition of other companies that tend to match its primary goal of providing high-quality drive-in food services with the inimitable 1950’s feel for its reliable clients. Taking in the tussles that McDonald’s had to endure after it acquired various restaurant chains it will be expedient for Sonic Corporation to merge with ”Ruby Tuesday” a business organization that offers similar quality of services to its clients in the form of home-styled meals. As of today, ”Ruby Tuesday” has its outlets in 850 various localities across the U.S and around the universe, and has generated a total of $1.3 billion, and this can be of great benefit for Sonic Corporation, who has not stretched out its services to the outside world (Cartwright & Cooper, 2014). Such a merger will allow Sonic Corporation to continue gaining significant partners who can expedite its expansion, thereby guaranteeing that the company increases its profits in the next couple of years.

International Business-Level Strategy and International Corporate-Level Strategy

McDonald’s has maintained success in the intercontinental market by making the most of the business-level, and corporate-level strategies that center on outfitting their products to the values of the consumers. One of the key business-level strategies that McDonald’s Corporation does utilize is the diversity of all its products in different states with the intention of ensuring that the needs of the consumers are met regardless of the dissimilarity in cultures. For instance, Germany sells ”McRib sandwiches” yearly, as opposed to the U.S who sell the “McRib sandwiches” as a seasonal good (Crawford, 2015). As opposed to the traditionally-known apple pie in the U.S, the McDonald’s in Brazil only delivers banana pies for pudding.

The main corporate-level strategy that McDonald’s use to garner worldwide success is to increase the quality of food that it serves to customers in outside nations. One method that this company has deployed to make sure that its key strategy falls into place is to purchase stock from ”Pret A Manger,” a corporation in the United Kingdom that delivers organic meat to interested groups of people (Funding Universe, 2012). Whereas this focus somehow enforced McDonald’s Corporation to sell the companies that they had acquired and that was not dealing in hamburgers, it has, to some extent, increased their productivity universally, and permitted them to increase the quality of foods in such locations (Funding Universe, 2012).

Business-Level Strategy and Corporate-Level Strategy to be considered by the Corporation

Taking into account the success that McDonald’s Corporation has maintained in the recent past as far as international business is concerned, there are many business-level and corporate-level strategies that Sonic Corporation can put to use because it is only through this that it can succeed once it expands its business (James, 2009). Sonic Corporation has capitalized on creating exceptional atmospheres for customers by offering drive-ins enriched with ”roller-skating” employees who provide quality foodstuffs. This exceptionality will allow this organization to be successful in the international front.

The business-level strategy that Sonic Corporation can employ is cost management. This entails having to create prices that are lower enough for clients to afford. Sonic Corporation has already put to use this system in the U.S by offering ”Happy Hour,” where any customer can purchase a drink at half-priced during certain times of the day. This strategy might draw the attention of significant transnational clients who are used to buying commodities at higher prices. By simply providing drinks at reduced costs in such countries, customers will have the chance to ascertain the quality of the products with the prices being too low for them to enjoy. This will at the end allows the customers to become attracted to the product after which they will purchase them.

On the corporate-level strategy that Sonic Corporation can apply in their efforts to expand their services transnationally, they should establish the plan of upholding lower turnaround rates (Bena & Li, 2014). Sonic Corporation honors most of its branch managers as minority partners, and this is what does allow the employees to have access to more flexible schedules and as a result facilitating higher output from both managers and employees. Suppose this policy is deployed internationally, the firm will be able to increase its profits mainly since those tasked with managing the various restaurants in the different countries will have the positive feeling of having vested in either the success or failure of the business (McDonald, Westphal, & Graebner, 2008). In most cases, the leaders will certainly take pieces of advice from the employees who will be in a better position to provide ways and means of renovating the service offered by the restaurant, and clients will receive service that is distinctive to the country and the locality where they exist.

In conclusion, acquisitions and mergers normally assist businesses to increase their profits and business projects globally (Nielsen & Melicher, 2013). While the experience that McDonald’s Corporation was distinctive, one can learn numerous lessons as concerns effectively acquiring and merging two business companies. If the appropriate business-level and corporate-level strategies are employed, companies can effectively increase their achievements and prospects for progress. By evaluating the strategies that were used to acquire ”Boston Market Corporation” and the effect that McDonald’s Corporation’s acquisition of ”Boston Market Corporation” had in their productivity and feats, a person can clearly get to understand the manner in which ”Sonic Corporation” could learn from such an experience to successfully acquire and merge with ”Ruby Tuesday” and spread their services to the global world.

References

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Cartwright, S., & Cooper, C. L. (2014). Mergers and acquisitions: The human factor. Butterworth-Heinemann.

Cooper, C. L., & Finkelstein, S. (Eds.). (2014). Advances in mergers and acquisitions. Emerald Group Publishing.

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Crawford, A. (2015). McDonald’s: A case study in glocalization. Journal of Global Business Issues, 9(1), 11.

Datta, D. K. (2011). Organizational fit and acquisition performance: Effects of post‐acquisition integration. Strategic management journal, 12(4), 281-297.

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Gerhardt, S., Hazen, S., & Lewis, S. (2014). Small Business Marketing Strategy Based on McDonald’s. ASBBS Proceedings, 21(1), 271

Investor Relations. (2017). Phx.corporate-ir.net. Retrieved 26 August 2017, from http://phx.corporate-ir.net/phoenix.zhtml?c=83799&p=irol-IRHome

James, R. (2009, October 28). ”McDonald’s abroad.” Time. Retrieved from: http://www.time.com/time/world/article/0,8599,1932839,00.html

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McDonald, M. L., Westphal, J. D., & Graebner, M. E. (2008). What do they know? The effects of outside director acquisition experience on firm acquisition performance. Strategic Management Journal, 29(11), 1155-1177.

Nielsen, J. F., & Melicher, R. W. (2013). A financial analysis of acquisition and merger premiums. Journal of Financial and Quantitative Analysis, 8(2), 139-148.

Ravenscraft, D. J., & Scherer, F. M. (2009). The profitability of mergers. International journal of industrial organization, 7(1), 101-116.