Business Combination As A Survival Strategy In A Period Of Economic Depression

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Business Combination As A Survival Strategy In A Period Of Economic Depression

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PROJECT TOPIC AND MATERIAL ON BUSINESS COMBINATION AS A SURVIVAL STRATEGY IN A PERIOD OF ECONOMIC DEPRESSION

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  • Name: Business Combination As A Survival Strategy In A Period Of Economic Depression
  • Type: PDF and MS Word (DOC)
  • Size: [70 KB]
  • Length: [56] Pages

 

 

CHAPTER ONE1.1INTRODUCTIONBusiness combination is the fusion of separate business entities into a unified whole. Business combination is one of the foremost strategy in shaping a firm’s strategic posture in the time of economic depression. Before we exploit in details business combination, it is important to look at the motives or aims of business in general.

According to Pearce, J.A. and Robinson, R.B. (2005), there are three Economic goals that guide the strategic direction of almost every viable business organizations. Whether or not they are explicitly stated, a company mission statement must reflect the three Economic goals which are profitability, survival and growth.

Profitability is the mainstay goal of a business organization. Profitability provides the justification and rationale for remaining in business. No matter how it is measured or defined, profit over the long term is the clearest indication of a firm’s ability to satisfy the principal claims and desires of employees and stockholders. This is why investors are only willing to invest in successful business organization such as the top players in Nigeria stock exchange market.

Business survival is another important goal of a business. Unless a firm is able to survive, it will be incapable of satisfying any of its stakeholders aims.

Lastly, the aim of business is to grow in size. A firm growth is tied to its ability to survive and be profitable. Growth means increase in size of an organization. Growth also means change, and proactive change is a necessity in a dynamic business environment.

The ability of a business enterprise to survive, grow and to make profit depends on its ability to operate effectively and efficiently in the business environment. The business environment is divided into two pails, the micro environment and macro environment. The micro-environment consists of various interest groups that make demands on the firm and with which the firm deals. The main elements of this environment are trade union, competitors, government, shareholders, distributors, consumers, suppliers and so on.

Macro environment are those element which the business does not have control over. They include demography, economic, political, socio-cultural factors, technology, competitor and others. The business enterprise must adapt to the environment by adopting measures that will enable them cope with such factors that may pose a threat or at the same time present opportunities for profitable business operations. In a bid to cope with these and exploit opportunities, business organization often formulate policies and implement strategies that will facilitate their survival and/or growth, one of such strategy is mergers and acquisitions.

Business combination is the fusion of separate business entities into a unified whole. Business combination strategies include merger, acquisition, absorption, amalgamation and takeover. These are instrument use in preventing the decline of companies and restoring them to a greater height.

Giwa (1987) stated that “merger and acquisition must be seen as an available means of saving companies from serious financial distress and providing such business with new management and better assets to new financial resources, such companies in distress are thus provided”. Merger according to Kazmi, A. (2005) “A merger is a combination of two or more organization in which one acquires the assets and liabilities of the other in exchange for shares or cash, or both organizations are dissolved and the assets and liabilities are combined and new stock is issued.”

The following are the salient reasons for business combination.

Enhances corporate performance

To ensure economics of scale

To lead to expansion in size of the business.

It reduces overhead cost of capital and enhances the earning per share.

It can lead to tax reduction

It can assist organization to expand their equity base through the reduction of debt/equity ratio.

To increase the profitability of the company

To enjoy a synergistic effect or advantage arising from sale operation investment, management and higher productivity.

Combination of strength in order to eliminate their individual weakness and exploit perceived opportunities

1.2OBJECTIVE OF THE STUDYThe general objectives of the study are investigating the visibility of business combination as a corporate survival strategy in a period of economic depression using Unilever Nigeria Plc. as a case study.

The specific objectives of the study business include the following:

To determine the extent to which business combination affect the firm’s profitability.

To find out the extent to which combined wealth of business organizations affect the market share of the firm’s product,

To obtain a broad overview of the effect of business combination on the turnover of an organization.

To ascertain the extent to which business combination improve the performance of an organization.

1.3RESEARCH QUESTIONBusiness is any lawful human activity which involves the production and distribution of goods or the rendering of services for the purpose of making profit. The objectives of any business are to maximize shareholders wealth, productivity, employee satisfaction, growth, public image offer reliable and efficient services to her customers.

Therefore, the motive is to evaluate the extent to which business combination play their role of achieving the above stated objectives has prompted the need to answer the following questions:

Does business combination have affect on a firm’s profitability?

Does the combined wealth improve the market share of the firm’s product?

What effect has business combination on turnover of an organization?

Does the business combination effect, improve the performance of the organization?

What is the overall effect of business combination in a firm’s?

1.4STATEMENT OF THE PROBLEMSThe present economic depression facing the Nigeria .nation started around 1982, when the austerity measures of the Shagari administration were launched, wherein many people began to witness economic turmoil, devaluation of Naira, persistent scarcity of foreign exchange, high inflation, recent high interest rates, couple with firm’s low capacity utilizations.

However the business sector has been employing one survival strategy or the other. This lead to the introduction of structural adjustment program in 1986, the stabilization security in 1992, privatization in the recent Obasanjo Government, the N25 billion recapitalization in 2005 and others, still yet the problems persist.

Business continues to face severe, further worsening of the unemployment situation and creating dis-investment. But then, If the economic must pull through the current depression and if life must go on, business must survive and be on-going, it is In connection with this that this research is looking into application of the business combination strategy with the aim of critically investigating into their suitability or otherwise as a survival strategy in a period of economic depression.

1.5HYPOTHESIS FORMULATIONIn the course of this project work, below are hypothesis put forward to be tested as regard business combination under the case study.

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