Acquisition is a growth strategy in which one company, the acquirer purchases the stocks and assets, and absorbs the operations of another company, the acquired (Gamble, Petaraf, & Thompson, 2015). It provides acquirer with the right to take decisions regarding the acquired company’s assets without consulting its shareholders (Investopedia, 2018). Acquisition strategy is used by the companies to become more competent in market by achieving larger assets base, entering in new market, generating greater market shares, increasing manufacturing capacities and/or gaining complementary strengths and competencies (Gupta, 2012).
Some of the companies that are using acquisition strategy to strengthen their market positions are:
Walmart’s Flipkart Acquisition
Walmart, an American multinational retail corporation, well known for its grocery stores, discount department stores and hypermarkets has acquired India’s largest online retailer, Flipkart on May, 2018 for $ 16 billion. It is the largest acquisition in India and marks the world’s biggest purchase of an e-commerce company. With this acquisition, Walmart owns 77% stake in the Indian e-commerce giant (India Times, 2018).
This acquisition is a move to compete with Amazon that has provided geographical spread to Walmart along with increased online presence (Ranjan, 2018). Only 100 million people out of the population of 1.3 billion using ecommerce and prediction by Morgan Stanley’s analysts to reach ecommerce business of India to estimated value of $200 billion in 2026 make it huge, yet relatively untapped market segment. So, Walmart is betting on this market with high growth potential by acquiring Flipkart (Roy, 2018).
The diverse retail expertise, merchandise supply chain and financial strength of Walmart can be used to accelerate the sales of Flipkart that has reached to $7.5 billion in fiscal year ending 2018, that will also improve Walmart’s performance in international market. In addition, Walmart can gain operational insight from Flipkart’s research in artificial intelligence, use of data across its platform, logistics network and burgeoning mobile payment service, and use India as a place to experiment with technology and ecommerce. The insights and learnings from those experimentations can be applied in global market that will enhance Walmart’s competitive capabilities (Levy, 2018). Prior to the acquisition of Flipkart, Walmart acquired jet.com, shoes.com, Moosejaw, Bonobus and Parcel that has proved to be beneficial for the company as it has increased number of items offered for sale and geographical coverage.
Facebook’s WhatsApp Acquisition
Facebook, one of the most popular American online social media and social networking company has been using acquisition strategy for its growth and success since its formation in 2004. Parakey, FriendFeed, Instagram, Onavo, Oculus VR are some of the acquisitions made by Facebook with the aim of increasing its functionability and features through procurement of new talent, acquisition of new technology and buying out the competitors. Among 50 companies and properties acquired by Facebook over the years, WhatsApp by far is the largest acquisition. WhatsApp is a freeware, cross-messaging and VoIP service that was purchased by Facebook at $ 19 billion in February 2014 (Hayes, 2018).
As per the data of May 2018, 65 billion messages are exchanged by 1.5 billion WhatsApp users every day. The tremendous growth of WhatsApp after being purchased by Facebook has proved the acquisition of the most popular messaging service a smart move. The acquisition has was also aimed on making the customers choose one of the many services offered by Facebook above the services one product competitors like Skype and Snapchat (Bhardwaj, 2018). The acquisition strategy has helped Facebook in achieving its aim to reach billions of users by increasing the customer base, achieving growth in smartphone market, reclaiming losing market share among teens, expanding its reach to Europe and emerging market and acquiring new customers (Singh, 2014). The competitive capabilities of Facebook has been enhanced as it has fueled the growth of Facebook in developing markets where WhatsApp is widely used despite the sparse internet connectivity.
To conclude, the acquisition strategy can work well for the organization by allowing access to markets, products, technology, resources and talent faster at reduced risk if there is strategic and organizational fit between the acquirer and acquired (Jemison & Sitkin, 1986).
References
Bhardwaj, P. (2018, May 8). The number of messages sent via WhatsApp each day has tripled since Facebook bought it four years ago. Retrieved from Business Insider: businessinsider.com/whatsapp-messa...
Gamble, J. E., Petaraf, M. A., & Thompson, A. A. (2015). Essentials of Strategic Management: The Quest for Competitive Advantage (Fourth ed.). New York: McGraw Hill Education.
Gupta, P. K. (2012). Mergers and Acquisitions (M&A): The Strategic Concepts For The Nuptials Of Corporate Sector. Innovative Journal of Business and Management, 1 (4), 60-68.
India Times. (2018, May 10). Walmart Acquires Flipkart for $16 Billion in World’s Largest E-commerce Deal. Retrieved from The Economic Times: economictimes.indiatimes.com/small...
Jemison, D. B., & Sitkin, S. B. (1986, March). Acquisitions: The Process Can Be a Problem. Harvard Business Review . Retrieved from hbr.org/1986/03/acquisitions-the-p...
Levy, A. (2018, May 15). 3 Reasons Walmart’s Flipkart Acquisition Is Its Most Important Yet. Retrieved from The Motley Fool: fool.com/investing/2018/05/15/3-re...
Ranjan, S. (2018, June 8). Will Flipkart buy be a shot in the arm for Walmart’s international ecommerce play? Retrieved from Your Story: yourstory.com/2018/06/will-flipkar...
Acquisition is a growth strategy in which one company, the acquirer purchases the stocks and assets, and absorbs the operations of another company, the acquired (Gamble, Petaraf, & Thompson, 2015). It provides acquirer with the right to take decisions regarding the acquired company’s assets without consulting its shareholders (Investopedia, 2018). Acquisition strategy is used by the companies to become more competent in market by achieving larger assets base, entering in new market, generating greater market shares, increasing manufacturing capacities and/or gaining complementary strengths and competencies (Gupta, 2012).
Some of the companies that are using acquisition strategy to strengthen their market positions are:
Walmart’s Flipkart Acquisition
Walmart, an American multinational retail corporation, well known for its grocery stores, discount department stores and hypermarkets has acquired India’s largest online retailer, Flipkart on May, 2018 for $ 16 billion. It is the largest acquisition in India and marks the world’s biggest purchase of an e-commerce company. With this acquisition, Walmart owns 77% stake in the Indian e-commerce giant (India Times, 2018).
This acquisition is a move to compete with Amazon that has provided geographical spread to Walmart along with increased online presence (Ranjan, 2018). Only 100 million people out of the population of 1.3 billion using ecommerce and prediction by Morgan Stanley’s analysts to reach ecommerce business of India to estimated value of $200 billion in 2026 make it huge, yet relatively untapped market segment. So, Walmart is betting on this market with high growth potential by acquiring Flipkart (Roy, 2018).
The diverse retail expertise, merchandise supply chain and financial strength of Walmart can be used to accelerate the sales of Flipkart that has reached to $7.5 billion in fiscal year ending 2018, that will also improve Walmart’s performance in international market. In addition, Walmart can gain operational insight from Flipkart’s research in artificial intelligence, use of data across its platform, logistics network and burgeoning mobile payment service, and use India as a place to experiment with technology and ecommerce. The insights and learnings from those experimentations can be applied in global market that will enhance Walmart’s competitive capabilities (Levy, 2018). Prior to the acquisition of Flipkart, Walmart acquired jet.com, shoes.com, Moosejaw, Bonobus and Parcel that has proved to be beneficial for the company as it has increased number of items offered for sale and geographical coverage.
Facebook’s WhatsApp Acquisition
Facebook, one of the most popular American online social media and social networking company has been using acquisition strategy for its growth and success since its formation in 2004. Parakey, FriendFeed, Instagram, Onavo, Oculus VR are some of the acquisitions made by Facebook with the aim of increasing its functionability and features through procurement of new talent, acquisition of new technology and buying out the competitors. Among 50 companies and properties acquired by Facebook over the years, WhatsApp by far is the largest acquisition. WhatsApp is a freeware, cross-messaging and VoIP service that was purchased by Facebook at $ 19 billion in February 2014 (Hayes, 2018).
As per the data of May 2018, 65 billion messages are exchanged by 1.5 billion WhatsApp users every day. The tremendous growth of WhatsApp after being purchased by Facebook has proved the acquisition of the most popular messaging service a smart move. The acquisition has was also aimed on making the customers choose one of the many services offered by Facebook above the services one product competitors like Skype and Snapchat (Bhardwaj, 2018). The acquisition strategy has helped Facebook in achieving its aim to reach billions of users by increasing the customer base, achieving growth in smartphone market, reclaiming losing market share among teens, expanding its reach to Europe and emerging market and acquiring new customers (Singh, 2014). The competitive capabilities of Facebook has been enhanced as it has fueled the growth of Facebook in developing markets where WhatsApp is widely used despite the sparse internet connectivity.
To conclude, the acquisition strategy can work well for the organization by allowing access to markets, products, technology, resources and talent faster at reduced risk if there is strategic and organizational fit between the acquirer and acquired (Jemison & Sitkin, 1986).
References
Bhardwaj, P. (2018, May 8). The number of messages sent via WhatsApp each day has tripled since Facebook bought it four years ago. Retrieved from Business Insider: businessinsider.com/whatsapp-messa...
Gamble, J. E., Petaraf, M. A., & Thompson, A. A. (2015). Essentials of Strategic Management: The Quest for Competitive Advantage (Fourth ed.). New York: McGraw Hill Education.
Gupta, P. K. (2012). Mergers and Acquisitions (M&A): The Strategic Concepts For The Nuptials Of Corporate Sector. Innovative Journal of Business and Management, 1 (4), 60-68.
Hayes, A. (2018). Facebook’s Most Important Acquisitions. Retrieved from Investopedia: investopedia.com/articles/investin...
India Times. (2018, May 10). Walmart Acquires Flipkart for $16 Billion in World’s Largest E-commerce Deal. Retrieved from The Economic Times: economictimes.indiatimes.com/small...
Investopedia. (2018). Acquisition . Retrieved from What is Aquisition?: investopedia.com/terms/a/acquisiti...
Jemison, D. B., & Sitkin, S. B. (1986, March). Acquisitions: The Process Can Be a Problem. Harvard Business Review . Retrieved from hbr.org/1986/03/acquisitions-the-p...
Levy, A. (2018, May 15). 3 Reasons Walmart’s Flipkart Acquisition Is Its Most Important Yet. Retrieved from The Motley Fool: fool.com/investing/2018/05/15/3-re...
Ranjan, S. (2018, June 8). Will Flipkart buy be a shot in the arm for Walmart’s international ecommerce play? Retrieved from Your Story: yourstory.com/2018/06/will-flipkar...
Roy, P. K. (2018, May 11). Why did Walmart buy India’s Flipkart? Retrieved from BBC News: bbc.com/news/world-asia-india-4406...
Singh, T. (2014, February 20). What is the significance of WhatsApp for Facebook? Retrieved from Quora: quora.com/What-is-the-significance...