Growth Strategy
Acquisition usually occurs between firms of different sizes and can be either friendly or hostile. Hostile acquisitions are often called takeovers. A Strategic Alliances is a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial. Growth is a very attractive strategy for two key reasons.
- Growth is based on increasing market demand may mask flaws in a company (flaws that would be immediately evident in a stable or declining market. A growing flow of revenue into a highly leveraged corporation can create a large amount of organization slack. (unused resources) that can be used to quickly resolve problems and conflicts between departments and divisions. Growth also provides a big cushion for a turnaround in case a strategic error is made. Larger firms also have more bargaining power than do small firms and are more likely to obtain support from key stake holders in case of difficulty.
- A growing firm offers more opportunities for advancement, promotions, and interesting jobs, growth itself is exciting and ego enhancing for CEO’s. The marketplace and potential investors tend to view a growing corporation as a winner or on the move. Executive compensation tends to get bigger as an organization increases in size. Large firms also more difficult to acquire than are smaller ones; thus an executive’s job is more secure.
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