1-Define the following terms in a sentence each:
Leveraged Buyout
It is a type of acquisition, in which a company borrows a considerable amount of money so that it could acquire a company/firm (acquisition). The assets of the company are used as collateral against the borrowed money.
Downscoping
The term means the elimination of those businesses, which are in the core business of a company. This process impacts structure of a company and increases its capacity to operate in a particular industry.
Functional Structure
Functional Structure refers to such body/mechanism, under which employees, of a company, are grouped, based on their skills and corporate understanding (experience). Any functional structure is comprised of intra-organizational institutions, which determines the capacity and efficiency of an organization.
Related Diversification
It is a type of corporate expansion, in different dimensions of an industry. For instance, when a firm or company starts to produce similar kinds of products or services, which it is already producing, it is identified as related diversification. When bike manufacturers decide to produce cars, of particular size and power.
Focus Strategy
When a firm or a company, which is operating in a particular industry, decides to operate in a specific segment of an industry (narrow downing of a focus), it is called Focus Strategy. For instance, a company decides to produce gear-box for cars.
IPv6
It is the most contemporary protocol version, which provides provide not only identification system, but also a local system for those computers that are on the network.
Carbon Footprint
It is mostly defined as the emission of greenhouse gases, which are similar or equivalent to carbon dioxide, caused by various reasons that include human activity or use of a product.
2-We have discussed the 2008 hostile takeover battle between Microsoft and Yahoo (read about it anywhere you like, for example at( http://massivegreatness.com/turning-purple-into-red). Name two ways in which Microsoft hoped to benefit from the acquisition. Can Yahoo’s perpetual raising of the price be considered a “poison pill”?
The acquisition is one of the methods to expand business; however, it was conserved an unorthodox method to expand and achieve competitive advantage. Though, as the economic systems have evolved, this method of expanding business and attaining competitive advantage has become quite common. Many companies, in a particular industry, are using it as an instrument to reduce competition and increase profits. However, in some industries, such as Information and Technology industry, these acquisitions are more straightforward and therefore, more commonly used as an instrument.
Many large corporations, such as Microsoft, have acquired other businesses, through peaceful negotiations or hostile strategies (hostile acquisitions) to establish their position in the industry further, consolidate the existing share of market/industry and to earn profits (the prime objective).
From the study of this case, we learn that Microsoft desired acquisition, of Yahoo, so badly, because in its grand design, to rival Google, Yahoo fitted perfectly. The immediate objective, of Microsoft, which can be considered its short-term objective, was to develop a formidable structure to rival Google. The development of an indigenous, such body would have taken not only enormous time, but also massive resources before it could hit economies of scale. During that time, Google would have evolved further to ensure its competitive edge against its rivals such as Microsoft and others (Massive Greatness, 2012).
Also, because of the acquisition, Microsoft would have shared the costs of operations and might have increased operational efficiency. It was presumed by the organization, Microsoft, that increased investment in R&D would have opened new avenues of innovation. However, Yahoo believed that increased innovation would have been limited to the tying of Microsoft products/technologies with the Yahoos. As the negotiations broke down, Microsoft initiated the process of hostile acquisition. The constant rising of the price is not the poison pill, but rather issuing of new shares, in this case, would be a poison pill if each share has the same unlimited voting power. It would dilute the power ofa predator, in this case, Microsoft, and would bring the Board of Directors in play.
3-The following article on executive compensation suggests that some executives are earning nearly $40,000 an hour (http://www.nytimes.com/2014/04/13/business/executive-pay-invasion-of-the-supersalaries.html)! The following figure shows that much of the compensation comes from stock options, which is considered a good instrument of “corporate governance” (http://www.nytimes.com/interactive/2013/04/05/business/the-highest-paid-ceos.html; also see our ppt in the course documents section). The data is a few years old, but the trend toward overpayment of CEOs has remained stable, and even intensified as we move into 2017. Do you think such compensation is fair? Should we move away from a stock option model to a straight salary model for CEOs and top managers? Discuss the pros and cons of both.
In contemporary corporate systems, firms have emphasized on top leadership to produce desired results, as many studies have suggested that able and shrewd leadership can facilitate a firm in realizing its both short and long-term objectives. Also, in recent studies, the human resource has been identified as the most valuable and sensitive of all resources. These studies also assert that to attain competitive edge, human resources of an organization should be developed to 1) compete against rivals and to attain competitive advantage. It brings back focus on the leadership or CEOs, which are responsible for the devising strategies and observe the implementation of these strategies at tactical levels, by the managers.
Most of the firms have devised various methods or strategies to synchronize objectives of CEOs with those of the company. One of the methods was to devise a performance-based salary, which implies that the better a company performs, the more a CEO earns. In fact, the formula, of paying CEOs, is base salary x base salary factor x business performance factor. To make CEOs legitimate stakeholders, they are asked to buy shares (Evais, 2014).
Initially, the idea was to constrain the pay and increase the performance; however, this theory evaporated by the facts, as CEOs, begun to earn more every year. It has both corporate and economic issues. For instance, because of the increase in paying and alignments of goals, such as profit, CEOs are less sympathetic towards human resource, as for considering it a mean of generating revenue/profit. Another issue regarding it is that it becomes the very reason for creating wage parity in an economic system (Russell & Mclean, 2013).
The Middle-class is desired to consider the engine of growth, as it has higher Marginal Propensity to Consume (MPC), which facilitates sustainable economic growth. However, because of the increased economic /wage imparity, economic growth slows down and increases economic vulnerability. Some economists also suggest that it may be yielding recession at regular intervals. However, this requires substantial evidence to back this claim (Dabla-Norris, Kochhar, & Tsounta, 2015). Though it is quite apparent because of this paying mechanism, yet the economic system suffers in the long run, and it reduces economic growth. Though, it is quite challenging to come up with another salary system, in short run, which could keep CEOs dedicated and keep salaries in check.
4-Do takeovers work? Read the following article in the context of the controversy that surrounded HP’s 2012 acquisition of Autonomy. Based on your experiences and other readings why do you think HP paid so much for Autonomy? Was it a doomed strategy, or was it a good idea that did not pan out? http://www.forbes.com/sites/robertsher/2012/11/28/the-lesson-of-h-p-for-mid-market-companies-with-acquisitions-really-do-your-homework/?ss=strategies-solutions
We have discussed at length that in contemporary corporate systems, acquisitions are the instruments that are used to expand market share, increase profits and to attain competitive advantage. However, it is must be acknowledged that process of acquisition or the entire strategy is not only complex and complicated, but also enormous risks are attached to it.
The vertical integrations are considered more complicated and riskier than horizontal acquisitions; however, when studied in totality, we learn that both kinds of acquisitions require a massive investment of time and human resource. We learn that despite the enormous investment, of time and intellect (legal and corporate), the desired objectives are still not achieved. It is because there are several factors, which are hard to discern and factor-in. In some cases, because of the lack of transparency, the decision could backfire. We learn that accounting fraud is not very difficult to commit, despite more checks and balances, which is why acquisitions could be tricky.
The case of Hewlett Packard is one such case, which acquired the corporate control of Autonomy for $11 billion. Many of the experts are of the view that the acquisition must be by the core strategy of a company, which was not the case of this acquisition, by Hewlett Packard. In fact, as per studies, it was a poor decision, which not well studied before the acquisition. Therefore, companies could not align strategic goals and systems of both companies (Sher, 2012).
We also learn that HP has accused the Autonomy of accounting fraud, which also seems to be the blunder on HP’s part, as it failed to see through accounting deception. Nevertheless, whatever may be the case, the primary responsibility was of HP to ensure that acquisition went well. However, this does not imply that acquisitions are doomed strategy, some companies have benefited a lot with it. Though, it depends upon the strategy devised for acquisition and to some extent in the industry.
5-Comment on Satya Nadella’s leadership style in 200 words or less. Emphasize how he was different from Steve Ballmer. https://www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code
Satya Nadella when took the company, Microsoft, it was in dismal shape, and there were several causes of it. However, one of the most apparent or evident reason was that the Company or the former CEO looked outwards for the solution, whereas Satya looked inwards for the solution. As a prudent leader, his early initiatives were resolved internal conflicts and issues, by Microsoft, and after increasing the company’s capacity and efficiency, apply a potent strategy for more market and industry share.
From the study of the article, we learn that Satya stopped infighting, which was affecting both efficiency and morale of employees (MacCracken, 2017). It resulted in better coordination between the various departments of the company, which allowed the realization of the full potential of the company. I believe that this style of leadership is more efficient, as it emphasized on collective effort to meet the set goals. We also know that when a company or a firm is operating efficiently, it attains competitive advantage, which could be regarding the ability to perform or increased market value of a company (both are intertwined). Also, Satya looked towards the future and encouraged innovation, as he realized that technology was evolving so should the company. It is an admirable and desired quality, of a competent leader, which ensures not just survival, but also higher profits.
References
Dabla-Norris, E., Kochhar, K., & Tsounta, E. (2015, June 15). Growth’s Secret Weapon: The Poor and the Middle Class. Retrieved from https://blogs.imf.org/2015/06/15/growths-secret-weapon-the-poor-and-the-middle-class/
Evais, P. (2014, April 12). Executive Pay: Invasion of the Supersalaries. Retrieved from https://www.nytimes.com/2014/04/13/business/executive-pay-invasion-of-the-supersalaries.html
MacCracken, H. (2017, September 18). Satya Nadella Rewrites Microsoft’s Code. Retrieved from https://www.fastcompany.com/40457458/satya-nadella-rewrites-microsofts-code
Massive Greatness. (2012, July 20). Remember When Microsoft Almost Bought Yahoo For $50 Billion? Retrieved from http://massivegreatness.com/turning-purple-into-red
Russell, K., & Mclean, A. (2013, April 5). The Highest-Paid C.E.O.’s. Retrieved from http://www.nytimes.com/interactive/2013/04/05/business/the-highest-paid-ceos.html
Sher, R. (2012, November 28). The Lesson of H-P for Mid-Market Companies: With Acquisitions, (Really) Do Your Homework. Retrieved from https://www.forbes.com/sites/robertsher/2012/11/28/the-lesson-of-h-p-for-mid-market-companies-with-acquisitions-really-do-your-homework/#473099da3c6e
+447462439809