Q2. Choose an acquisition/merger which has featured prominently in the business press.
a) Critically assess the motives behind the making of the deal. You should consider the different levels of analysis and specifically address the question of how the deal contributed to the creating and/or sustaining of competitive advantage.
"To be the most successful premium manufacturer in the industry." BMW's mission statement states. BMW has two key objectives for its lifestyle business: brand support, and a positive contribution to the company's overall financial goals. In 1994 the firm decided that it wanted to take their mission and objectives into the future. A merger was the outcome of this choice. The ÃÂ£800 million BMW merger with Rover took place in secrecy in 1994. The hope was to achieve economies of scale, break into the US sports car market, increase over all market share, emerge into new smaller and lower budget car markets and decrease production costs.
The motives were created from different levels of the firm and were a matter of careful strategic situation and strategic choice analysis.
BMW already held strong competitive advantage within the automobile industry. BMW are known for their automobiles at the top end of the car market. They tend to cater for the more luxurious buyer with cars such as the BMW 8 series. They are profitable from niche marketing.
The strong brand image makes BMW an exception from being a search good.
Consumers spend a lot of time searching for the right car at the right price. They have the power to easily verify the price of the product at other outlets and make sure that the products are comparable. However, BMW escapes this as had built up a robust reputation.
Barriers to entry also helped BMW to keep the competitive advantage.