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Essay / Research Paper Abstract
This 9 page paper discusses the reasons or influences that explain why takeover activity, in the form of mergers and acquisitions is characterised by industry clustering. The factors considered include industry profitability, industry growth, industry concentration, capital intensity an industry deregulation. The paper also considers the motivations and potential impact on the acquiring and target company. The bibliography cites 6 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEmercluster.rtf
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Unformatted sample text from the term paper:
as both push and pull factors that result in the appearance of clustering. The five main factors are industry profitability, industry growth, industry concentration, capital intensity and industry deregulation. Each
of these may be seen as an independent factor, but they may often work in conjunction with each other and further concentrate the way that clusters are formed we can
look at each and consider what impact they have and also the way in which they may impact on the profitability of the acquiring company and the target company.
Industry Profitability The first of these is industry profitability. There are many examples of companies seeking to take over other companies in order to increase their own profitability where there
is a maturing industry and profits are falling due to the level of competition and number of companies competing. The aim here is for the profitability of the target and
the acquiring company to increase, and see an increase in shareholder wealth. The acquiring company sees potential in terms of economies of
scope and scale. Porter has argued there are two causes of competitive advantage, cost advantage and differentiation. Differentiation is the most common, this is the way in which a competitor
adds value to their product or service at a lower cost than the premium which can be added to the final price and also sets the product or service
apart from others (Mintzberg et al, 1998). However cost advantage may only be held by a single company in each sector, this
is where the company is able to produce the goods at a lower cost than their competitors. This doe not mean they sell the goods for lower price (Mintzberg et
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