Photo AI
Kiltronan Ltd produces a range of chilled food products - Leaving Cert Business - Question 6 - 2011
Question 6
Kiltronan Ltd produces a range of chilled food products. Made from natural ingredients, the firm's award winning products have become household names. It is now one ... show full transcript
Worked Solution & Example Answer:Kiltronan Ltd produces a range of chilled food products - Leaving Cert Business - Question 6 - 2011
Step 1
Illustrate the difference between a merger and a takeover as methods of business expansion.
Answer
A merger is a friendly and voluntary amalgamation of two firms for their mutual benefit. It requires the mutual consent of both companies to combine and become one entity. For instance, if two companies decide to form a single entity to enhance their market presence, it represents a merger.
In contrast, a takeover occurs when one company acquires another, usually through purchasing a majority of its shares, often without the consent of the comparatively smaller entity. This can happen in either a hostile or friendly manner. An example of this could be when a larger company buys a controlling interest in a smaller firm, absorbing it into its operations completely.
Step 2
Discuss the benefits and risks of a merger as a method of expansion for Kiltronan Ltd.
Answer
Benefits:
-
A merger can serve as a strategic move that expands Kiltronan Ltd's product line through diversification, potentially leading to the introduction of new products to the market. This is particularly advantageous if other brands in the chilled food sector are failing, ensuring Kiltronan's survival through broader offerings.
-
The merger can act as a quick form of business expansion, allowing Kiltronan Ltd to grow rapidly compared to organic growth methods.
-
Costs are likely to be lower when merging with another business due to economies of scale and shared resources, ultimately leading to improved profitability.
-
Additionally, by merging, Kiltronan Ltd can gain access to new technologies and markets quickly, enhancing its competitive edge in the industry.
Risks:
-
Mergers may lead to industrial relations problems, particularly if redundancies occur as a result of overlapping roles. Such problems can create dissatisfaction among employees.
-
The differing organizational cultures between Kiltronan Ltd and the other merging entity might result in conflict, hindering effective integration and cooperation following the merger. This can lead to difficulties in decision-making within the newly formed organization.