When You Grow Too BIG…

Mergers and acquisitions have always been the fast-lane tickets for organisations to grow. Naturally, since top executives’ fat bonuses were directly linked to how sales (and reputations hence shares’ prices) were accomplished (during the relatively short tenure), the very notion of becoming big and bigger seems too hard to dismiss. In fact, as I was writing, another great acquisition (more like hostile takeover) is already underway: Kraft relentless pursuit of Cadbury is almost a done deal. History repeats. On short-term perhaps, M&A seems in every manner logical (EOS, market share, diversification etc) and profitable (tax liability, vertical/horizontal integration), but over time due to incompatibility, complacency (elephant syndrome) and myopic management, the rate of failure is often high. GM had failed. In retrospect, Jack Welch fantastic turnaround of GE started with good runs of divestment: opting to stay in industries where they are either number one or number two player (marketing law: law of duality). And sometimes, growing too big need not due to M&A, hasty expansion (at the wrong timing) could be equally fatal. Toyota, once the darling of automotive industry in products quality and safety, is already showing disturbing signals: second massive recalls of defective vehicles in relative short span of time. And VW is now aggressively (and realistically) eyeing for the top-auto maker position and may as well succeed if the current trend continues in favor. Will Kraft-Cadbury survives? Too early to tell as the merging has yet to receive Warren Buffett blessing. In sum, being number 1 is (much) easy, staying there is hard! Good luck Kraft-Cadbury. I love Cadbury chocolates!


About jensonlim

A young, learning adult with deep thoughts on life and interests on provocative and unusual stuffs.

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