Acquisition Strategy: Tyco International Ltd

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Acquisition strategy refers to a high-level business and technical organization system designed to achieve planned goals within a particular resource limits and time. Acquisition strategy as management program can be viewed as a procurement method for the business components or services.

Before an acquisition plan is initiated, the target company market performance and market situation should be analyzed to determine the best target company, and its best acquisition price.

Tyco international ltd has been able to use acquisition strategy to promote its growth to very high levels of excellence, through its highly diversified world company incorporation of its three major business divisions of; security solutions, fire protection and flow control. In the early 1960s it acquired Armin plastics and the Ludlow Corporation to start packaging services.

After this acquisition, the company recorded booming business and consequently high profits due to diversity of products in the market. Due to this, the company met the business threshold to be listed in the New York stock exchange in the year 1974.

Soon after Tyco international joined the stock exchange, it gained competitive advantage against its competitors, as this acted as an advertisement to those who did not know it and its products. It continued to expand both in its products and services, and through acquiring other companies to a point, where it has gained an international recognition, further widening of its market share through export of its products.

Through this strategy, speed of growth in terms of resources and competency of the company is higher than that of competitors, with ability to provide a wide range of new products of high quality.

By the way of acquiring an already established firm with ready products for sale such as polythene and plastic pipes, after acquisition the company was able to minimize the risks and cost of developing these new products, hence making its production cost low. This is translated into low prices of its products in the market compared to those of competitors.

The acquiring company has been able to increase its market power through enhanced market presence with a wide range of products and services. Many companies feel that they have inside ability to do business, but they are unable to exhaust their available capital and capability due to insufficient size.

During acquisition, a company gets a good opportunity to increase its size that is necessary to exploit its overall competences by developing and growing in terms of sizes. The major concern of increase of size is the market share of the company.

For instance, Tyco has a history of expanding its market shares through acquiring various companies from both within and without the industry. Whenever a company expands its market share, the market power as well increases, hence placing it at a more competitive edge in the market.

For a company to enjoy a powerful market share, it may be forced to acquire the relied supplier in the market, the most competing company, or the major distributor. To some extent, some companies like Tyco international have tried to expand their market shares through acquiring companies from a different industry, and the process has proved to be successful.

Starting a new company is usually associated with many hindrances, the company enjoyed easy acquisition of Armin plastics and the Ludlow Corporation and with minimal competition effect. Through acquisition, there is a very high likelihood of the company to overcome the main entry barriers.

The big companies with expanded market shares find it easier to venture even to the most competitive areas. This is facilitated by the strong financial base of that company, as most of the companies that are new and upcoming find it hard and expensive to enter the market.

When it becomes challenging for small companies to venture into the market, those opportunities are left to be exploited by the big companies. When Tyco international acquired the second company it was soon listed in the New York stock exchange, this increased confidence among shareholders and other stakeholders, due to anticipated growth which was then realized.

When it acquired Armin plastics and the Ludlow Corporation, the later management and workforce was also absorbed to the new program, they brought new ideas and management strength that has made the company prosper to greater heights.

In addition, the company may use acquisition as a way of eradicating the behavior of depending on a single or few products in its operating market. For instance, at the beginning, the company was majoring in three types of products only within its operating market.

Within a duration of less than five years Tyco international had acquired various companies dealing with different products such as fire control, security services, electronics, packaging etc. one of its target was to acquire such companies to gather the basic guidelines of venturing into such fields.

In conclusion, although it has benefitted widely from acquisition strategy, there are some weaknesses that are associated with that strategy. There are some of the companies that have tried acquisition to no success due to such challenges. Most of the researches done on acquisition strategy prove that the benefits of this strategy outweigh the challenges making the process acceptable.

References

Birkler, J. (2004). An acquisition strategy, process, and organization for innovative systems. New York: Rand Corporation.

Gamble, J., & Thompson, A. (2006). Essentils of Strategic Management:The Quest for competitive Advantage. Michigan: Routledge.

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Acquisition Strategy: Tyco International Ltd

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