Acquisition and Strategic Planning - 2

Growth Strategy Implementation

Alternatives and their advantages and disadvantages

Build (organic growth)

Adv:
Control

Dis:

Capital/expense requirements
Speed

Partner
Alternatives possible
- Marketing/distribution alliance
- Joint venture
- License
- Franchise

Adv:
Limited capital and expense requirment

Dis:
lack of or limited control
Potential for diverging objectives
Potential for creating a competitor

Minorty Stakes in other companies

Adv.
Limited capital and expense requirment

dis:
High risk of failure
lack of control



Acquire

Adv.
Speed
Control

Dis:
Capital expense requirements
Potential earnings dilution


Swap assets

Adv:
Limited use of cash
No earnings dilution
Limits tax liability if assets base does not change

Dis:
Finding willing parties
Reaching agreement onf assets to be exchanged

According to standard theory, the decision ot choose among alternative options should be made based upon the discounting of the cash flow stream to the firm resulting from each option.

The final selection may depend on such nonquantifiable factors as the senior manager's risk profile, patience and ego.