Commercial Logic of Acquiring Mandrake Footwear Coursework

Commercial Logic of Acquiring Mandrake Footwear - Coursework Example The decision to make acquisitions is taken by several companies in many parts of the world every now and then. Some of these decisions eventually proof to be vital and profitable while others turn out to be wrong decisions because they result in losses (Olsson, 2001). Fundamentally, the prediction as to whether or not a particular acquisition would be beneficial depends on a number of factors. Among other things, it should be possible to evaluate the commercial logic of the intended acquisition (Patra, Khatik, & Kolhe, 2003). If signals from the evaluation turn out to be bright, then the acquisition could probably be beneficial. In the case of Gear Active acquiring Mandrake Footwear, there are four major themes that can be used in evaluating the commercial logic and viability of the acquisition. These are briefly explained below. Ready Market with existing Customer Base Commercially, an acquisition such as the one Gear Active is seeking to undertake comes with the position whereby th e acquirer has at his disposal, the ready market that the existing company had. They also have access to the existing customers of the companies that they acquired. This is an important commercial value that purchasers can build on as competitive advantages (Roy, 1999). To Gear Active therefore, there is this major advantage in acquiring Mandrake Footwear. Already, Mandrake Footwear has been identified as a major competitor in the footwear industry. The company is also seemingly larger than Gear Active. This means that Mandrake has created a very huge market base that Gear Active would only need to build on. The acquisition would therefore be an opportunity for Gear Active to record massive expansion over a very short period of time. Unlike what would have existed in a merger case, this acquisition would make Gear Active an outright owner of the acquired footwear company and so Gear Active would record a quantitative expansion that would more than double the size of the present stat e company. This expansion shall be in terms of asset capital, market base and customers. Existing Popularity The popularity of a company is an important commercial value that cannot be underestimated in anyway. Many companies have been able to develop their popularity to building a competitive advantage over rivals. Without any doubt, there are companies who have continued to top the chart of revenue makers not because of their present performances but because of the popularity they have created for themselves over the years (Sackmann, Flamholtz, & Bullen, 1989). In the commercial market, it is possible that the popularity of a particular brand of product would make the name of that brand stand for the product that the company manufactures. For example one of NESTLE’s a cocoa drink brands named Milo is so popular in most countries that people who want to purchase cocoa drinks from retailers actually say they are buying Milo even if they are not making specific reference to NE STLE’s product. With such a situation, the possibility that Milo would loss its market value is very low. The same situation applies to Mandrake and Gear Active in this instance. Clearly, the name that Mandrake has gained for its brand is enough for Gear Active to continue building on that name to its advantage. Opportunity to Access New Organizational Culture An organization’s culture is an important element for determining the commercial value and predicting the future success of the company in question (Sandervang, 2000). This is because the organizational culture goes a very long way to determine how the company deals with its customers, suppliers and wholesalers. It also refers to the employee-employer relationship that would go on in the company. These dealings are also very important in determining whether or not a company would succeed (Schmidt, Minssen, 2007). This is because they serve as service values for which these stakeholders would choose one company ov er the other.