Acquisition results in growth after companies purchase existing businesses. This method of business growth is usually less expensive and fast. It reduces most of the risks encountered whenever focusing on the traditional methods of business growth. The practice presents various benefits. Companies can also acquire new resources thus promoting their performances. Acquisitions also increase the market power of an organization.
Entry barriers are also reduced while at the same time increasing a firm’s financial gain. However, the process has specific challenges. The strategy can result in integration issues. Sometimes the costs of acquisition might rise. Some companies might acquire new businesses that might affect their goals. The process forces the top managers to focus on the expected operations. This form of distraction can affect the operations of the parent company.
That being the case, business organizations should use the best practices to manage their acquisitions. The case of Whole Foods offers numerous lessons that can be considered whenever acquiring new firms. Whole Foods’ decision to acquire Wild Oats was something critical. During the time, Whole Foods was facing numerous financial struggles. The FTC also wanted to stop the acquisition because it could monopolize the industry.
The top managers explained how the company was also competing with non-organic food producers. A “considerable amount of managerial time and energy is required for acquisition strategies to be used successfully” (Hitt et al., 2010, p. 202). The process will eventually bolster the company’s market position. The targeted companies should also train their new employees. The acquisition strategy should always consider the best business practices. Employees and managers from the two companies should also be involved in the acquisition process.
Reference
Hitt, M., Ireland, R., & Hoskisson, R. (2010). Strategic Management: Concepts and Cases. Boston, MA: Cengage Learning.