Growing a company by international acquisition can be a strategic move to expand its reach and increase its market share. Acquiring a company in another country can gain access to new customers, products, and distribution channels. Additionally, international acquisition can help a company diversify its operations and reduce reliance on a single market or region. However, international acquisition can also present challenges like cultural differences, regulatory hurdles, and integration issues. Companies must carefully evaluate international acquisition’s potential risks and benefits and develop a clear strategy and execution plan to ensure a successful outcome.
An intelligent company knows when to expand and grow and when to stay put and continue with the strategies that are working for them. Company expansion methods include acquisitions, mergers, ventures, franchising, dealerships, and other techniques. The best way to expand is by entering new borders and markets. International acquisitions allow the company to tap into markets they did not have a reach to. Many Chinese companies have used this method to expand and enter various markets to help increase their sales, profit, customers, and distribution channels.
Ways a company can grow
The difference between a merger and an acquisition is that in a merger, two separate companies or entities decide to make one new company, whereas, in an acquisition, one company takes over the other entity.
It is always believed a company should follow these five steps before expanding its reach.
Start building relationships with foreign markets.
Always be on the lookout for developing new relationships with influencers and partners that may benefit your expansion.
Go over your Capital
Before making any significant step, assessing the organization’s financial status is imperative. Expanding an organization internationally is impossible without the capital for investment. Expansion is not a one-time thing; you must be prepared to put all or nothing in for successfully working.
Work with a Market-Research Firm
Entering a new market can be very difficult; it is vital to have in-depth research on the market. Hence, one of the first steps is to hire a reputable market research firm that can conduct research on hot spots, customer trends, and whether there is a need for your product in the new market.
Cultural Differences and Language Barrier
Remember, when entering a new market, there will be a difference in culture and language barrier. A company must adjust, adapt, and understand these differences to coexist in the same market.
Prepare Employees for Change
The employees must be on board, trained, and prepared to create an impact on the organization’s expansion.
The growth of the Davis Service Group
David Service Group had three leading companies with different products or services operating all across Europe. However, being in the European market for years, the market had started to mature, and hence they needed to act fast, or else they’d eventually lose customers and sales. Therefore, in 2002, DSG acquired Berendsen, which operated in many countries, such as Denmark, Sweden, Norway, Austria, Poland, Germany, and the Netherlands. Berendsen was also a leading company in the textile sector of its geographical area.
However, Berendsen struggled with maintaining profitability and had to take up DSG’s offer to acquire it. They both would benefit this way; Berendsen would introduce DSG to new markets while DSG would use its expertise in the management system to reduce operating costs and save fixed costs.
It was a win-win situation for both companies. Therefore, the best-fit method for these companies was horizontal integration. Horizontal integration is when one company increases its production of goods and services and acquires another in the supply chain.
How the Acquisition of Berendsen saved Davis Service Group and helped it grow
Acquiring another company can have its ups and downs; however, this was one of the best decisions for Davis Service Group. Berendsen was a strong market leader with a hold of seven EU countries. Acquiring Berendsen allowed DSG to expand its reach with customers and enter a market, they did not need a lot of cultural understanding for. If they had opened their outlet in any of these seven countries, they would have been rivals with an existing company that would not have benefited them. DSG saw an opportunity, availed it, and grew its profits through this decision. Horizontal integration benefits organizations, such as a larger market share, a more significant customer base, increased revenue, and minimal competition.
The part played by EU markets in DSG growth.
The European Union has a total of 27 countries, 500 million customers that are ready to purchase products and services. It is a vast market to start a business in. Moreover, the transport of goods has developed immensely in the past decade. There are fast trains, buses, trucks, and many other means of transport, which makes getting the product to the customer simple. With most countries using the Euro currency, it has also made trading goods and services accessible. Therefore, DSG did not face many adjustment challenges when expanding to different countries.
Next step for DSG
The following steps for DSG should be the same as they did with Berendsen; they should acquire other leading markets to expand their reach of customers that would benefit them and the acquired company. Many countries around the world have markets that are in the same category as DSG. DSG can expand in the US, China, and other leading markets with proper research and strategies.
Analyzing your company well enough to know which expansion method will benefit you is essential.
An example of companies merging is when the Walt Disney Company merged with Pixar Entertainment for $74 billion in 2007 (Meyer, 2020).
Read more about Growing a Company by International Acquisition
- CFI. (2021). Merger vs. Acquisition
- (2021). Davis Service Group PLC – Company Profile, Information, Business Description, History, Background Information on Davis Service Group PLC:
- Global, V. (2018). International Acquisition: Is Your Business Ready?
- (2020). Is Franchising the Best Method of Business Expansion?
- (2013). Horizontal Integration
- Meyer, J. (2020). 5 Successful Business Merger Examples and the Factors That Contributed to Their Success
- (2021). Horizontal Integration: Benefits and Drawbacks
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