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Facebook Marketing
Better TipsBusinessManagementMarketingTrendingWriting

Why Facebook Marketing is Essential for Every Brand in 2022 – How to Do it Right

by Shamsul August 5, 2022

Why Facebook Marketing is Essential for Every Brand in 2022 – How to Do it Right

 

We all believe that Facebook is the most popular social media platform. According to an estimate, it has billions of monthly users (over 2.89 billion), and this number is still growing. Such engagement of people and popularity makes it an excellent platform for brands and business owners to advertise their services and products because they can connect with billions of people simultaneously. It means Facebook Marketing is Essential for Every Brand in 2022.

Only a few businesses utilize social media marketing strategies, especially Facebook. In this article, we will tell you why every brand or business should use an excellent Facebook marketing strategy in 2022 to succeed. We will also explain how to do it in the right way. You can lift up your business’ presence and awareness on Facebook to increase the spark of customers by following these Facebook marketing tips.

 

Facebook is the Most Powerful Social Media Site

There is no suspicion about it that Facebook is one of the most influential and popular social media platforms, with over 9 million advertisers and 2.89 billion monthly users. Connecting with a number of people is not a difficult task for companies with Facebook. You can click and engage billions of users at once with the help of this gigantic social networking site. Engaging such a large audience at once is the biggest advantage of Facebook for brands. Through Facebook, customers can get their favorite brands’ latest news about products and services.

When it comes to finding digital content, the role of Facebook is huge. Moreover, users love to spend time on Facebook due to its engaging content such as images, videos, and chats. According to a survey, the average spending time of people on Facebook is 20-30 minutes per day.

Every business owner or marketer should consider these stats in order to build an effective Facebook marketing strategy for their business. There is a chance that you can attract more clients by creating an excellent strategy. Why is Facebook marketing essential for every brand?

We will discuss 14 solid reasons that prove Facebook marketing is necessary for every business or company.

1- Facebook Helps to Target Micro-Audience

According to social media analysts, social networking sites are highly useful for promoting and advertising your brand. But, Facebook is king in this scenario. This data-rich platform is a hotbed for companies and businesses when it comes to marketing their products or services. Advertisers can quickly identify who they are looking for or targeting. So, they can build strategies on these bases.

Explained in short, Facebook can help you target the audience you need for your business success. So, you can get the customers you are looking for.

Facebook’s overall targeting and system are highly in-depth and detailed, allowing brands or businesses to target a broad audience at once. There is no need to focus on each person or target group to promote your products and services. If a business wants to attract a huge number of people by creating Facebook ads, then the following segments are highly crucial,

  • Gender
  • Location
  • Age
  • Spoken languages
  • Education
  • History
  • Interests such as hobbies
  • Income
  • Job designation
  • Life events
  • Behaviors
  • Political interests

By motivating the people based on the above-mentioned segments, you can force people to love and buy your products. This is what makes a huge difference when you add a Facebook marketing strategy in your marketing policy. You must know what your customer wants as a business owner or company.

Facebook permits you to build an effective marketing strategy that revolves around the people you want to reach or target. That’s the beauty of Facebook ads. It is easy to engage those customers who have interacted with your product or services in the past. As a result, you can reach those people easily.

On the other hand, you can also target relevant people or customers with messages. These techniques allow business owners to understand the needs and preferences of the customers, and they can build useful strategies to fulfill their needs.

Moreover, Facebook also allows marketers to know customers interacting with your brand through the Facebook platform. They can take the help of the aggregate data feature to identify these stats.

 

2- Facebook Offers Maximum Retail ROAS

It is understood that Facebook ads have unlimited advantages. They are incredibly helpful when it comes to advertising or promoting your business. According to Forbes, the average ROAS (Return on Ad Spend) for Facebook is almost 8.75 dollars/for every dollar spent. You just need to pay 10 dollars to attract a customer on the platform. You just make 5 dollars from them, which means you are making a profit of 4.75 dollars from return on ad spend. In short, there is no need to spend anything to get that consumer.

This one thing shows how powerful the platform is. All you need to do is to put in some effort and money, and you can make your brand a king in the eyes of the customers. If you are not exploiting Facebook ads, you haven’t reached the right customers. According to some marketers, Facebook is such a fun place for advertising because it allows you to share your content with your audience without any nuisance. It is a massive opportunity for business owners to utilize this platform for marketing purposes.

Moreover, the platform effectively invests in your marketing finances because of its huge 80% click-through rate. How can you overlook this opportunity?

 

3- Facebook Display Ads in a Better Way

There are thousands of perks to using Facebook ads. Its ability of conversion tracking is not the only advantage. There are so many unique types of ad varieties that Facebook offers. Some social media platforms do not have different types of ads. Here are some effective varieties of Facebook business advertising:

  • Photostatic images with catchy captions.
  • Video – It is one of the most engaging types of Facebook ads that can be appeared on feeds, stories, and in-stream.
  • Stories – They can be static or video-based. They take the full screen and are customizable. Users can see your stories by visiting your site.
  • Messenger ads – These ads appear during Messenger conversations.
  • Carousel ads – In carousel ads, followers can see up to ten static images.
  • Slideshow – They are short videos using text, sound, and motion effects. It is a very engaging type of Facebook ad.
  • Collection – With a single ad, people can interact with an assortment of products and services.
  • Playables – It is a type of demo game. Users can play them before downloading a game or an app.

You have immense freedom to create any of the above-mentioned ads on Facebook. Just create an ad of your type and take your branding to a whole new level.

In the past, there were some limitations and restrictions associated with Facebook ads. But, marketers can use any type of ad format, ranging from photos to videos to stories to slideshow of their choice.

Another exciting thing about Facebook ads is that it gives a huge opportunity to design a campaign or ad of your desire because of the availability of different types of visual graphics, multimedia elements, and ad types such as photo, video etc.

 

4- Facebook Advertisements are Cost-Effective and Useful

There is nothing better platform for advertising than Facebook. Facebook ads are incredibly cost-effective but offer a higher return on investment (ROI). This gives marketers a big sigh of relief, and they think their investments are well spent. With a daily budget of dollars, you can run your ads on Facebook. The platform has designed this feature for those who want to advertise or promote their products and services. There is no risk of wasting or losing your money.

A business or company can also enhance its organic reach with the platform by posting engaging content on a regular basis. This is specifically good for small as well as big businesses to promote a particular product or service. You can’t ignore that over 2 billion active users use Facebook monthly. So, there is a maximum chance that your brand or product can get the right limelight.

Any type of business or company can use the platform within a specific budget. You can exploit their analytics and targeting features. As a result, you can optimize your ads on Facebook for a great return on investment. Using the platform for advertising is really easy.

 

5- Facebook Helps to Track Your ROI

It is very crucial to determine your return on investment (ROI) when initiating a marketing campaign on Facebook. You can easily track your ads and can learn who they are being watched through Facebook’s detailed and in-depth analytics. This way, you can find the difference between other types of marketing content and your Facebook ads.

The most significant advantage of this is that you can improve your marketing content with time. You can make your efforts and investment fruitful.

Other social media platforms also provide this feature to track your return on investment, but Facebook has one of the most influential and detailed systems that give accurate data. In order to reach or target potential customers, the Facebook ad is one of the most important tools. You can provide your brand international fame just because of Facebook marketing.

 

6- Facebook Advertisements Provide Very Effective and Quick Results

If your goal is to gain short- and long-term digital objectives, then Facebook ads are the best. You can start getting encouraging results when you go live on Facebook. Here, timing matters a lot. You can engage a large audience during seasonal sales, introduce a new product line etc.

Some companies or brands are highly focused on instant outcomes, making Facebook a prestigious platform for these users compared to other social media platforms.

You can focus on the right audience by creating engaging ads with suitable captions. You can force your audience to see your content without any interruption. Do not make them unhappy by posting misleading or irrelevant ads or posts.

The main purpose of telling all this is that Facebook provides instant and effective results in such a short period of time.

 

7- Facebook Ads Help to Obtain Your Particular Business Goals

Facebook provides a lot of different types of marketing ad opportunities. You can pick any according to the type of your business or business goals. It is ideal for those brands who want to get specific results in a particular niche. They can prioritize their products and differences on the basis of these ad types.

For instance, if you want to promote a special product, you can use this tool to reach millions of customers and easily drive their sales. They will love to visit your online store or products. It will ultimately increase your profit margins.

That’s why Facebook marketing is so appealing to every type of brand or business. Moreover, its feasibility also makes it compelling for many companies. In short, Facebook ads can push your brand towards a new horizon of success.

 

8- Facebook is the Biggest Platform with Largest Audience

Billions of people are using Facebook every month, and this number is still growing. So, it is a hundred percent chance that your potential customers are present on the platform. You have an excellent opportunity to target them on their preferences, demographics, age, gender, and other segments. You don’t need to spend time finding your target audience.

Facebook has made it easier for you to target a specific potential group for your business. There are countless advantages of using Facebook advertising.

Just because of this reason, every small and big business is using this platform to target customers. They are investing heavily in this segment to spark the interest of millions of people at once. You just need to diversify your investments and efforts to get suitable attention.

Many companies and business have successfully expanded their customer base through Facebook advertising. They are increasing their sales, brand awareness, and loyalty. In a nutshell, Facebook can help you achieve the right success in such a quick span of time.

 

9- Facebook Gives A/B Ad Testing Facility

With Facebook Ads, you can grow your business faster and improve your marketing techniques. The platform provides in-depth information that can be utilized to boost your marketing strategy. Facebook offers you two choices to run ads such as A/B. It is an auto-optimization tool that provides the correct information about the ads. They help to show comparisons between the ads by telling them which ad works better.

No social media platform gives this feature except Facebook marketing. When you post an ad, wait for some time until your potential audience can see it. Facebook helps to collect this data and shows you everything about your potential customers and how they react to it.

On the other hand, Facebook’s real-time feedback data will show you everything about your target audience without using A/B testing. Through such information, you can build useful ways to connect with your audience in a better way. This will surely enhance your business performance.

If you are exploiting Facebook ads to promote your business, it is imperative for you to learn how its ad strategy works. As the platform is highly beneficial for companies, some specific techniques must be utilized when creating and posting an ad on Facebook to hit the right audience.

 

10- Pay-per-click Ads on Facebook

Every time a customer visits your site or interacts with your ad, Facebook charges you on this basis. If they don’t click, then Facebook will not cost you a single penny. Otherwise, you have to pay. Some other things, such as demographics and time spent on your site, really matter. In this way, Facebook can help you identify which kinds of things customers want to see so you can change your strategy accordingly to meet their preferences. You can develop videos, messages, and pictures of their interest. This will directly boost your sales, and it is one of the major advantages of Facebook ads.

Instead of A/B testing, many other tools can help your brand grow faster only because of Facebook advertising.

As a result, you can offer limited sales offers and special deals to customers to drive sales. It boosts repeat visits and loyalty, which means your customer pool increases. They would love to come back again to buy your products and services. Online businesses are using these platforms in such a great way to increase their sales and revenues. You can completely rely on Facebook advertising.

 

11- Facebook Provides a Specific Filter to Block Unwanted Audiences

Once you identify your potential customers, you can list them in your email and send them messages about those products or services they have already tested. It will reduce the cost of your Facebook marketing and retain your customers. This type of advertising is also beneficial because you don’t have to create different ads or advertising content. It also gives the freedom to manage things with ease.

But, Facebook has everything when it comes to advertising and promoting something. The platform can replace any other advertising platform due to its powerful features. It has a unique filter that allows you to block any type of segment, customer group, or people you don’t want to show or sell your products. So, you can specify those customers you want to target.

 

12- Facebook Gives Ad Forecasting and Performance Evaluations

Facebook can help reduce your marketing efforts by ad forecasting and performance estimates. In this regard, Facebook marketing can provide a big help. It is necessary to keep in mind that your Facebook ads will only work when they are targeted toward the potential audience. Sometimes, you have to consider other types of ad campaigns instead of relying on just a specific ad. You can also choose other social media platforms.

Allot a specific budget just for Facebook marketing. As we mentioned earlier, Facebook marketing is inexpensive but still costs some money. Always set aside a particular marketing budget, so you have enough money to spend without disturbing your other expenses.

No matter what kind of business you’re running, Facebook marketing is suitable for all types and sizes. But don’t forget to set aside enough money and resources to invest it in those areas where you can get maximum results in the future. Monitor your progress occasionally by using A/B testing and other tools. It will give you a clear idea about what’s working for you and against you.

 

13- Facebook Ads Re-marketing

When it comes to boosting your sales and profits, Facebook ad remarketing can be beneficial in this matter. You must use data that comes from A/B testing to revamp or remarket your strategies or campaigns to achieve greater ROI.

The key advantage of Facebook ads is that you can track your performance and can make policies accordingly. It will help you that how to spend your money on Facebook marketing. Evaluating your cost and profit is necessary so that you can learn what you are getting. Identify the direct and indirect advantages (such as brand loyalty, more exposure, and new customers) that you are getting from Facebook marketing.

 

14- Facebook Offers Sponsored Messages

If you are not getting suitable marketing results, change your marketing strategy and create innovative ads and content that can easily target a broad audience. We have mentioned some of the most effective types of advertisements above that you can use.

In this matter, Messenger ads are especially useful for various businesses and companies to get the attention of potential users. You can send tailor-made messages to customers through Facebook messaging. In short, there are numerous benefits of using Messenger ads.

They hit customers differently because they look personal and memorable. So, a customer will feel special that he really matters to you. They will think that you do care about your customers and their preferences. For small companies and businesses, Facebook marketing is very effective.

Every business or organization can use Facebook’s marketing features to boost its reach and profits. Incorporating Facebook marketing will help you obtain your short-term and long-term objectives. However, there is room for improvement. The presence of such a big audience on the platform ensures maximum success.

 
 

Need Help or Advice in Content Management:

Do you want more advice? Do you have good practices to share? Express yourself in the comments.

Moreover, if you want any help in writing content to drive more traffic and boost conversions, get in touch through Contact our team.

Do you want any help writing quality content, driving more traffic to your website, and boosting conversions? You can contact me through my Freelancer.com profile also. I always prefer to work through Freelancer.com for smooth functioning. Here you pay safely and securely.

 

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A COMPLETE GUIDE TO FACEBOOK MARKETING IN 2022

August 5, 2022 0 comment
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Powerful Link Buillding
Better TipsBusinessManagementMarketingTrendingWriting

7 Tips for Powerful Link Building

by Shamsul June 24, 2022

7 Tips for Powerful Link Building

 

Whether your goal is to generate traffic to your site, increase sales, grow your business, or expand your presence, link building can do this in a more convenient way. Almost every marketer and business owner are familiar with this specific factor of marketing. If you want to know more about link building and how it can benefit your business, keep reading this article.

 

What is Link Building?

It is a procedure of getting hyperlinks from different sites to your own. You can provide people with direct access to your content by hyperlinking text within blog posts and articles. Google’s ranking algorithms are always evolving and highly complicated too, but backlinks are still a crucial element in how search engines evaluate which websites rank for which the main keyword. It is a wonderful tool that is mostly utilized in SEO (Search Engine Optimizations). It is an indicator to Google that your website holds well-intentioned citations. If a site has more backlinks, it will likely gain higher rankings on Google.

The advantages of Link Building are unlimited and wide. The major benefit of link building is that it enhances your searchability in an organic way. It also boosts your credibility and authority. As a result, you can successfully generate more traffic on your website, triggering more sales, ROI, and customers.

 

7 Useful Tips and Strategies for Link Building

Link building is also an evolving thing. It evolves as search engines change their algorithms. It is continuously growing. But, if you want to learn the basics of link building then the following seven tips will help you a lot,

1- Create Quality Content:

Link building is an easy process if you handle it with care. The overall appearance of links is attractive and sparkly, but they won’t be effective if your content is not up to the mark. So, it is crucial to create some quality content first and then jump in the link building process.

There is no need to post hundreds of blog posts on your site. However, you must have high-quality content that you can link with ease.

Your article should be focused on onsite content techniques. If it is not focused on onsite content, we advise you to look into a pillar strategy. A great pillar strategy integrated with a strong link building strategies can produce encouraging results in a specific niche.

 

2- Identify Your Audience:

For effective link building, you have to select the right publisher as well. It is easy for anyone to go and get a variety of links in a convenient way. It is necessary to align your site, audience, and publisher. If you are from the home improvement sector, then you can take advantage of link building from DIY blogs and home maintenance sites.

 

3- Use Anchor Text:

It is also necessary to use anchor text with extra care in every off-site article, guest post, and press release. You should bring variability and diversity when using anchor text. Here we have mentioned some sites that rank in the top 10 categories on the bases of assessment.

 

4- Use the Right Link Velocity:

If your website gets 20 links one day and 20000 backlinks the other day, does it look natural? The number of links in a particular time period is referred to as link velocity. There must be an order in this series in the form of 8000, 10000, 150000, and 20000. Your links will guild overtime on each other. If your link goes viral, then it can be referred to as natural.

For instance, if you acquired 50 links in a month, then your next must be 60 links in the next month. It is a way to boost your link velocity and you will notice a huge impact in terms of your rankings.

 

5- Hire a Link Building Service:

Link building can be overwhelming if you have decided to do it on your own. It also needs some SEO skills and know-how. If you don’t have expertise in content strategy and SEO, then you can simply acquire the help of a service. They can help you in a good way. If you are searching for link building services, then we suggest you look for those companies that have strong relations with publishers. Hiring a new or inexperienced service can waste your time and money. The turnover rate is on the upper side in this industry, so be careful. An experienced and trustworthy service provider is ideal for the job.

 

6- Stick with It:

It takes some time when it comes to link building. You can’t get instant results right after the process. It is similar to making an investment that gives you encouraging results over time. You must invest in at least two to three high-quality backlinks every month according to your marketing strategy.

7- Don’t Just Focus on Link Building:

If you are not getting fruitful results, then you must focus on other areas that can impact your site. Link building is an essential factor, but it doesn’t provide the maximum correlation sometimes. You should focus on diversity for improving your rankings.

 

Summary

When it comes to link building, it requires so many resources. Do it like you are making an investment. And expect a greater reward at the end. There is no need to build thousands of links at once. Take baby steps and start from the beginning. After a few weeks or months, you will get the maximum advantages of link building.

 
 

Need Help or Advice in Content Management:

Do you want more advice? Do you have good practices to share? Express yourself in the comments.

Moreover, if you want any help to write content to drive more traffic and boost conversions, get in touch through Contact our team?

Do you want any help writing quality content, driving more traffic to your website, and boosting conversions? You can contact me through my Freelancer.com profile also. I always prefer to work through Freelancer.com for smooth functioning. Here you pay safely and securely.

 

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FACEBOOK MARKETING TRENDS FOR 2022 – ACHIEVE YOUR DESIRED TARGET

MERGERS AND ACQUISITIONS

June 24, 2022 0 comment
0 FacebookTwitterPinterestEmail
Facebook Marketing
Better TipsBusinessCooking & FoodsManagementMarketingPersonal GrowthTrendingWriting

Facebook Marketing Trends for 2022 – Achieve your Desired Target

by Shamsul June 18, 2022

Facebook Marketing Trends for 2022

 

These days, there is only one app that is ruling the hearts of people and that is TikTok. It is one of the most sought-after social media platforms of this decade. However, Facebook is still the number 1 social media platform globally, Facebook Marketing plays an effective role in the marketing and selling of products all over the world.

Instagram is another crown jewel of social media platforms. This app got popularity because of its shining features such as stories and reels. Since its infancy, it is going strong.

Do you really think Facebook is the largest social media platform in 2022?

We all are huge admirers of great Instagram features and the shining aura of TikTok, but Facebook is still one of the most valuable and powerful platforms in the social networking world. Facebook is still the most popular marketing platform for marketers. Well, the credit goes to its ability to increase business website traffic and effectiveness.

When it comes to communicating something, there is nothing better platform than Facebook. However, many changes occur on a daily basis in the social media universe. Businesses or brands that are struggling to adopt these social media changes are on the verge of falling behind.

According to several social studies and authentic data, the following are the five biggest Facebook marketing trends for 2022 that every business or brand should incorporate into their marketing strategy if they really want to give a boost to their business.

Video Albums Help to Drive Engagement on Facebook

Various social media analytics tool has performed many analyses to compare the engagement rate per post. In this regard, SocialInsider has done a tremendous job by analyzing the different markers such as the UAE and the UK. Their verdict is that the most engaging type of post on Facebook is the Album type.

The reason behind this factor is that every person wants to be part of any album posted on Facebook.

After hosting an event on Facebook, many businesses and brands post albums. Well, the role of people is huge in this matter as they show maximum enthusiasm and testify that they were a part of that event. They also share their experiences and in this way albums help to drive higher engagement on Facebook.

Video Content Brings the Highest Facebook Click-Through-Rate

The recent year was one of the most prosperous and shining periods for social media sites. The consumption of video material was the biggest factor in that regard.

The video content has the ability to catch the attention of users and creates a big impact on people’s minds. In this way, a brand or business can retain its customers by keeping them engaged or motivated. It is crucial for each marketer or businessman to keep this factor in mind while building the marketing strategy for their company. The video content brings the highest click-through rate on Facebook.

When building a Facebook marketing strategy for your brand or business, you should not ignore your business goals and adjust your business marketing policy according to Facebook’s video content strategy.

If you are planning to increase the album posts on Facebook to derive engagement then you must focus on video content as well as it is helpful in bringing traffic to your site. This will directly improve the level of your sales. It depends on you how can you manage all this in a particular time period.

Different post types can boost your business in a different way and can provide certain advantages as well. According to social media analytics, you should bring diversity to your content strategy because it can help you in accomplishing your long-term goals. This policy is highly lucrative and one of the biggest reasons for flourishing.

If you have made up your mind to create and post more video content, then go ahead because it is a win-win Facebook marketing strategy in 2022.

While posting video content, you must pair videos with short and engaging captions. This will help you to increase your engagement on Facebook.

Live Videos are Getting Popularity

During the pandemic of COVID-19, many brands have recognized the power of video content. It is one of the most effective tactics to increase your brand’s popularity. Hosting live webinars is one of the most useful tools of Facebook that has proven highly successful when it comes to engaging customers. It shows the authenticity of your brand and your marketing tactics.

Through such live webinars, brands or businesses can provide a great opportunity for their customers to share and express their thoughts, suggestions, and concerns. It also helps to connect with the followers and build strong relationships with the. This is the thing that every brand or business wants for long-term success.

A brand can show its human side with the use of a live-streaming feature. According to various surveys, live streaming or live videos help to bring more engagement than other pre-recorded video content.

Facebook Ads Budget is Expected to Grow

This decade is really helpful for social media sites because they have achieved immense success and popularity all over the world. In the presence of various gigantic social media platforms, Facebook is still the largest and most effective platform. Its ads budget is expected to grow in 2022, so brands can invest in paid advertising content.

Many international brands have reduced their marketing budget during the COVID-19 period and invested in social media paid ads.

Due to this reason, many businesses are investing in Facebook’s paid advertising and its budget is growing with each passing day.

However, Instagram is also catching the attention by offering the same paid advertising facilities. When compared to Facebook, Instagram’s paid ads are more useful in increasing brand awareness. This predicts the bright future of social media sites.

Facebook Video Feed

Facebook has the lowest cost per click which is proof that the Facebook video feed is the most suitable marketing feature. Every business owner or marketer should keep this factor in mind while creating its Facebook marketing strategy.

According to SocialInsider, placing a link inside your Facebook post will help to increase your engagement on Facebook. This has a huge impact on your business and enhances overall engagement.

 

Final Thoughts

Social media is an ever-evolving thing and it looks more challenging than ever. No one can predict the future, but we know one thing social media is going to be a powerhouse in the marketing sector. By adopting the following Facebook marketing trends, you can touch the success with ease. Use these major marketing tips and enhance your Facebook marketing strategy in 2022. You can easily achieve both short and long-term business goals with the support of these Facebook marketing trends.

 

Need Help or Advice in Content Management:

Do you want more advice? Do you have good practices to share? Express yourself in the comments.

Moreover, if you want any help to write content to drive more traffic and boost conversions, get in touch through Contact our team.

Do you want any help writing quality content, driving more traffic to your website, and boosting conversions? You can contact me through my Freelancer.com profile also. I always prefer to work through Freelancer.com for smooth functioning. Here you pay safely and securely.

 

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June 18, 2022 0 comment
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Merger and Acquisition
BusinessManagementMarketingScholarlyWriting

Mergers and Acquisitions

by Shamsul April 29, 2022

 

Mergers and Acquisitions

Table of Contents

Introduction. 4

Introduction. 4

The Process of Acquisition. 5

Mergers And Acquisitions – Fact-Based Decision Making. 7

Decision Models For Target Screening Process. 7

Methods Of Target Screening. 8

Strategic Decision Criteria. 8

Organizational Decision Criteria. 10

Financial Decision Criteria. 14

Decision criteria for evaluation of industry and business environment. 15

Candidate Selection. 16

Creation of Acquisition Strategy. 17

Forming List of the Potential Target. 17

Refining Criteria of Your Target. 17

Target Prioritization. 18

Target Evaluation. 18

Strategic Match Analysis is primary for M&A Analysis. 18

Target Screening Process. 19

Step 1: Figure out where to play. 19

Step 2: Pinpoint Companies of Interest. 21

Step 3: Prepare for pursuit. 24

Step 4: Move forward with due diligence. 25

Research Methodology. 25

Research Philosophy. 26

Data Collection. 26

Secondary data. 27

Primary Data. 27

Qualitative Research. 29

In-depth interviews. 29

Interview themes. 33

Value Creation. 33

Target Selection. 33

Due Diligence and Valuation. 33

Analysis And Presentation Of The Empirical Findings. 36

Pre-Acquisition Process. 36

Value Creation. 36

Analysis of Value Creation. 36

Target Selection. 37

Interpretation. 39

Conclusion. 41

References. 42

Introduction

According to many types of research, the base of Merger & Acquisitions is on strategic and financial motives with the goal of creating value that will not emerge or come out if two companies started to act individually (Bower, 2001; McCarthy & Dolfsma, 2013; Schweiger & Very, 2003; Seth, Song, & Pettit, 2000). Hitt, Hokisson, Duane and Harrison stated in (2001) that synergy is the essence of value creation. Hence, it is essential for the acquiring companies to recognize factors for creation of synergy while looking for acquisition objects. Jameson and Haspeslagh (2006a) came to know that synergies basically depend on organizational and strategic fit between acquiring organization and acquiring company. Reasons for the acquisitions are the aim of reaching the new markets, increasing the efficiency of present resources or gaining the new resources (Bower, 2001; Haspeslagh & Jemison, 1991; Hubbard, 2001; Schweiger & Very, 2003).

Bower (2001) made outlines different activities of strategies that he proposed as the basis for the engagement of companies in mergers and acquisitions. The 5 strategies which he identified were:

  1. The geographic roll-up M&A
  2. The overcapacity M&A
  3. The M&A as R&D
  4. The market or product extension M&A
  5. The convergence of industry M&A

The extended explanation of these objectives came in 2001 from Hubbard which related strategic motives to strengthened position of the market and future growth. The objectives of acquisition were sorted further into 6 categories:

  1. Market penetration
  2. Financial synergies
  3. Vertical expansion
  4. Horizontal acquisition / Synergy or asset potential
  5. Market entry
  6. Economies of scale

Very and Schweiger took a similar approach in 2003 to objectives for the undertaking acquisition that, combined with the explanation of Hubbard (2001), gave rise following description in acquisition objectives:

The meaning of market penetration is the acquisition that is made with the intent of gaining market share and market power. Financial synergies do come from acquisitions that are made with the intent of improving earnings through enhanced facility ownership, enhanced terms of finance, and accounting variations. Vertical Integration means acquisitions that are made with the intent to enhance control over the resources, the distribution channels, or technology by the acquiring companies which have similar characteristics. Horizontal acquisitions which are also known as asset potential are made with the intent of optimizing the use of assets of the acquired company. Market entry acquisitions are developed to enter new regions, industries or unrelated or related markets for enhancing market coverage. Economies of scale mean acquisitions with the intent of integrating fragments or entire acquired companies for optimizing the earning abilities (Hubbard, 2001; Schweiger & Very, 2003).

The Process of Acquisition

The acquisition value depends on the ability of management to deal acquisition process regardless of strategic objectives which an organization has (Cartwright & Schoenberg, 2006; Gomes et al., 2013; Haspeslagh & Jemison, 1991 and; Jemison & Sitkin, 2006b). The theory of acquisition process mainly throws light on process of acquisition. It proposes that final acquisition outcome is determined by factors and activities in acquisition process (Jemison & Sitkin, 2006b). Moreover, acquisition process is used for understanding of creating the value in acquisition instead of determining company value (Haspeslagh & Jemison, 1991).

The process of acquisition is seen basically as two underlying major sub processes, that are pre-acquisition and post-acquisition process (Gomes et al., 2013; Lasserre, 2003; Hubbard, 2001; Haspeslagh & Jemison, 1991 and; Jemison & Sitkin 2006b). Pre-acquisition process consists of decision-making issues with regard to acquisition, that includes rationales for justified acquisition like analyzing, screening and strategically evaluating prospects of acquisition (Haspeslagh & Jemison, 1991). Post-acquisition process contains implementation phase of acquired company like products, cultures, values and integrating processes which are the capabilities that play part to value of acquisition (Haspeslagh & Jemison, 1991; Pablo et al., 1996).

Haspeslagh and Jemison (1991) came to know the perspective of acquisition process in 1991 that was being explained by researchers through decades. It is a linear process that starts with pre-acquisition and ends in the post-acquisition process. (See Figure Summarized Acquisition process model adapted from Haspeslagh and Jemison (1991), Lasserre (2003), and Gomes et al., (2013).

The process of pre-acquisition is described by a set of the strategic motives for undertaking acquisition and evaluation of various targets of acquisition to notice which target creates good synergies for the acquirer (Hubbard, 2001; Lasserre, 2003). Mainly, the process is evaluated by a strategic fit which is the identification of the contribution that an acquisition makes and after that it determines if the proposed target of acquisition fulfills strategic contributions. For example, in the terms of products or new customers which contribute to an increase in non-financial or financial goals (Jemison and Sitkin, 2006b).

Organizational fit mainly is being used to a lower extent for the identification of possible problems which can lead to interruption in process of value creation (Bing and Wingrove, 2012). The process of post-acquisition is characterized by an integration of the acquired company and transition to new standards and cultures too as a business operation that is supposed to produce enhanced value is transferred (Lasserre, 2003). This process takes into consideration the organizational fit as organizational differences sometimes cause issues that lessen the probability of succeeding with extracting operational and financial gains (Gomes et al., 2013). The other aspect in which the acquiring organization sometimes faces problems is a willingness to do fast or quick endorsement of the acquisition process. So, the chance of ignoring important organizational fit and strategic issues is more and it can disturb the transition from two individual entities into one acquisition (Gomes et al., 2013; Jemison and Sitkin, 2006a).

Mergers And Acquisitions – Fact-Based Decision Making

Mergers and Acquisitions have become an integral part of the corporate strategy which is a combination of the buying and selling of business corporations or assets with the aim of promoting the growth of the business in its respective sector. The amalgamation of two corporations can result in increased financial power, business activity as well as market share (). In addition to this, this offers opportunities to synergize through efficiencies gained by economies of scale. According to the figures released by Statista (2017) the total value of international M&A deals amounts to approximately 4.74 trillion U.S. dollars however, the rate of merger and acquisition failures is somewhere between 70% to 90% (Statista, 2017).

The primary cause of this rate of failure are varied however, it will not be unfair to say that the entire failure of the deal starts with flawed decision-making criteria. In simple terms, a haphazard process of decision-making tends to generate haphazard results. When a haphazard decision-making process is involved in the target screening and selection process it will definitely result in a failure. Moreover, this result can have a long-lasting and detrimental impact on the acquirer. Having the fact that mergers and acquisitions will increase in the next few years, most businesses are moving toward eradicating haphazard decision-making processes from their M&A approach so as to improve the overall M&A decisions.

Decision Models For Target Screening Process

The task of screening as well as management of target companies is a very classic challenge of portfolio management.it involves considering various factors, the alternatives for evaluation along with the decisions that should be made. Emphasis should be on over-analyzing available data along with engaging all internal stakeholders for leveraging their insights, experiences and decisions.  This situation can be best controlled by developing one or more decision models so as to enable a multi-criterion decision-making process. Decision models comprise of goals, measures, weighted criteria along with an associated rating scales. These models help decision-makers to consistently and comprehensively evaluate and rate the value of the business of the alternatives that effectively contribute toward the decision objective (Sahu et al., 2013).

Decision models offer distinct advantages which include:

  • Assuring a comprehensive analysis of every possible alternative
  • Balancing of multiple qualitative and quantitative factors
  • Improved justification for business decisions
  • Promoting cost vs. benefits assessment
  • Enabling fast reprioritization in response to the ever-changing business conditions.

Methods Of Target Screening

Criteria for evaluating potential and screening acquisition targets present the benchmarks against that for the evaluation of a company (Srivastava and Datta, 2002). In this part overview of the strategic financial, industry, organizational and business environment related decision criteria which is used by the corporates acquirers in process of selection of candidate.

Strategic Decision Criteria

The main aim of strategic screening is to search whether characteristics of target match with objectives of acquisition of acquirer and whether there are strategic risks linked with firm (Becker, 2016, p. 303). In strategic screening, decision makers have a look whether any of potential synergistic gains have chance to be realized (Eschen and Bresser, 2005; Jemison and Sitkin, 1986).

Criteria of strategic decision implemented by decision makers during strategic screening process are usually derived from acquisition strategy (Lucks and Meckl, 2015, p. 123) and capture that which of the “white spots” in firm’s strategic positioning must be closed with acquisition (Becker, 2016, p. 302). These gaps of strategies may link to dimensions like product portfolio, market shares, customer segment, business or technology models and geographical markets (Becker, 2016, p. 302). Therefore, it relates to target characteristics which determine whether “strategic fit” is found between acquirer and the target. Strategic fit can be defined as degree to that target company complements or augments parent’s strategy and by doing so makes known contributions to both financial as well as non-financial goals of the parent company (Bettinazzi and Zollo, 2017;). The main argument of discussion is the loss or gain from acquisition are dependent on strategic fit between acquiring company and target (Lubatkin, 2003). The higher is the probability of a strategic fit of the acquirer and the target, the more gains can be expected from the deal (Calipha et al., 2010). The table given below provides an overview of the literature on criteria of strategic decision.

Organizational Decision Criteria

On one hand, this criterion relates to the concept of the organizational fit while on the other hand it relates to the characteristics describing capabilities of target and resources which can be considered important for the acquirer. Scholars have evaluated organizational fit in the terms of the various dimensions. For example, these include the Top Management Team compatibility in the terms of cultural differences among top management teams (Chatterjee et al., 2007; Datta, 2002), the fit similarity or compatibility of the management style (Larsson and Finkelstein, 2010; Rao et al., 1991), various functional backgrounds (Haspeslagh and Jemison, 1991; Krishnan et al., 2007; Wiersema and Bantel, 2002) control and reward system (Datta, 2002). Moreover, Dollinger and Saxton have operationalized the organizational fit as scale which reflects similarities in information system, human resources, organizational structure, culture among two companies and information and accounting system. A dimension which is discussed very frequently of organizational fit concept in both M&A literature as well as amongst practitioners, is cultural compatibility, cultural fit or degree of relatedness of culture among acquirer and target in the terms of national and organizational cultures (Ahammad and Glaister, 2013; Bauer et al., 2016; Marks and Mirvis, 2001; Stahl and Voigt, 2008; Tarba et al., 2017; Weber, 2018).

Second, the firms engage in the acquisition to reach critical resources of organization which can be valuable and which may be particularly lacking (Granata and Chirico, 2010). These resources can be tangible (e.g., physical and final assets) and intangible (capabilities of TMT, corporate reputation, human capitals and brands). Prior research of M&A suggests that comprehensive screening of target acquisition and the evaluation process should include assessment of target’s both tangible as well as intangible resources and assets (Harvey and Lusch, 1995; Hitt and Pisano, 2003). It is for this purpose that the resource-based view of firm gives suitable perspective for investigating the acquirer’s target screening processes. It is because the profile of target can be regarded as the combination of intangible and tangible resources. Specifically, during organizational screening, the acquirer commonly investigates the firm specific capabilities and knowledge like market, industry, production, technical know-how (Hitt et al., 2000) and R&D, which are important competitive assets that the firm has (Grant, 1996). This type of firm specific knowledge is often found in human capital, in particular firm’s TMT and the senior managers. Henceforth, organizational screening involves the evaluation of target’s capabilities of the top managers and key executives (Hitt et al., 2000; Kiessling and Harvey, 2006; Marks and Mirvis, 2001). Most of the times, the top manager’s implicit knowledge about the industry, the corporate strategy along with the strengths and weaknesses of the organization along with maintaining of interpersonal networks of external and internal relationship which is very crucial for the business activities (Kiessling et al., 2008; Kiessling and Harvey, 2008). Further, information-based assets and resources which are sometimes evaluated in the corporate acquisitions are the intellectual brands, the reputation of target among customers or suppliers and property rights (Capron and Shen, 2007; Hitt et al., 2000; Hitt and Pisano, 2003; Kiessling and Harvey, 2006; Mahajan et al., 2014; Rao et al., 1991; Saxton and Dollinger, 2004).

Financial Decision Criteria

This is the third step in evaluation of “financial fit”. In early pre acquisition screening, financial fit’s assessment does not include the detailed valuation of company and assessment of the thing whether expected price of purchase lies below or above this value (Lucks and Meckl, 2015, p. 128). Financial screening on this stage consists of initial assessment of transaction’s financial feasibility and evaluation of consequences which are possible for annual profit and other main performance indicators like debt ratio or profit per share (Becker, 2016, p. 303; Lucks and Meckl, 2015, p. 128). Decision makers can easily have a rough estimate about deal’s affordability by calculating price range for expected price of acquisition. It is done by usage of valuation multiples like EBIT(DA) of the companies in close group of them (Lucks and Meckl, 2015, p. 128). The acquiring firm can get some useful ideas about the acquisition premium by determining expected price range of acquisition. It tells about how much the acquisition is ready to pay for target firm (Laamanen, 2007; Reuer et al., 2012). It also includes assessment of financial situation by the study of historical statement of income of target. It can also be done by studying the financial forecasts and balance sheet. By using the data available at this point, the decision makers evaluate and calculate the key performance and its range (Henn et al., 2018; Hitt et al., 2000; Hitt and Tyler, 1991; Kim and Finkelstein, 2009; Very and Schweiger, 2001, p. 13). With help of balance sheet products, financial analysis includes consideration of target’s intangible (like brands, patent, reputation, human capital) and tangible assets (like financial and physical) and liabilities (Kiessling and Harvey, 2008). Accounting valuation can differ in different regions because of unsafe conditions (Harvey and Lusch, 1999). Financial assessments can provide the foundation for making of forecasts on cost, future revenues, profit scenarios for target and financing requirements (Harvey and Lusch, 1995; Very and Schweiger, 2001).

Decision criteria for evaluation of industry and business environment

This is the final step in process of target screening. Prior researches have shown that the attractiveness of company is determined usually by industry’s structural effectiveness and competitive strength within its industry (Porter, 2008). Scholars have therefor suggested that screening activity must incorporate assessment in terms of dimensions (Rajagopalan et al., 2013). Resources of firm depends on environment type of industry where resources are usually employed (Heeley et al., 2006). Environmental factors can have an impact on the value and performance of firm. PEST analysis includes thorough and rigorous environmental screening with four dimensions: economic, socio-cultural, political and technological aspects (Gupta, 2013; Sammut-Bonnici and Galea, 2015). PEST analysis can guide environmental assessment and support acquirers. This type of analysis is important for cross-border deals or transactions. When assessing the potential target of acquisition, the acquirers should look at industry context too (Anand, 2005; Anand and Delios, 2002; Bauer and Matzler, 2014). Normally, attractiveness of industry in which target operates actually depends on structure of industry (Porter, 2008), which on other hand, drives the competition among firms (Porter, 2008). Five forces model is important for attractiveness of industry (Porter, 2008). This model involves qualitative and quantitative assessment of other competitors and direct competitors force stemming from suppliers, new industry, substitute products and customers. According to literature, two common quantitative measures are average profitability and growth of industry (Dawson, 2011). It is important to consider the industry’s growth because it can allow the ability of target to increase the revenues in future (Wright et al., 2001).

Candidate Selection

When you come to know that one company is acquiring other, it sounds like the process is done in a blink of eye. You hear about the merging of two companies for example ABC Co. has announced the plan to merge with or acquire XYZ Corp for $20M stock and then occurs the transaction and you think “this is what I heard about and they were doing it”.

But in actual the process of acquisition is longer than the blink of eye. You will notice that whenever there is a news about acquisition, there is always a word used “plan”. It is because a lot of hard work is done in process to bring this so far. The critical steps involved in planning process of the target screening.

Creation of Acquisition Strategy

Acquiring companies which are very successful are pro-active. They are not waiting for some bankers for investment deals, instead, they have acquirers as hunters. Acquiring companies are actually keen hunters, they are passionate about the acquiring targets. In the start, they need to identify the potential targets which make sense overall business goals of company (Canila, 2009).

The companies don’t merge or acquire company because of acquiring purpose. Instead, they look for places where chances of success are high. They go with the theory of economic function of acquisition, reason of business transaction and relationship resulted between merging entities. As a result, acquisition strategy is created where assiduity has identified most promising segment of market for growth and points out financial and commercial hurdles for the potential deals. An acquisition thus can result into new market exposure, growth, enhanced efficiencies by addition of more synergies and growth. To do it all, acquisition team should know about the strategy, profile of acquisition target and their company inside and out (Chen and Liang, 2011).

Forming List of the Potential Target

When the clear and clean acquisition strategy is ready, next important step in process of planning is to form a list of those companies which are potential target. Acquiring company should select industry or company it is targeting and then compile list of those companies which match to their acquisition strategy to some extent (DePamphilis, 2010).

Refining Criteria of Your Target

Development in target list goes on with increased number of information lists of the targets. It can come from working with M&A experts, market, institutional learning and research in market segment where the acquisitions can create value. They will find potential segment and perform complete examination of value chain of industry and ecosystem. By this research, it is easy to identify potential sources of profit with disruptive and emerging technologies, important part of competitive advantage and customer buying pattern. Once, the initial list is developed, then they will refine list by setting criteria for the target companies. By doing so, initial list is developed which is based on descriptive screening criteria (Gaughan, 2010).

Target Prioritization

When the initial list of the potential targets is formed by screening criteria, then acquisition team of company can reduce list to further those potential targets who are at priority. Availability of assets in market, potential for the value creating synergies and parenting strategy are basis for culling of potential targets to categorized list (Gomes et al., 2013).

Target Evaluation

With refined lists of the targets, acquiring company contacts with sellers. Maximum work on this stage is about to gather data about potential target and data should be maximum. If the acquiring company fails to do so, then it will have to make request to target for initial data. This information can help the acquiring company to know that either forward motion in M&A process is good from both points i.e., financial and strategic standpoint. Due diligence on this point in target screening process appears to be quite critical. Formation of the acquisition strategy is critical step for acquisition process. Explaining detailed criteria to the screen- potential target can become point where acquiring company is sure about its choice (Kim et al., 2011).

Strategic Match Analysis is primary for M&A Analysis

M&A are probably driven over considerations of being strategically fit. Both the qualitative and quantitative factors can be closely considered with the screening process based upon the strategic fit aspects. Those targets that pass from the initial as well as subsequent evaluations and filters needs to be compared as well as prioritized based upon a consistent criterion. A good example can be the development of a strategic fit assessment matrix. This matrix can comprise of assessing the competitive position of the target including competitor retaliation, distribution channels and the risk associated with substitutes along with the power relation with the suppliers including supply chain, economies of scale and supply contingencies and proposition to buyers including pricing, quality and portfolio (Holland et al., 2003).

Apart from a strategic fit, companies that were selected in the target screening process should be supported through profiles so as to better evaluate and assess their potential of value integration.

The profiles need to incorporate product lines, and business segment, manufacturing sites, manufacturing sites and recovery, recent company news, selected history of transactions as well a potential risk.

Whilst the fact that investigation of every target firm fits within the acquisition strategy of the company, it still holds key importance in the screening and selection process. Screening targets for assessing strategic fit also involves avoiding any issues or potential pitfalls at an earlier stage, prior to having a huge amount of money and time involved.

When strategically fit companies have been screened down, the list of options that are viable for the deal is further reduced. This is the time when more in-depth value-analysis can be applied: a typical way pf assessing the strategic fit of a target company include:

  • Application of subjective screens inclusive of various challenges like integration challenges, product for, etc.
  • Determining how each target will effectively contribute towards M&A strategy.
  • Identification of unique challenges as well as red flag s for every target and potential acquisition.

Target Screening Process

 

Step 1: Figure out where to play

Many organizations consider M&A as a beneficial opportunity for the business. They do so when there is an attractive target or when they are mentally prepared to increase the cash available to them (Christensen et al., 2011). But value cannot be created by using acquisition opportunistically. Finding the right target for acquisition has no shortcuts. Using a comprehensive method for acquisition tells about where to look for the target in first place. It is called “where to play”. It is not right to see the reviews of good candidates directly. Instead, there is a whole process which starts with exploration of industry ecosystem. It means the environment in that acquirer works and interacts with customers, suppliers and partners. Then, there is analysis of potential-opportunity portion or segment. It means the segment where there are attractive companies to purchase. It ends with long list where there is a long list of potential candidates (Haberberg and Rieple, 2008).

Analyzing Industry Ecosystem

The underlying reason is to challenge the acquirer to create a defensible rationale of acquisition. The business should be able to explain that how this deal will proceed and it will create good value. Whether the purchase will be helpful for the core growth of acquirer or not. Will there be any change in technology, will it prove a game changer and will it be attractive for customers? It should properly tell that how acquisition will help to strengthen position of acquirer and create nice value for all shareholders.

This stage does not only look at the recent factors which will influence industry but it also looks at the future progress of industry in future. For example, in the retail sector, analysis can consider the speed of recent multichannel sales-activities along with determining the new waves of mechanization which will be there in future such as grocery will be delivered by drones (King et al., 2008).

Defining Opportunity Segments

After the identification of the generic industry sectors, the next step is the identification of opportunity segments which are specific. For every search direction, we have summarized the results of analysis in scoring matrix. It looks at 2 dimensions:

  1. The strategic fit should be strong with acquirer (in the terms of attractiveness of business model, technological suitability and customer perspective)
  2. This segment should be attractive (in the terms of margin potential, competitive intensity and growth).

Those segments which have good scores in both dimensions are opportunity segments.

Creating Long List

Within the opportunity segment, the search starts for the discrete targets. Each potential acquirer may start its search by using SIC codes and databases that are obtained from them. But this search does not throw light on all sides of acquisition universe. Some companies have data or tools to do so. It is not simple to identify target universe. It is done by involving functional experts.

Source: BCG, (2011)

 

Step 2: Pinpoint Companies of Interest

The previous step helped in identification of relevant industries and this step helps in focusing the specific industries. Now, it is time to mark those companies which are best for the acquisition candidate. It is important to keep in mind that it will not happen in blink of eye but it will take time. Real discipline is required in this process. There is a process called robust gate stage which helps in identification of right companies. At this point, the financial position of the target matters a lot for the acquirer. But sometimes this type of approach may fall short. Strong performers are not always attractive. For sure, the financial strength can be seen acquisition price. Long term success cannot be promised just by having a look at the past performance of company but it is important to have a look at their ability to create value and realize synergies in future. Might possible that a company which is financially distressed blooms by reconstructing efforts of acquirer and then become a good acquisition target. The acquirer can identify the target it must pursue by having a look at two dimensions: strategic fit among potential candidates & acquirer, and feasibility of deal (Bruner, 2004a).

Assessing the strategic fit

It is not about the attractiveness of company but it is about the fit of company. Its suppliers, geographical footprints, set of the customers and operations should be complementary to those of acquirer. It also matters that how much significant cost particular purchase can generate (Collan and Kinnunen, 2009).

Assessing Feasibility of deal

The thing you should know first about company is that it is available or not. Conventional approaches are sometimes not clear and it causes the wastage of time of the acquirer. For assessment of deal feasibility, there are two levels: market intelligence on chance of sale and ownership structure. Ownership structure is first level and it gives important information. For example, it is noticed from history that companies which have shareholders or which have family relations are least interested in opportunities of M&A, while companies which are owned by the financial investors are more interested in this idea. Second level supports first one. Market intelligence process means that company will be first one to know either the target company is interested in M&A or not (Harding et al., 2004).

Source: BCG, (2001)

Financial Performance

Asset’s financial performance is also under consideration in this process. As already described, financial performance is not the key or main criterion for giving priority to target. Financial performance can dictate premium & have effect on acquisition price to some extent. But it cannot be used as distinction between unattractiveness and attractiveness (Smit et al., 2005).

Defining watch list and action list

When you have the score list of every target on basis of deal feasibility, financial performance and strategic fit, then it is easy to choose a target by summarizing the results. If there are some companies which are not on high priority and they are available, then it is not important to pay attention to them. those companies which have strong strategic fit and are on list are divided into two classes.

  • Action list: It includes companies with good strategic fit & deal feasibility. According to experience, these companies are mostly available for opportunity.
  • Watch list: It includes companies which have high strategic fit with less deal feasibility. An acquisition on proper time seems difficult. So, it is better to keep them on availability changes.

Source: Krishnamurti and Vishwanath, (2008)

But it is not good to rely on watch list or action list. There should be a proper research for this purpose which can tell either the target is good or not.

Step 3: Prepare for pursuit

By doing all above step, the acquirer can short list some very attractive companies. Now, their M&A team should come in action and start working hard.

Action List

For every action list target, teams must start collecting target’s cost upsides and revenue. The experts have enough experience to do work properly so that much of information can be collected. This information can help team to add shareholder value to potential target. The acquirer team should have a solid reason of buying target so that target can agree with acquirer.

Watch List

There is a process for continuous monitoring of targets that are on this list. This process is established by BCG. These processes are used for many companies. Aim is to have mechanism which can alerts acquirer to anything that can lead to change in the availability. Continuous monitoring is required in this process. To work with them, it is possible to do regular monitoring so that you don’t miss any chance or alert.

Source: Krishnamurti and Vishwanath, (2008)

Step 4: Move forward with due diligence

After moving till Step 3, almost everyone is clear about desired target. But the thing is that only acquirer is not the only who will be interested in acquisition, there will be other options too. And here, due diligence can start.

Due diligence has 4 phases: having a close-up picture of each target’s attractiveness, examination of synergies of potential deal, reviewing feasibility of deal and digging in business plan of target. Even after following the four stages, the due-diligence projects never become same. A well-defined methodology of due diligence, documentation and the standardized processes are applied for giving predictable look and feel to results (Walker, 2000). There are some firms which are providing services and are positioned really well in due diligence to create the value. Their network is present all around the globe and that is why they deserve appreciation. The experts are present which have information about strategies, plans and the conditions. They help the acquirer to get proper information about target. They help to prioritize and identify the key issues which are unique to target by identifying relevant markets of target into all dimensions- the growth drivers, its forecast demand and segmentation logic. The clear picture of target’s environment is built up. The success factors & comparative performance is also kept in front so that it is easier to make decision. Potential of target for value creation is studied briefly and sensitivities are also told. Hence, a close analysis is provided which is helpful for acquirer to assess business case completely. Result is realistic and professional which allows a good decision (Walker, 2000).

Research Methodology

The purpose behind this type of study is to know that how strategic fit & organizational fit and acquisition can be dealt for facilitation of successful acquisition. In this section, the report will seek empirical and theoretical findings and how data have been gathered & then interpreted. Different choices are made during study and they are motivated. In it, case company used in study is described and various interviewees that were interviewed also included.

Research Philosophy

Mayer (2009) said that it is useful to classify the research methods if underlying philosophical assumptions are distinguished that guide the research. He stated that all types of researches whether it is qualitative or quantitative relies on some underlying assumptions. Along with which research is valid and what methods being the appropriate (Myers, 2009, p. 35). Hence, it becomes important to know about these assumptions.

Most famous forms of the research philosophies in management & business disciplines are interpretivism and positivism. In positivism, the assumption is that the reality is an objective and it can be described by the quantifiable characteristics, irrespective of the researcher and the research instruments. In positivism, sometimes theory undergoes tests and then a statement is formed which tries to tell about dependent and independent variables according to researched subject & relationship among them (Myers, 2009).

There is an assumption about access to reality by social structures like instruments, consciousness and language in interpretivism. Within this approach, independent and dependent variables are not specified by researches. Instead of it, they go with interpretation which is done by information what people give them by their experiences. It is very important to understand the context. Generalizations from the subjects which are extracted depends on researcher & method used (Myers, 2009).

The interpretive approach is the author’s choice because characteristics of this study matches with purpose of study that is to see how to handle the strategic fit, organizational fit and acquisition process to get a successful acquisition.

Qualitative and Quantitative Considerations

Quantitative and qualitative are the two different forms of research approach.  Qualitative approach is characterized as constructive, inductivistic and inpertivistic whereas, the quantitative approach emphasizes over quantification and is depicted as dedudistic and objectivistic. According to Bryman and Bell (2011) an inductive approach is usually associated with qualitative research whereas, the deductive reasoning can be linked with quantitative research methods. The nature of this study is subjective as a large extent of the research is based upon interviews which associates the research method to be of qualitative nature. However, the method of algorithm-based approach was also constructed which is categorized as the quantitative research method.

Data Collection

According to Carr, Babin, Griffin & Zikmund (2010), there are 2 types of the data collection; primary and secondary data. Secondary data is the data that is assembled & recorded for reasons and prior to than research purpose. Primary data is that that is generated & obtained by researchers for some specific purpose.

Primary Data

The collection of primary data of author consists of the semi structured interviews with the main persons of management at different organizations. The purpose behind this collection was to know how organizational fit, strategic fit and acquisition process can easily be handled for facilitation of successful acquisition.

Qualitative Research

Patton (2002) and Saunders et al., (2009) had an argument that two main methods are present there: qualitative and quantitative. In qualitative method, non-numerical data like interviews or open-ended data is used for creating through by environment studies (Patton, 2002). In quantitative method, statistical or numerical data is used for testing explanations or theories with statistical validation of the hypotheses or questions.

Strategy for case study was presented earlier that how organizational fit, strategic fit and acquisition process can be dealt with facility of successful acquisition. It is aim for qualitative research to collect huge amount of information for research (Patton, 2002; Saunders et al., 2009).

Qualitative method is useful creation of understanding because examination is done with openness, in depth & focus on details (Patton, 2002). Qualitative method is better to use than quantitative method when research is being done with perspective of understanding (Saunders et al., 2009).

In-depth interviews

Method which is used is in-depth interviews. It is for those questions which have open ended character because it provides in depth responses about opinion, knowledge and experiences (Patton, 2002). Yin (2003, p. 89) further said that case study can be done properly when source of information is interview. Exploring questions will be better to ask as they’ll give developed answers (Saunders et al., 2009). Authors do know that it is difficult to analyze the open-ended qualitative questions because there is lack of the standardization (Patton, 2002). Advantage of the understanding phenomenon by respondents POV is argued so that lack of the standardization can overcome and that is why qualitative methods get used (Patton, 2002).

According to Saunders et al., (2009) and Myers (2009), there are 3 kinds of interviews.

  • Structured Interviews: Interviews where strict, pre formulated and regulated questions are used to make sure the consistency among several interviews.
  • Semi-Structured Interviews: interviews where some pre formulated questions are used but it offers room to the improvisation for pursuing new inquiry which emerge during interview.
  • Unstructured Interviews: interviews where no pre formulated questions are used and the interviewee speaks freely by mind.

In this thesis, author selected semi structural interviews according to the Myers (2009) because it is beneficial and it offers room to person for speaking by mind or show some insights.

If you want an honest interview where the purpose can be studied easily then there should be no pressure of time limit (Myers, 2009).

Myers (2009) suggested that the interviews with people who are on different positions should be conducted so that great understanding of phenomenon can be obtained. He also said that open ended questions are preferable because they increase the validity. So, author interviewed 4 people which were on various positions: CEO, the Vice CEO, HR responsible and CFO. But the HR has no influence on process of acquisition and that is why not present in thesis’s findings.

The first participant of the research is working at the position of CEO and started his career in 1997. In 2004 he was Vice President in the company and has been a part of more than 20 acquisitions in executive group.

The second participant is also the CEO and was employed in 2003, he was Vice President in 2008. He has been a part of almost 15 acquisition deals since his career within executive groups.

Another participant is the CFO is controller in an organization since 2003, he joined group of management in 2013. He has been part of more than 20 acquisitions.

Another research participant is an HR management member and is part of management group since 2013. He has not participated in any of acquisition.

During interview, questions were open-ended and semi structured so that the depth of the inquiry can be easy to obtain. There were different devices to record interviews so that there is no technical fault. The interviews are given here:

Interviews with CEO

Location: AB Headquarter, Time: 13.30 – 14.21, January, 2022

Setting: The office of the CEO, together with the HR responsible, quiet surroundings, behind shut doors and no risk for overhearing or interruption.

Immediate impressions of the interview: Openhearted answers to the questions asked, about company culture, structure, acquisition process and the organization’s ways of thinking. A good connection and relationship between the authors and the interviewee were established and a feeling of trust was present, which enabled the authors to gain deeper knowledge.

An additional meeting with the CEO was conducted, since the possibility to get confirmation and additional information arose.

Location: AB Headquarter, Time: 12.50 – 13.07, February – 2022

Setting: Lunchroom with some noise in the surroundings, the two interviewers and the CEO eating lunch together.

Immediate impressions of the interview: Rapid interview, trying to gain as much knowledge as possible over a quick lunch. Since the person has been involved in the acquisitions and knew what we are writing about he could provide us with useful information. Some stress was felt but was understandable; the interview was a reschedule due to unforeseen circum- stances for the CEO.

Interview with CFO

Location: EFG Headquarter, Time: 13.00 – 13.45, February – 2022

Setting: Quiet meeting room with a good setting for a relaxed interview and no risk for overhearing or interruption.

Immediate impressions of the interview: Slow start, required some efforts from the inter- viewers to explain the questions and our intentions. After some minutes of getting into the right context the interview went on in a highly qualitative manner. The interviewee answered the questions with details and good elaborations on the answers. It became evident that he had been a part of many acquisitions as he could develop how they thought and worked in the acquisition processes and how they evaluated the fit.

Interview with Vice CEO

Location: SBS Headquarter, Time: 10.00 – 12.10, March – 2022

Setting: The office of the Vice President, quiet surroundings, behind shut doors and no risk for overhearing or interruption.

Immediate impressions of the interview: This was a very unstructured interview with a lot of explaining through stories and anecdotes. If one question was asked, then the person being interview mentioned a lot and went on with his own thoughts instead of making sure he answered the right questions. A long meeting, which was appreciated by the interviewers, in which detailed information was given due to the fact that the person who was being interviewed had been deeply involved in over 20 acquisitions.

The Vice CEO was Swedish hence the interview was held in Swedish which was translated into English when transcribed. Due to the semi-structured nature of the questions the interviews contained information unrelated to the actual research. As proposed by Saunders et al., (2009) the interviews are not presented to full length but instead the information appropriate for this thesis. This was done to reduce irrelevant data and instead provide the reader relevant information for coming analysis.

The interview material was sorted into a matrix where data from all interview objects were categorized into themes in order to create common frames for the empirical findings. As the interviews were of different characteristics, i.e., in the number of probing questions and the authors need to direct the conversations, the matrix structure enabled the authors to extract similarities in their answers to enhance the empirical uniformity.

Interview themes

Authors have already decided to go with open ended questions which were related to theoretical aspects. Following are questions and themes.

Value Creation

Jemison and Sitkin (2006b), Haspeslagh and Jeminson (1991) and Lasserre (2003) threw light that how much important it is to find the right acquisition target in pre-acquisition part of process. Basis are some specific motives. The questions that were created to theme are given below:

  • What are your motives for acquisition?
  • Why do you want to go with acquisition?

Target Selection

It is essential to find a good acquisition target and then evaluation and analysis of target (Haspeslagh & Jemison, 1991; Jemison & Sitkin, 1986b; Lasserre, 2003). Question related to theme are

  • What is action in pre-acquisition process?
  • How to look for target of acquisition?

Due Diligence and Valuation

Lasserre (2003) suggests about how important it is to have a look at financial performance of target because it tells about what price of acquisition should be settled down. The information that had been gathered is very useful as it helps in decision making and valuation (Hubbard, 2001). Theme is given below with questions

  • How determination of value of target organization is done at the company?

Process of due diligence is important because possible best deal is usually pursued here. The analysis of acquisition & searches for synergies are done here. This step is hard and time consuming while no time is used for aspects of soft organization (Bing & Wingrove, 2012). Question related to theme are:

  • Describe the working of process of due diligence at the organization?

Integration

Integration is part where two companies come in contact with each other. in this step, value creation depends on ability of understanding (Haspeslagh & Jemison, 1991). Question related to theme are:

  • How integration of acquired companies can be done?
  • Organization issues, practices, management and cultural considerations

Datta (1991, p. 281) emphasized on influence which organizational fit can have if 2 organizations are at ease after acquisition. Differences in organizational system and management style are important for post-acquisition integration. Question related to theme are

  • Do you consider process of post-acquisition in pre-acquisition process?

Transition

This phase is linked with emerging problems and uncertainties when acquiring organization is preparing for value creation and capability transfer (Haspeslagh & Jemison, 1991; Lasserre, 2003). Questions related to theme are:

  • How can you approach transition phase?
  • What are the important things you need to focus on during transition?

Harrison, et al., (2000) said that the synergy is essence for value creation. So, it is important to recognize synergy creating factors for acquiring organizations while looking for acquisition objects. The acquisition depends upon the way management deals with process of acquisition (Cartwright & Schoenberg, 2006; Gomes et al., 2013; Haspeslagh & Jemison, 1991; Jemison & Sitkin, 2006b). Theme is:

  • What will be your act in facilitation of synergies which are identified in pre-acquisition process?

Strategic & Organizational Fit

It is important to see the degree to which acquiring organization fits (Haspeslagh & Jemison, 1991; Jemison & Sitkin, 2006b; Lasserre, 2003). Strategic fit means degree to which target firm complements parent’s strategy. It adds value to non financial and financial goals of parent (Jemison & Sitkin, 2006b, p. 146). Jemison and Sitkin (2006b). So, theme is

  • What are roles of fit in pre-acquisition process?
  • How identification of strategic and organizational contribution is done?
  • Tell about objectives you are looking for?

Quantitative Research

Because of the economic significance of the ability to anticipate corporate mergers and acquisitions, this domain ahs managed to attract considerable attention towards research aspects. There have been applied a wide range of methodological approaches so as to uncover the common characteristics towards merger targets along with forecasting targets inclusive of univariate analysis (Rege, 1984), MDA (Barnes, 1998 and; Stevens, 1973), probit / logit analysis (Meador et al., 1996, Castagna and Matolcsy, 1985), and multi-layer perceptrons (MLPs) (Cheh et al., 1999). These classification models have exhibited varying degrees of success that ranges from below 50% to around 70% out of sample.  

Most of the studies that forecast merger or acquisition targets are heavily relied over company accounting data which is supported by market data like share prices as the modelling input data. Using accounting data has a long foresight in the domains of corporate failures (Altman, 1968 and; Altman, 1993).

 Biologically Inspired Algorithms

In the previous decade, the range of computational technologies used by modellers have expanded significantly. With this, there have emerged a series of biologically-inspired methods that have a wide range of classification and prediction problems in business and finance (Brabazon and O’Neill, 2006). This methodology includes genetic algorithms, MLPs (Mitchell, 1996), grammatical evolution (O’Neill and Ryan, 2003) and genetic programming (Koza, 1992).

For this reason, this research applies a self-organizing map (SOM). Up till now, the main applications of SOM have been in the aspect of corporate failure prediction (Serrano-Cina, 1996 and, Kiviluoto and, 1998).  No previous application of SOMs for the reason of categorizing corporations as merger and acquisition targets has been noted by the authors. Hence, the aim of the study is to contribute in two ways. The first is the presentation of the description of SOM so as to disseminate knowledge related to this research method. Secondly, to assess the potential of SOM for anticipating whether the companies will be corporate mergers or acquisition targets.

Experimental Approach

Discussed data concludes the outputs obtained from 200 UD firms and is gathered in the time period of 1 January 2000 to the 31st December 2002. To collect all the needed data, Compustat database was used. Information technology data was taken into account to make sure that all the firms under data collection were free of financial difference (GICS Sector code of 45). Discussed data of 100 US firms (group 1) was gathered successfully (both merging firms and firms which were taken-over) in the above-mentioned time period 2000-2002 while the other 100 US firms data (group 2) was gathered for a separate group and in this group where the included firms were not either taking over their targets or merging in the time period 2000-2002 understudy.

The relation between both groups was made on the basis of merger acquisition year and GICS sector code in such a way that group 1 and group 2 firms were allowed to present in the mentioned time period. Dataset includes test data (50 companies) and randomized data (150 companies) collected over 5 recruits.

  1. Selection of input variables

The review of literature (Belkaoui, 1978, Cheh, 1999, Castagna and Matolcsy, 1985 and; Esphabodi and Esphabodi, 2001) helped in identifying 17 parameters for the initial study process.  All of these 17 parameters were based on below given ratio classifications.

  1. Liquidity
  2. Debt
  3. Profitability
  4. Activity / Efficiency
  5. Size
  6. Valuation
  7. Dividend payout
  8. Firm size

In the initial statistical approaches, it was made sure that any variable which is not showing any significant changes in its mean value for both groups is not further included. After initial review, 7 parameters were eliminated and 10 were left included (see table I). These above-mentioned ratios were also studied for the cross-correlation coefficients which led to the elimination of two more ratios (cash/total assets and the growth ratio) due to their relating market/book value ratios and working capital to total assets due to which these two ratios were not included further.

  • SOM Model Construction

For an SOM classifier development, below given tasks hold prime importance:

  1. Training of the SOM
  2. Determining the clusters on the SOM
  3. Using the SOM to predict out-of-sample

Firstly, normalization was taken into account to deal with possible occurring of different magnitudes in individual data elements.

To obtain SOM, modeler was needed to build many of the map parameters and mapping layer node numbers. Enhanced node quantity results in enhanced details of mapping. In next step, the mapping layer was set at a suitable size of 1000 nodes based on the trial and error process. To obtain the clusters, different clustering algorithms were made use of. In the start, every node was assigned one distinctive cluster. Then in each step, clusters were reduced in number by combining the most relating clusters. The granulity of the modeler and the set parameters play a vital role in deciding how many clusters will be left at the end. Our parameters were designed in a manner to make sure that final clusters will be 7. In next step, these clusters were divided and labelled in merged or non-merged groups by using simple voting mechanism using the state of the training data vectors. To label out of sample data vectors were labelled as clusters while the nearest layer node was kept.

Analysis And Presentation of The Empirical Findings

In this part, empirical findings that are obtained from different interviews are presented & analyzed for sake of easy interpretation. The structure of this chapter is same as that of interview themes and theoretical framework. Acquisition process is not moving from pre-acquisition towards post acquisition.

Qualitative Analysis Results

Pre-Acquisition Process

Value Creation

It is seen from researches that the basis of M&As are strategic and financial motives along with value creation goal. Value creation is not possible if two organizations carry on to work separately (Bower, 2001; McCarthy & Dolfsma, 2013; Schweiger & Very, 2003; Seth et al., 2000). Harrison et al., (2001) said that synergy is essential for creation of value. Lasserre (2003) said that there should be few reasons behind acquisition. There is a need for organizational contributions and analyzing possible strategies which are possible to assess from acquisition (Jemison & Sitkin, 2006b).

During the interview with four people at different positions, it is described that how an organizational strategy can be formed for long term growth by keeping other things in mind too. Vice CEO has said that they want to look for companies which will be of their match (Interviewee 1, 2022-01).

CFO said that there are different motives and they change with strategic conditions. Company has strategy that customer should be close to ITAB and it is essential (Interviewee 3, 2022-03). He also said that there should be a complementary target for acquisition. If a company has nice shop fitting and is competitive but it does not have good lighting, then it is good for value creation to go with a company which has nice lighting business (Interviewee, 7, 2022-03).

Analysis of Value Creation

It is important to see that in what way acquired company can help organization to grow because growth is based on 3 pillars which are geographical spread, concept platform and customer portfolio (Interviewee 2, 2022-04). Lasserre (2003) had also said that value creation is important for acquisition and growth. The analysis of organizational and strategic contribution of businesses relates to what Hubbard (2001) and Sitkin and Jameson (2006b) said. The purpose of acquisition is necessary to understand.

Target Selection

Lasserre (2003) emphasized on finding a target for acquisition that is good for strategy creation and for financial value. Acquiring organization must enlist the benefits & problems or either acquisition is according to justice or not (Lasserre, 2003).

There are some common factors which can help to estimate the organizational and strategic fit (Gomes et al., 2013; Hubbard, 2001; Jemison & Sitkin, 2006b). only two factors which are involved are facilitation of objective of acquisition and creation of understanding (Hubbard, 2001).

The company wants from all acquisitions to cause an increase in growth so that organization can move forward. CEO says that you know really well about us but still we don’t go with acquisition until we are sure that this strategy can cause growth and development (Interviewee 4, 2022-03).

CFO says that we make acquisition with those about whom we are sure that they are right people and they will fit well with us in strategies and mental compatibility. So, it is important to talk to each other to know about each other more by meetings (Interviewee 5, 2022-01).

There are similarities and differences in target organization and acquisition so they should talk about it earlier.

Analysis of Target selection

Lasserre (2003) stated that target should be of good value creation and the organization agrees with it. This is the operational strategy. When it is specified that which company can cause great value creation, then it will look for potential target among all which are available. It prefers to go with those who are clear in their objective and do have nice strategies. Organizational fit is must to examine when potential target organizations come with same strategic fit. In this case, organizational fit can deceive. Flexibility, key personnel and culture also matter. It is exactly what Gomes et al., (2013), Hubbard’s (2001) and Jemison and Sitkin’s (2006b) statement had in common.

The company prefers to know what key personnel in target company works and thinks. It is accomplished through informal and formal meetings, dinners etc.

Valuation and Due Diligence

According to theory of M&A, due diligence has a great role in process of pre acquisition so that best deal can be obtained and possible synergies can be identified by keeping eyes on financial performance (Bing & Wingrove, 2012).

Due diligence of the business is done in process of post-acquisition when acquirer and seller are agreed on deal. Vice CEO says that due diligence is the time taking step and a lot of energy is utilized in this step. So why to complete it in pre-acquisition if both organizations don’t agree later on. Then it is completely time wastage. So, it is good to conduct it in process of post-acquisition when the deal is confirmed and we are able to use our time (Interviewee 3, 2022-02). Jemison and Sitkin (2006b) and Lasserre (2003) threw light on financial valuation’s importance. There should be a set value of price of target.

CEO of AB company says that acquisition is just not opportunity. There are some good things about it and some risks are also there. So, when you are making a deal you should be ready for risks too. if you have thinking that price is bit high but it is acceptable, you are not in position to take all those risks (Interviewee 1, 2022-02).

CFO explains in way that it is essential to understand agenda of company. It is needed to be attentive and it is must to know that sellers want from you and it will help you in negotiation (Interviewee 3, 2022-03).

Analysis of Due diligence and valuation

Lasserre (2003) and Jemison and Sitkin (2006b) stated that the due diligence takes place in pre-acquisition but the CEO thinks on opposite side. The Due diligence is less time taking when it takes place in post-acquisition process. There should be a mutual trust between the acquirer and seller because the information obtained from seller is fundamental. Things will go wrong if the information of seller is wrong or misleading.

Jemison and Sitkin (2006b) and Lasserre (2003) acquisition price comprise of financial values with strategic and organizational fit. It gives business a possibility to see either risk degree and strategic value match with financial valuation. Financial valuation can affect decision that they are in mood of acquisition or not. Acquiring businesses prefers to know the strategies before so that it can become easy to know what they want to do. If the strategic fit is good, then there is less risk and ambiguity. It is important to have understanding with agenda of seller for the organization. Hence, the business can prove to be a right buyer by reaching suitable price and it creates understanding.

Interpretation

The section is dedicated to identify differences between the businesses way of formulating the acquisition procedure with that of the generic theoretical process perspective with the focus over evaluating how the acquisition process is handled for facilitating successful acquisitions.

A study carried out by Gomes et al., (2003) and Lasserre (2003), the acquisition process is the same for from decades. What has been identified by the authors is the potential explanation as to how the acquisition process can be handled in a more efficient manner through three aspects.

Simplification Of the Acquisition Process

The viewpoint of organizational acquisitions can be easily compared with a simple purchase of one item from another. Interviewee 1 states that ‘Sitting down and talking about potential acquisitions, face-to-face discussions with each other, the seller and the buyer and this is how the process should be done’. Businesses prefer not to make the process complicated than this. Previous researchers indicates that the process of acquisition is both time and resource-consuming as per a pre-set pattern. Businesses prefer sticking to a usual approach having same key personnel each time. CEO of businesses mentioned that they have been part of acquisition for more than 10 years which gives additional experience and confidence in acquisition deals.

Conducting of due-diligence in the post-acquisition process

The fact that most companies carry out due diligence in its post-acquisition phase is another aspect which tends to facilitate successful acquisitions (Lasserre, 2003). As per the interview with Vice CEO of AB company, this phase commonly sabotages the acquisition mainly because of the fact that most of the sellers and buyers hesitates in seeking advice from the brokers and auditors when they seek an advantageous deal for the client. Experts involved in the acquisition process considers due-diligence to be a part of post-acquisition process which is the time at which the deal has been agreed upon and contracts have been signed. To get this done, companies, emphasizes over the relationship between the acquirer and the seller and invests in a great deal of effort to determine the motives and agenda of the seller. Through the aim of gaining mutual trust, the dal can be carried on by trusting the information of each other regarding the important aspect of the acquisition process. Many companies also use guarantees in the due-diligence process which makes a deal with the seller without having time consuming and expensive in-depth analysis carried out by different specialists.  

Considering organizational fit throughout the entire process

In the theory of acquisition, organizational fit is used for determining whether the target company is a good fit for the acquiring organization and it is not until the phase of post-acquisition where this transition is emphasized on part of the management (Bower, 2001 and; Gomes et al., 2013). According to the analysis of the interviews, authors have determined that businesses consider organizational fit to be a criterion for acquisition in the target selection phase. Unless, a proper fit for the organization is identified, in terms of cultural and managerial values, it is less likely that the acquisition will be conducted. Moreover, depending upon the degree of organizational fit, the business starts considering probable issues that may incur in the pre-acquisition process and highlights various strategies over aligning the deal. Through the identification of factors that may incur issues, businesses prepare over how to foster mutual understanding in the deal.

Quantitative Analysis Results

Table II shows the results of our experiments and the mean classification value of insample (out-of-sample) accuracy of 94.80% (95.20) % is obtained. Press’s Q statistic (Hair, Anderson, Tatham and Black, 1998) was calculated to obtain insample accuracy along with null hypothesis stating that the out-of-sample classification accuracy does not yield a preferred output than the individual output and faces a 5% rejection level.

To check the sensitivity of gathered data and results, node number were changed (between 500 and 2000 nodes), along with the number of clusters (between five and nine clusters) which helped in map detailing. For in and out-of-sample data results, accuracies were undisturbed by changes in clusters or number of nodes.

SOM created clusters were further evaluated for better understanding and the analysis of “typical” ratio analysis of different map clusters was done (Figure 2 illustrates the final SOM corresponding to the third data recut). In Table III, the average value obtained for all the models relative to the merged firms and clusters is given along with non-merged ones. On 3rd recruit, the SOM gave enhanced in and out of sample accuracy and clusters gave smaller means than the overall data cluster means. The data given in Table I and III, leads to few common conclusions regarding “typical” takeover targets or mergers. It is observed that the target firms have a pattern of less debts, increased liquidity, less profitability and are small as compared to the non-target firms.

Conclusion

There are several researches over mergers and acquisitions as it is very crucial for the success of a business. The research concludes that a successful merger and acquisition deal involves two phases – pre-acquisition and post-acquisition process. However, it has also been identified that the more dynamic a procedure the more is the probability of a successful acquisitions.  The overall view of the entire process of merger and acquisition instead of focusing over step-wise progression facilitating the ability of assessing strategic and organizational fit in every phase for enhanced ability so as to reduce the probability of misunderstandings and problems.

Another good way to deal with the acquisition process is to conduct due-diligence in the post-acquisition process. This can be possible when there is a mutual trust between the two parties as the agreement can be created on the words of the seller and can be supported with clauses and guarantees. Additionally, mutual trust is also crucial for understanding what can be acquired along with understanding how a company can be approached in the process of acquisition. Moreover, keeping the pre-acquisition process as concise and efficient is considered to be beneficial as fewer resources will be involved. This can be made possible when the same set of experts are involved in the process which will also augment expertise as well as experience from previous acquisitions.

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April 29, 2022 7 comments
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Brand Identity Case Study of Dolce and Gabbana

by Shamsul April 16, 2022

Brand Identity Case Study of Dolce and Gabbana

 

Brief Introduction to Brand Image:

The brand, Dolce and Gabbana, was created based on an audacious women’s idea. The brand reflects the self-love and self-worth properties through each article. This well-known brand has been leading the fashion industry with its unique and symbolic articles. Let’s light on how it became what it is today i.e. its brand identity.

Brand Identity:

The message that any brand plans to convey to its buyers through its services or articles. The brand keeps it in mind while shaping any campaign or activity. It can be portrayed in the form of tagline, personality, or just hidden in what they do. Brand image and brand identity have close relations but are distinctive. The former is based on how a buyer observes a brand while the latter is what and how a brand plans its customers to interact with the brand.

Value of Brand Identity:

Brand identity is one of the most valuable assets of any brand whose value and importance cannot be duly stressed upon. Any brand’s identity makes it stand out.

Brand Identity Aids Brand Image:

Your brand’s identity is in your hands to some extent while how a client feels about your product or service i.e. the brand image is not. So, a clear and better image of the brand is dependent on brand identity.

Highlights the Difference:

Brand identity is the chance of any brand to stand out and develop a marketing plan that differs from the competitors. A brand can also use it to attract the desired client base.

Consistency:

Adapting to new market demands is necessary but having a consistent set of core values is a brand’s expression and visual tool. Brand identity keeps a brand consistent.

Brand Identity of Dolce and Gabbana:

The fashion industry knows these two as the most creative minds to come up with unique ideas. Their brand story is incomplete without an understanding of their own story.

Birth:

Domenico Dolce and Stefano Gabbana were born in Sicily in 1958 and 1962.  Dolce had the opportunity to have a firsthand experience of the fashion industry through the small-scale family business while Gabbana went to study graphics. They initially met in a fashion house in the 70s as designers. But their actual connection started when they had to become roommates as Dolce lets fashion house and Gabbana was looking for a place.  This connection of living together grew stronger when they saw their fashion designs and thinking has meshed. The brand, Dolce and Gabbana, initially came into being when they started working on designs together.

At first, this brand wasn’t having enough finance so it was quite simple but in 1985, they got a chance to exhibit their debut collection of real women in Milan Fashion. At that time, they used their friends as models, bedsheets as curtains, and the accessories brought by various friends. These boys, as people called them, weren’t having many funds but their talent brought them to the attention.

The bigger fame actually initiated with they became friends with Madonna, who ordered a jacket and a corset from them. Other than these two articles for the “Truth and Dare” film launch, the 1993 Girlie show collection was also designed by them on the selection done by Madonna. Since then, a Sicilian effect is visible in each article.

Business Growth:

The brand didn’t stop at clothes but also introduced a wide fragrance range. They launched an eyewear line and music CDs.  In 1996, they had their 10th anniversary on which the book “Ten Years of Dolce and Gabbana” was published. 3 years after the 10th anniversary, they launched a kid collection, then debuted a kid clothing slow in Florence, and opened a Dolce’s design-based lamp-making store in Milan.

Sicilian Aura:

This brand conveys the vibe of bold, blessed, fashionable, and courageous women. In the start, the Sicilian style wasn’t of much interest for Dolce although he grew up there but with the help of Gabbana, he not only realized the aura of Sicilian style but also made it a brand expression and impression. Their muses, Madonna, Gina Lollobrigida, Sophia Loren, and others were a personality while the sensual collection was a hit.

 

D&G Brand Identity:

D&G has a black, white, and gold logo which represents the color of secret, purity, and achievement. This brand reflects it all in each design. It has a main focus on women and menswear, both are uniquely lavish, glitzy, and deluxe. The brand has never left its Sicilian touch even though its expression is unconventional and lavish. Their articles are full of passion, innovation, and the roots of their origin. D&G women have a high amount of elegancy and a decent aura while the D&G men are about the care in detail. The whole brand image is of a successful individual and a brand thorough and thorough.

Targeted Customers:

This brand is identified as a luxurious brand having decent and classy customers. Its targeted customers are what it portrays. It attracts fashion addicted trendsetters from the infants to 50 years old range. Its innovative ideas, bright colors, and beautiful designs are attractive to anyone with an appreciating eye. It could be any socialist, actor, model, celebrity, or anyone. Its targeted customers usually fly through private jets, dine in fanciest restaurants and stay in luxurious places while planning to attend an upcoming event. It targets the individuals having a vision toward success and details.

Iconic Designs:

This brand has a separate place for its black lace, pinstripe, Italian staples, and animal prints. This brand has various iconic designs as it decided on its identity very early. Its designs are a trendsetter in Italian fashion and the global clothing industry.

Famous D&G Designs:

Pantsuit:

This brand works on portraying women as strong individuals so they symbolize women by removing the masculine element of traditional suits. Even at the start of the brand’s career, they designed a pantsuit by using pinstripe, sequins, leather etc.

This high-end brand has quite high prices so if a customer can’t afford then they prefer to get second-hand D&G pieces through consignment stores. Its regular customers are ready to pay whatever it takes to look this classy.

 
Read Also: SWOT ANALYSIS OF DOLCE & GABBANA AND ITS UNIQUE SELLING PROPOSITION
 

Marketing Strategy and Marketing Mix of Dolce and Gabbana

In order to investigate the marketing strategy and marketing mix of Dolce and Gabbana, we are going to study four important things that are called as 4Ps. This stands for Product, Price, Place, and Promotion. With these four factors, you can easily understand the business framework of Dolce and Gabbana. It also involves price adjustment, product innovation, advertising strategies, and other business approaches. These things help the company to establish itself as a successful and popular brand in the world. With the help of these factors, the company can position itself in the competitive market and can achieve business objectives. Read the complete marketing strategy and marketing mix of Dolce and Gabbana.

Dolce and Gabbana is a renowned Italian fashion brand in the world with strong brand awareness. In 1985, Domenico Dolce and Stefano Gabbana founded this company. The company is fully operational in more than 40 countries of the world with several outlets.

Product Strategy of Dolce and Gabbana:

No doubt, Dolce and Gabbana brand is one of the leading fashion brands in the world with a strong market share and brand image. It offers a wide variety of products for men, women, and kids. From clothing to footwear, bags, jewelry, and other accessories, the company manufactures a plethora of products. The main attraction of its products is its bold prints, bright colors, unique patterns, and well-crafted features that make the company special from other brands. The main product portfolio of the brand is its luxury and premium products. In short, Dolce and Gabbana is a trendsetter when it comes to the latest fashion items. It also sells plenty of accessories like makeup products, belts, sunglasses, perfumes, and much more. On the other hand, the company has collaborated with several clothing brands to enhance its market share and product portfolio.

Price Strategy of Dolce and Gabbana:

As a luxury brand, nearly all of its products are highly-priced. That’s why its customer base mostly consists of rich and elite people. Its products are considered the status symbol and the company set the price of its product accordingly. When it comes to customers, it has a loyal consumer base that loves its highly attractive and beautiful products. Many famous celebrities endorse the brand which is another major reason for expensive products. From Angelina Jolie to Jennifer Lopez, Madonna, Scarlett Johansson, and much more, there are several famous faces that endorse the brand.

Place and Distribution Strategy of Dolce and Gabbana:

Currently, the company is operating in several countries. They have fabulous stores and outlets in prime locations of the world. So, customers can easily find and purchase its products from anywhere. This kind of availability hits the brand-conscious customers differently. Most of its customers can easily afford its luxury products and these people are the main reason for the revenue generator for the company. Dolce and Gabbana also have a strong online platform and sells its product through many e-commerce channels including the company’s official website. Moreover, the company also offers special discounts and vouchers on different products at special events. Overall, the company’s place and distribution strategy of the Dolce and Gabbana brand is really awesome and they are earning huge profits and market share just because of their smooth strategies.

Promotional Strategy of Dolce and Gabbana:

The company promotes the brand through different channels such as websites, social media, TV ads, and billboards. They also promote their products through magazines. The association of other brands with Dolce and Gabbana is also a big reason of the promotion of the company. It is necessary for the company to avoid negative promotions because they can damage the overall image of the brand. The company connects with its customers through social media. In this way, customers can easily send their queries to Dolce and Gabbana. The company has also launched a mobile application to give a one-on-one experience to its users.

Conclusion:

D&G brand identity was of a bold woman but with the passage of time, changes and evolution are observed. It worked with well-known models, celebrities and created a market influence. It has developed a positive emotional connection with its buyers that compels them to buy from the brand. The brand is highly inspired by Sicilian women. It attracts and targets high-end women and men from all across the globe. The story of Dolce and Gabbana itself has a great influence on the image and identity of the brand.

 
 

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Project Management Method
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Successful Project Management Method (Proven)

by Shamsul April 12, 2022

Successful Project Management Method (Proven)

 

The Project Management Method is really important for success. From curve diagrams to complex lean management concepts, a wide-ranging network plan, the creation of plans and diagrams is a kind of methodical method. The project management method plays a huge role in the success of any plan. Because they aid to make sure that a project or plan is carried out to a suitable conclusion within a given period of time and with the resources in hand. Whatever the business, job, or project you are in, time and financial resources are rare.

With the project management method, you can increase the chance of completing a project on time and easily. Project management helps you even in difficult situations. On the other hand, project management needs planning, monitoring, evaluating, and controlling. Well, it is the responsibility of the project manager to manage all these factors. They must keep eye on all these important factors and assign tasks to their employees. For project implementation, there are so many methodical approaches.

 

The Benefits of a Methodical Approach:

The main benefit of the project management method is that it structures a project. It breaks down the complete project into small manageable works. As a result, each smaller part is highly easier to process. So, you don’t need to put extra effort into completing the project.

Most project management methods depend on work packages. They need to refer to as self-contained tasks that have to be finished to process a specific service within a plan or project. A group of people and a single person both can work on a work package. The aim is to obtain desired results in a given time period. Moreover, work packages can also be used to convert long-term tasks into smaller work parts. These tasks are usually categorized hierarchically in order to set priorities. It is necessary to see the relation or connection between each task.

After that, each task is to be delegated to a most-trusted employee who has to put all his efforts to achieve results within a given deadline and a planned budget.

For Example:

For example, an advertising agency is initiating a strong and lasting campaign for a public transport company. The main aim is to increase the popularity of the company and to attract people to use public transport. They start by creating social media pages, websites, and posters for the company. After this, they can use the project management method to divide the whole task into smaller work areas. Factors like managing time, budget, and deadlines are also important for the success of the campaign. It is crucial to process smaller tasks with excellent management.

These methodologies also help to keep your eyes on the goals and give a complete overview of the project. That’s why you must select a suitable project management method so that you can assign tasks to the right employees. It also makes sure that you must utilize the budget in the right areas to achieve the planned results.

If your project is large and complex, then it is vital to select a suitable project management method. It is particularly important when plenty of different people are with a project. A large-scale project is often carried out by different people, departments, and so on. It also involves various people and things such as the service providers, customers, stakeholders, financiers, and management. These factors help to make a plan or project easier.

 

How to Select the Right Project Management Method:

You have to consider numerous factors when selecting a specific project management method. Here are some factors that will help you choose the relevant method,

  • Project Type:

When choosing the relevant project management method, you need to find out the type of your project. Is it an international development project, an organizational project, a marketing project, or an IT project? Based on the project, involves other shareholders who are chasing different targets. For example, a marketing agency determines its customers in order to capture them with their advertising. When it comes to organizational projects, it includes managing directors’ and employees’ wishes. You have to give priority to the risk management team if your project is related to construction.

  • Project Size:

After finding the type of your project, it is vital to find out the size of your project. The duration and the number of people involved decide the complexity level of the project. If your project is long-term then it requires small-scale planning. Some Project Management Method is only suitable for a certain size of projects. Implementing less than 5 employees to each small-scale task is ideal.

  • Project Phase:

Sometimes, it is safe to use different project management methods for each project area. If you are a software developer and working on new software, then creativity methods are most suitable for the starting period. But, the test phase, marketing phase, and delivery phase require different project management methods.

ALSO

  • Industry:

Software developers often needed computer-aided solutions to execute a project plan. They also require technical infrastructure which helps in the development of software. Just like software developers, other fields and organizations also require technical infrastructure and necessary aid. The project management method allows evaluations can be ideal for such projects.

  • Business Trend:

The business culture or trend depends on various factors such as its philosophy, trend, age, and size. Small businesses or organizations usually prefer agile project management methods. But, traditional companies prefer traditional methods and traditional project management. These agile methods promote flexibility, responsibility, and accountability. Companies that rely on detailed documentation, comprehensive planning, and inflexible structures are usually prefer traditional methods.

 

Project Management Method: An Overview of the Most Important Methodologies

A wide range of different methodologies is available for project management. Below, we are going to discuss some proven methodologies,

Kanban Method | Project Management Method

Originating from the Japanese automotive industry, Kanban aims for continuous process improvement. Companies are now massively using this agile method and its table visualization model for their project management.


Kanban is a working method inspired by the Lean approach centered on the continuous improvement of production processes. It was conceptualized in 1950 by Japanese industrial engineer Taiichi Ōno on behalf of Toyota with the aim of optimizing the car manufacturer’s manufacturing. It is based on a “pull flow” system, taking into account consumer demands, and not a push flow system.

The objective of Kanban is thus to constantly adapt to the customer’s needs. The objective is to limit the risk of overproduction and waste, but also to reduce lead times and costs. Qualified as an agile method in the same way as Scrum. Kanban advocates the visualization of workflows through a board (known as a Kanban board), making it possible to prioritize and monitor the progress of the tasks to be accomplished.

Read More Details about Kanban Method

 

Lean Project Management | Project Management Method

Lean Project Management

How does it work?

This methodology is based on the idea of lean management. It is result-oriented management that provides high-quality results within the time. The aim of this method is to obtain results with minimum effort. This process also helps to keep the costs low. So that you can spend the remaining budget on the important tasks. In short, lean project management reduces the bureaucratic struggle.

Despite efficiency and cost reduction, this process also plays a huge role in customer orientation. It takes customers’ wishes into account and helps to reduce the costs of the project at the same time. However, lean project management requires some help from specialists.

The task areas in lean project management are assigned or abandoned on the basis of customer needs. For example, if the client or customer wants to shorten the test period of a product then managers must cancel the remaining test periods of the product. So, it is clear that this method is based on direct approvals of the client or customer. It is also based on interdisciplinary teams. In the development of software, designers, IT experts, marketing managers, and software developers work together.

Other Vital Characteristics:

Another vital characteristic of this method is that it keeps the duration of a project very short. That’s why each progress or activity can be observed very clearly. It also shows the relevance of the project to the customer.

Utilizing this method needs little flexibility. Tasks can be adapted or re-negotiated on the basis of current needs. So, it is very easy to assign a task to an individual. It is crucial to assign tasks to less bust employees in order to avoid delays.

Just like the Kanban method, The Lean project management method is also agile and promotes transparency and personal responsibility. Managers delegate tasks and are responsible for quality control and efficiency. But, it involves each employee in the decision-making process. This process follows the bottom-up principle which is really helpful in finding suitable solutions.

 

Advantages and Disadvantages of Lean Project Management:

As we mentioned above Lean Project Management Method is an agile method that focuses on customers and results, so it is great for several types of service providers. Projects that need detailed planning and documentation are not suitable for Lean Project Management. This process requires a high amount of expertise in order to get high efficiency and suitable results. Below, we have curated some benefits that Lean Project Management offers,

  • Efficiency:

It helps to save resources and costs.

  • Shortened Process:

This provides timely feedback and quick results. It is because this process constantly monitors the efficiency, so, its quality automatically improves.

  • Bottom-up Principle:

The solution is argued with all managers and employees. This results in the enhancement of employees’ motivation and they will perform better.

  • High-quality Standards with Efficiency:

This process takes customers’ needs into account so the quality of the product can’t be overlooked. It boosts the satisfaction of customers as well as employees.

 

Lean Project Management Disadvantages:

On the other hand, Lean Project Management has some disadvantages too that we have mentioned below,

  • The pressure of time and cost creates a pressure bubble on employees and their efficiency drop. It also decreases creativity and motivation levels. It also causes delays and wastes resources.
  • Streamlining and organizing plans and processes require the supervision of highly competent project managers. The role of a project manager is very crucial in the whole process. The entire process may suffer just because of any wrong decision from the project manager.
 

Project Structure Planning | Project Management Method

Hierarchical Structuring of Tasks:

A project breakdown framework offers the complete synopsis of all tasks. They are essential to complete a big project. You can divide a large project into smaller parts and smaller units in a hierarchical order. You can see a project in both inductive and deductive ways through this method. The deductive method provides a more detailed view while the induction method gives a whole concise view. The last procedure is highly suitable for unique projects where you cannot rely on previous experience. The first batch of the project can be dedicated to a huge area of responsibility. The given paragraph explains which departments or which people are accountable for this area.

The tasks on the top are very difficult that’s why they are a priority. The sub-tasks are smaller task areas. Work packages are even smaller and more detailed task areas that include even the smallest of the details.

Here is the hierarchical structure that follows different principles,

  • Phase-oriented Structuring:

In this structure, tasks are arranged and divided on the basis of chronological sequence.

  • Function-oriented Structuring:

In this structure, tasks are delegated to particular organizational units on the basis of their function. For example, a software project has divisions into PR, graphic design, and development units.

  • Object-oriented Structuring:

This structure is ideal for projects where work is carried out. For example, you can divide a construction project into the basement, first floor, and basement.

This kind of methodology goes well with a graphical tree structure. The individual units are interlinked with the higher unit through a line.

 

For which project is a structured plan useful?

It is really suitable for difficult or complex projects because it provides a clear overview of the project. Moreover, it subdivides all the tasks into smaller steps which helps to remember each and every part of the project. You can also give colored markings to each step or task to make them visible to every employee. On the other hand, the project management method creates an easy and clear visual representation of a project which is easy to understand and process. So, it is really easy to track progress and everyone can see it visibly.

 

Advantages and Disadvantages of Project Structure Planning:

Advantages:

  • Provides clear representation of all tasks and helps to visualize work steps in a clear and easy way.
  • Offers good structuring through hierarchical planning and helps to create a sequence. It equally describes detailed planning as well as rough planning.
  • It helps to prioritize tasks and also makes it prior in the eyes of managers or employees.

Disadvantages:

  • For complex projects, it does not provide clarity. So, it is not suitable for lengthy and complex projects. Many small steps can lead to big diagrams that are difficult to manage sometimes.
  • It doesn’t provide flexibility.

 

Milestone Trend Analysis | Project Management Method

Is it possible to follow a schedule? If you always feel difficulty in following the schedule then milestone trend analysis can help you. This process helps to control time processes. It is also in use to answer questions to make things clearer. It is a rule that every project has a schedule with a particular end date. Moreover, it has a timeline and budget. It is crucial so that client can see the results. This process helps to divide larger projects into different phases which helps to see which task is behind the schedule.

For this purpose, milestones must be defined. For each milestone, a target is delegated with a deadline. There are several factors involved in the delay of a task or project. The main reason for the delay is that there are several aspects that build on each other, which leads to particular delays.

Milestone trend analysis helps to control these delays by controlling time processes. While planning schedules or tasks, you must add smaller buffers for regular disruptive factors. Moreover, this analysis allows you to recognize bottlenecks in good time. So, you can start appropriate measures to control them. If it is not possible, then this process still helps you to find out the roots that are causing delays. It also helps in the overall evaluation at the end of the project. This is really good for reducing risks for future projects.

 

How does it work?

It usually utilizes process diagrams that help to visualize the project’s progress. It sets a deadline for each milestone which is necessary to complete the project on time. Moreover, you need to set various report dates. you can do it in monthly, weekly, fortnightly, or even shorter phases.

For displaying the process of the project, a line diagram is suitable. On the X-axis, there are reporting periods and on the Y-axis there are milestone dates. The following factors show the progress,

  • Horizontal Progress:

It shows that the project is finished on time.

  • Falling Line:

It shows that project stages are obtained earlier.

  • Rising Line:

This line indicates delays.

 

Advantages and Disadvantages of Milestone Trend Analysis:

For monitoring the deadline of a single project, Milestone trend analysis is very helpful. This analysis can reveal the real cause of delay in a project. However, it is equally good for large as well as small projects.

Advantages:

  • The main advantage of this Project Management Method is that it is really simple and easy to implement. Plus, it is extremely useful.
  • It gives a clear representation of a project in the form of line diagrams.
  • It monitors the current status of the project and offers valuable outcomes about the workflow.

Disadvantages:

  • It is only limited to a target or actual comparison.
  • Sometimes, this method fails to identify problems earlier.

 

Critical Path Analysis | Project Management Method

It displays task relationships and time structure in a network. Critical path analysis is mostly in utilization for scheduling deadlines. It has the ability to map difficult time structures and provides a highly dynamic approach.

Dependency Relationships:

This method visualizes a logical process and reveals which chores build on each other. It also shows subsequent tasks and preceding tasks.

Time Buffer:

Time buffer helps to indicate how much buffer remains to obtain the earliest start. Each buffer offers exact times, for example, “4 days”.

Critical Path:

There are some phrases in a project that you must complete earlier. If the total buffer is 0 days then they show some risk. It is crucial to monitor these projects with care otherwise they can put the completion date into jeopardy.

 

Advantages and Disadvantages of Critical Path Analysis | Project Management Method

Advantages:

  • You can calculate the total time realistically.
  • It divides a project into maps correlations.
  • Buffer representation enables better capacity scheduling.
  • Saves time.
  • Employees can identify risks.
  • It has a dynamic structure and processes that make the model better.

Disadvantages:

  1. In Critical Path Analysis scheduling of personnel is not possible.
  2. It has difficulty estimating the activity completion time.
  3. For larger projects, Critical Path Analysis networks are complicated too.
  4. The critical path is not always clear in CPM.
  5. No possibility for the scheduling of resource allocation.
  6. The critical path needs calculation precisely.
 
 

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The Sandwich Method of Criticism | A Simple Method to Make any Criticism that goes Smoothly

by Shamsul April 10, 2022

The Sandwich Method of Criticism

 

The sandwich method is a very effective management tool to make your negative feedback more easily accepted. It is one of the so-called “emotional intelligence” techniques. Emotional intelligence is an area to be developed to improve well-being at work. If you are interested, I advise you to order Daniel Goleman’s book, emotional intelligence, so you will have all the bases to understand what this intelligence is and how it can help you in your daily life.

How to Pass a Criticism Gently?


Have you ever listened to a friend sing but not been totally captivated by his performance? Your colleague has just given you a presentation but do you think that many elements are missing?

It is not always easy to give negative feedback to a person without upsetting them, especially if they are sensitive.

For this, a wonderful method exists. The sandwich technique will save you a lot of tension.

There are only a few people that enjoy receiving criticism. On the other hand, employees or workers frequently feel de-motivated after hearing criticism. So, managers must avoid doing this because it drops the productivity and efficiency levels of employees. On the contrary, they could use the “sandwich method” because it is based on a fixed sequence of criticism. The structure of this criticism is just like a sandwich, the criticism is lined between two comments of admiration. The filler of the sandwich is referred to as criticism. This kind of criticism is digestible for employees and they can receive negative feedback with an open heart. Plus, this criticism or conversation between managers and employees is really constructive. But, if managers cannot communicate it clearly, then it has some negative outcomes.

 

What is the Sandwich method? How is it used?

Basically, it is a kind of feedback that wraps criticism in praise. It starts with praises and then is followed by negative feedback, before using praising words again. You can consider ham and cheese as criticism which is packed between appreciative comments that you can call as the bread slices. The main purpose of this method is to create a constructive environment for employees in which they can receive negative feedback without getting it to severe. It depends on the person who is criticizing the employees that how he manages to give this conversation a good vibe.

 

When it is used?

It is often used in professional life, particularly in the valuation of employees, appraisal interviews, and performance of employees. For spontaneous feedback, the sandwich method is really useful because it offsets negative feedback with positive comments. The following quote will help you understand the sandwich method more efficiently,

“Your topic was very good and well-structured from the beginning. But, there were some areas that need detailed information and material. You must cover these missing areas in your topic that we had discussed before. Still, your report was very insightful and you must work on the missing topic.”

As you can see, the above quote doesn’t look like negative feedback but it was actually very constructive for both sides. The application of the sandwich method is really broad in everyday life. You can talk with your friends or family on those topics that they do not want to listen to. It is also useful in sales and retailing as salespeople can exploit it to sell their products to targeted customers. In this scenario, they must fill investment and price into a sandwich. The slices of bread represent the possible uses and advantages of the product.

 

Criticism Regarding the Sandwich Method:

It could take away the real value of being admired. It is one of the biggest disadvantages or dangers of the sandwich method. The employees can easily recognize this tactic which is really unconstructive, especially if it is exploited repeatedly. They can’t consider your positive feedback as honest praise. Moreover, the sandwich method often overlooks the real points of criticism just because of positive evaluations. In this scenario, managers feel very confused and the actual purpose of criticism is lost. According to some people who do not in favor of the sandwich method, they believe that criticism should be expressed unambiguously and clearly so that employees can improve their performance and play their role to increase the company’s profit.

 

Conclusion:

You better understand whether this style of criticism will work for you or not. If you think employees would respond positively to it then you can use it, otherwise, it could be fatal for the performance and growth of the company. Some employees just need a simple push but some need a heavy push. You must learn how to treat your employees in order to get the most out of their performance. On the contrary, the sandwich method has its own benefits and disadvantages. It is better to change your communication style and learn how and when to use the sandwich method.

 
 

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The Six Sigma Method – Quality Management Process for Business

by Shamsul April 10, 2022

The Six Sigma Method

 

What it does and how does it work?

This method is utilized for process optimization and quality management. The Six Sigma Method was introduced by an American engineer “Bill Smith” while working at Motorola in 1986. It is a very useful method than others due to its mathematical approach which helps to measure the important factors of a process to analyze its progress. It reduces error rates and helps to identify rough relations for improving the whole process. Below, you will study the Six Sigma method. How does it work? What it does do? These are some vital aspects we will cover in this article.

What is the Six Sigma Method?

The explanation of Six Sigma lies in its name. In math, sigma denotes the “standard deviation of a Gaussian distribution”, and six is the number. It is a common practice in business that you can’t achieve all your desired results. There is always some variation. The number of errors in a project can be reckoned as a sigma level. If the variance level is small, the performance will be better in the process. As a result, the sigma level will be increased.

Definition of Six Sigma Method:

This method is used for quality management and process approach which blends several processes to aid organizations enhances their items and reducing error rates. In this way, they can lower their manufacturing costs and produce more profits.

 

Benefits of the Six Sigma Method:

The main purpose of using Six Sigma is to reduce the error rate. Companies that use this principle get the ultimate benefit. Here are five major advantages of using the Six Sigma method,

1- Sustainability:

This method enables companies to achieve long-term success. It is because it gives a clear picture of a process and reduces errors. In short, it gives the perfect foundation for improvement and aids to change the environment according to the changing market conditions.

2- Customer Satisfaction:

The Six Sigma method gives a higher preference to customers. After all, companies want to fulfill the customer’s requirements. This process helps companies to obtain beneficial results without disturbing manufacturing costs.

3- Enhanced Value:

Companies can enhance their value to consumers by using this method. This method provides a clear idea of customers’ needs to a company and they can target customers accordingly.

4- Corporate Culture:

It helps to establish an excellent connection between managers and employees. They can clearly understand each other and communicate effectively. So, this is one of the biggest advantages of implementing this method into your company.

5- A Learning Organization:

This method enables managers and employees to share their thoughts and suggestions. In this way, a company can position itself in the competitive market easily.

 

How is the Six Sigma Method Applied in Business Practice?

This method contains a range of various management techniques for process optimization and quality control. It is denoted as the Six Sigma Toolkit. In this regard, the five-phase model is very crucial and famous and is generally referred to as the DMAIC cycle,

  • Define:

In the initial stage, you recognize the process that needs to be improved. After this, you identify the problem and the process. Then you find out the scope of the project and the target values.

  • Measure:

In this phase, you study quality-related factors relating to the outcomes of the process. It uses different methods to analyze the current status.

  • Analyze:

In this phase, you find out the rough chain of the issues and the causes.

  • Improve:

You improve the whole process using different techniques.

  • Control:

In the last phase, you control the adapted process using different methods to ensure the improvement is long-term.

You can also modify this five-phase DMAIC cycle by replacing the “improve” phase with an “engineer” phase.

 

Employees have different roles in the Six Sigma Method improvement project. It is crucial for employees to determine the actual task and arrange it in hierarchical order to understand their responsibilities and roles. It is based on the belts such as Yellow, Green, Black, Master belts, and Champion. Employees and managers can achieve certification for each belt.

  • Yellow Belt:

It is an entry-level belt that offers a complete overview of Six Sigma’s basics. Employees that have yellow belts can help with projects. It is necessary for achieving additional certifications.

  • Green Belt:

Those who have green belts, they have advanced methodological knowledge. They can easily manage their roles in a project.

  • Black Belt:

Employees or managers with a black belt can lead difficult Six Sigma projects. They have advanced technical knowledge and skills. They play a huge role in the process of a project.

  • Master Black Belt:

People with a master’s black belt are completely accountable for the process. They handle strategic decisions and are in charge of employees. They also define the standards for the organization.

  • Champion:

They come from upper or middle management. They are not responsible for day-to-day business activities. Champions just choose, start, control, and support different aspects of a project.

 

Success Factors When Implementing Six Sigma Method:

The implementation success of Six Sigma depends on several factors. Banuelas and Antony have explored the most crucial factors for a successful implementation. Here are some factors,

  • Involvement of management
  • Clearly understanding the methodology
  • Linking to the business strategy
  • Linking to customers
  • Selection of project
  • Organizational infrastructure
  • Corporate cultural change
  • Project management expertise
  • Linking to suppliers
  • Training project members
  • Linking to planning
 

Six Sigma vs. Lean Management:

Generally speaking, the real forms of these two methods are really different. But, both are used for process optimization. On the other hand, you can combine both methods according to the needs of your project because they do not overlap with one another.

Six Sigma focuses on reducing errors and boosting effectiveness while lean management helps to increase efficiency and avoids waste. Lean management provides fast solutions while Six Sigma provides the best solutions. Six Sigma uses project-driven implementation while lean management uses an event-driven implementation process. Lean management saves time while Six Sigma saves money. Six Sigma uses both complex and simple tools but lean management uses only a few tools.

 

The Spread and History of the Six Sigma Method:

The main aim was to reduce the error rate in the process. Companies like IBM, Kodak, and ABB have adopted this method. This method got popular in the 1990s. It was used only in the production industries at the start but now you can implement the Six Sigma method in different areas and service industries. In 2000, companies started combining lean management with Six Sigma. That’s why it is referred to as “Lean Sigma” or “Lean Six Sigma”. Indeed, it is one of the best methods for reducing error rates and process optimization.

 
 

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The 80-20 Rule – The Pareto Principle for More Profits

by Shamsul April 9, 2022

The 80-20 Rule: The Pareto Principle

 

The Pareto Principle is also called the Pareto Effect or 80-20 rule. The founder of this rule was Vilfredo Pareto, an Italian inventor. He was an engineer, sociologist, and economist so he proposed the Pareto Principle. His study dealt with the distribution of Italy’s national wealth. According to his research, 20 % or one-fifth of Italian citizens had approximately 80 % of the assets of the state. He proposed that banks should pay attention to this 20% of people to make more profit. On the other hand, the banks would at that juncture offer 80 % of the populace with merely a fifth of their time used up.

 

What is the 80-20 rule?

This rule indicates the uneven distribution and shortage of balance between return and resource input. We have summed up the rule as follows,

  • Sales:

Only 20 % of consumers or goods generate 80 % of sales.

  • Storage:

20 % of the goods occupy 80 % of the space.

  • Internet:

80 % of online traffic data is consumed on 20 % of websites.

  • Road traffic:

Only 20 % of the roads are utilized for 80 % of the traffic.

  • Phone calls:

80 % of phone calls are made with 20 % of the existing contacts.

Moreover, the 80-20 rule is basically famous for its use in the time management process. It is a method of completing 80 % of the work in just 20 % of the time. In short, it helps to perform a long task in a minimum period of time.

 

Definition of the Pareto Principle:

The simple definition of the Pareto principle is to gain 80 % of the result just by investing 20 % of time or effort. For achieving the remaining 20 % result, 80 % effort or time is required. Due to this reason, it is also known as the 80-20 rule.

 

Advantages and Purpose of the Pareto Principle:

The purpose of the Pareto method is very clear from the above definition. It is a method of achieving something bigger by investing minimum effort or time. Sometimes, we invested so much time in a low-priority task. You can achieve something bigger with proper time management and identifying the right chances. In short, the Pareto method helps you work more purposefully and efficiently. This is an effective method to achieve something within a given deadline. This method helps to keep your focus on the right track and boosts your mind to achieve a task in the given time. The Pareto principle or the 80-20 rule is mostly used with other time management frameworks or tools like the Eisenhower principle.

 

Disadvantages and Dangers of the Pareto Principle:

There are various mistakes that often happened in association with the Pareto principle. It is a common misconception that you can achieve 80 % of the result with the usual time and effort. There is no need to fix 20 % time or effort. Honestly speaking, it makes no sense. On the other hand, 100 % result would be obtained with 20 % effort. There is a huge difference between income and expense. You can’t add them together. You need to do 100 % expenditure in order to achieve 100 % return. So, this thing often leads to over-optimistic assumptions.

However, if you completely understand this method then you will find out that 80 % of the result is just achieved by 20 % of the effort. Nevertheless, there are plenty of tasks that don’t add openly to the actual goal. It is a disadvantage of the Pareto method that it brings negligence. If a task is structured, designed, and concentrated in the right way then you can obtain 80 % of the result with 20 % of the effort, otherwise it can lead to negligence.

 

Importance and Use of the 80-20 Rule:

You can apply the 80-20 rule in different ways. You can use it as time management for your private life, work, or studies. It helps to identify which task can produce better results so you can easily prioritize your tasks. It also helps to identify which task or work should be completed first.

 

When can the Pareto principle be applied?

It can be applied to vast areas or fields of life such as in school, education, work, or everyday life. However, the 80-20 rule can be applied to practical life such as work where you have to meet deadlines. On the other, you can implement this rule in your private life to complete everyday tasks more efficiently and easily.

 

Examples of the Pareto Principle from Everyday Use:

If you are expecting unexpected guests at your home then you need some time to make it tidy. If it usually takes 2 to 3 hours then you can apply the Pareto principle to get quick results. With this rule, you can complete household tasks within an hour or a half. It helps to prioritize your tasks and tells which task should be completed first. For example, if your house is messy with clothes then you must tackle them. Put the dirty dishes in the dishwasher and clean the tables. Moreover, you must concentrate on the bathrooms because it is mostly visited by guests.

 

The 80-20 Rule and the Yerkes – Dodson Curve:

Dodson curve deals with the connection between productivity and input. It is named after John Dodson and Robert Yerkes. Their study has shown that commitment can increase productivity. But, this thing is only true in some particular aspects otherwise the productivity level will go down. It is also referred to as the Yerkes-Dodson apex.

It is a U-shaped curve that shows if you invest effort and time constantly then your productivity level increased. After reaching at a specific point, productivity decreases. Stress and performance drop are the real cause of this drop. It leads to some terrible results. Just like the 80-20 rule, the Yerkes-Dodson explains that only a particular amount of effort causes the highest productivity. Higher percentages of time or effort, conversely, do not result from much in relation to production.

 
 

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5S Methodology – Essentials to Improve Environment for Productivity

by Shamsul April 6, 2022

5S Methodology – Increasing Workplace Productivity

 

The 5S methodology comes from 5 Japanese action verbs summarizing the essential tasks to be carried out to improve one’s environment.

The 5S method is a management technique that is part of the quality approach. You can sort, discard, recycle, archive, and place work tools according to their frequency of use. Store, classify in such a way as to limit physical movement or the carrying of heavy objects and optimize the use of space.

It is a fact that a bad workplace environment decreases the productivity level of the firm as well as employees. Thus, it stops us from achieving the desired or planned results. It destroys resources and brings negative effects on the whole. Many organizations, businesses, and companies regard isolated clean-ups in order to increase productivity. But, it is really helpful in short-term projects or tasks. The old routine will again back in and slowly disrupt the workplace conditions.

An excellent method is needed for the long term which comes from the management as well as employees. For this purpose, the Japanese 5S methodology is really useful and is increasingly gaining attention in the western world. This methodology is also referred to as the 5S methodology. The 5 represents five single steps. A workplace environment can be improved by using this methodology. The best thing about this methodology is that once the result has been obtained, it is continuously improved and examined. Below, you will find more about the 5S methodology.

 

5S Kaizen and Continuous Improvement:

Kaizen is a Japanese philosophy of working and living. The 5S methodology is based on this philosophy. The word is a combination of two words such as “Kai” (meaning “change”) and “Zen” (meaning “for the better”). Here we also talk about CIP (continuous improvement process). It is a process of focusing on guidelines and methods, but it is a unique way of focusing on living conditions, the work processes, and the workplace. This method helps to improve the workplace environment by developing desired conditions.

Kaizen brings improvement with small steps. For example, it helps to organize your desk and gives you peace of mind. Generally speaking, it is about searching for improvements on a daily basis and being excited to improve standards constantly. In this way, you can save your resources for the right projects and make work processes more efficient. Moreover, it allows using resources in a more sustainable approach. This type of methodology only works if management takes suggestions from employees and supervisors.

Important Note:

Lean management is also used for the optimization of work processes in western countries. The purpose of Lean management is similar to Kaizen, to make an efficient work environment and process-oriented work conditions. This method usually revolves around the steps of Kaizen.

 

What does 5S or 5A stand for?

For your information, the 5S methodology was created by Toyota’s production manager, Taiichi Ono. He was the original creator of this methodology. At that time, Toyota had been facing a crisis but they used the 5S methodology and become successful despite all the bad conditions. Since then, the 5S methodology has gained immense worldwide popularity. Companies that are utilizing this method have developed excellent work environments. But, do you really know what does 5A or 5S stand for?

Seiri or Sort (Separating):

Some workplaces are often occupied with too many things which are rarely used. You start overlooking these items and they create the space even messier. It is important to keep your items sorted and tidy. You must evaluate which items are useless or should be removed permanently. Which items should be stored or ignored? By doing this, you can easily find out what you have in terms of resources. It also saves the time that you have to spend rearranging these items.

Seiton or Straighten (Organizing):

This process directly follows the sorting. In this process, you need to find out which materials or items should be organized. Every item or thing needs a specific place or position. You must know how and when to use this material. After organizing material, you must structure or sign them for remembering. You can attach graphs or photos on organized materials in order to make them visible to everyone.

Seiso or Shine (Cleaning the Workplace):

Cleaning the workplace is really important because it gives your mind some peace and relief. It also covers the machines and equipment that are under maintenance or inspected. If they are too dirty then their efficiency will be decreased. This is one of the major reasons for productivity drop. In the 5S methodology, the cleaning process is not as important as other processes. But, its impact is very huge on productivity and the work environment. A clean workplace also attracts customers which leads to more profit.

Seiketsu or Standardize (Standardizing the Workplace):

This step covers two parts; first, the acquired company and cleanliness must be made standard and second covers how this standard was grasped. Marking the material or machines and maintaining a record of how often they need maintenance or cleaning. You can give charge of equipment or machines to individuals as a task. You can also make lists in order to give clear directions to employees.

Shitsuke or Self-Discipline (Complying with and Improving):

To maintain a new-made standard in the long-term, self-discipline is the key. You must deal with any negligence in a sensible manner. This requires employee commitment and often checkups. It is imperative to repeat the 5S methodology to gain regular improvements. This last step is a repetitive cycle. You can place this last step anywhere in the 5S methodology. But, the fact is that the other four steps revolve around Shitsuke.

 

Application and Benefits:

The 5S methodology and its five steps seem very easy and simple at first. But, they are really difficult to implement. So, the practical reality is way more complex than the virtual. It is crucial that all the employees and management should be on the same page for the success of the 5S methodology. This method requires a specific level of effort. It is the responsibility of the management to tell everyone about Kaizen and 5S. They must tell its benefits. For your ease, we are explaining some of its advantages below,

  • Cleanliness and organization enhance well-being.
  • Utilize resources in a more efficient way.
  • It makes the work environment more productive and efficient.
  • Makes the workplace less complicated.
  • Reduces workplace accidents.
  • It creates new opportunities and builds extra space.

Once the above benefits have been explained and presented clearly, employees will be inclined to work more efficiently. This can be achieved with proper training. Implementing the 5S methodology will take some time and courage, but you will see positive developments if you implement it regularly. The seniors must lead in this scenario. This is the best method to gain long terms success.

 

Summary:

We are summarizing the 5S methodology in the following points,

  1. Sort
  2. Straighten
  3. Shine
  4. Standardize
  5. Self-discipline

Generally speaking, this method was originally created for production companies, organizations, or industries, but it can be applied in numerous fields of work also. The aim is to create a productive and manageable work environment. You can employ this 5S method with the help of managers. The implementation of this method requires some time and courage. To implement you need the help of employees. Yes, it is time-consuming but the result is very fruitful. It is a successful method in Japan and most companies are using this methodology.

 
 

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