Critically evaluate the benefits and disadvantages of expansion via Essay

Critically evaluate the benefits and disadvantages of expansion via organic product versus expansion via acquisition. using real - Essay ExampleThis worldwide business related news is advance in the context of financial downturn of the year 2008, still casting its shadow on the global ontogeny of large businesses. Luypaert & Huyghebaert (2007) attempt a statistical analysis of the expansion via acquisition strategy get a trend, as in 2005 only, 29,585 acquisitions got materialised. Companies take to grow and expand through acquisitions instead than organically because it is the speedy way of growth relatively to internal growth as the aimed company is well positioned with its production, distribution and node base. It also minimises the risk of investing for the increasing growth of the company. Otherwise also, expansion via acquisition could prove to be cost-efficient way out relatively to organic growth, especially when the replacement cost of assets is higher than the c o-occurrent worth of the aimed assets. Another benefit of the expansion via acquisition is that in comparison to organic growth, it can be acquired by paying through the stemma as well. It can be a way-out for companies veneering cash-crunch or for those companies already deficient in debt power. Literature reveals that during flourishing stock market behaviour, bidding companies opt to pay for the acquisition through stock. Irrespective of this fact, expansion via organic growth and via acquisitions is mutually inclusive enthronement decision for a firm it can be an added advantage to choose any of the expansion methods rather than selecting a single alternative. Before taking a decision to go either for internal expansion or expansion via acquisition, thorough research needs to be made to gather industry opposition and aggregate market variables for opting out external expansion. There might be the opening night that firm surface may artificially hold the impact of industry concentration whereas the market-to-book ratio may reveal the solace of bidding firms to reward aimed shareholders with stock if stock markets are flourishing. Industry features are crucial factors like the electromotive force for economies of scale, industry concentration, sales growth and deregulation, and aggregate market variables, like historical volume of merger and acquisition, stock prices, GDP growth and the output spread (Luypaert & Huyghebaert, 2007). In a mutually inclusive relationship amid internal growth and expansion via acquisition for making investment, a company may opt for growth via expansion additionally to organic or internal growth. Financially sound companies with enough investment possibilities would prefer to practice both options of growth for leveraging from competitive advantage as early as possible. In case, firms face cash crunch, they might prefer an alternative of the two. Strategies for both kinds of growth options need not to be necessarily re lated. Statistical research on the connection between external and internal growth is exceptional with complicated outcomes. Hay and Liu, as cited by Luypaert & Huyghebaert (2007) evaluate M&A in the UK across 19711989 and scrape that M&A and organic expansion are supportive to each other. On the opposite side, Dickerson et al., as cited by Luypaert & Huyghebaert (2007), employing data on UK listed companies in manufacturing during 19481970 and 19751990, note that the connection between organic growth and the possibility of expansion through acquisition is surely negative, which underscores that these growth strategies are to be used alternatively (Luypaert & Huygh