Companies of various industries regulate competition and the quality of products by collaborating in different ways. Such strategies as acquisition, merging, and downsizing help firms achieve their growth goals and improve overall production. Modern markets develop due to technological progress and globalization, and producers’ optimization helps fulfill the demand (Shook & Roth, 2011). This paper aims to analyze the difference between an acquisition, merger, and downsizing and discuss when a company should select one over the other.
Business strategies determined to achieve sustainable growth might utilize radical approaches such as acquisition, merger, or downsizing. For example, Pixar was acquired by Disney in 2006, and it allowed the former to solve its financial issues and get technical and human recourses to continue making successful animated movies (Harris, 2018). Moreover, the operation improved Pixar’s competitiveness by eliminating the necessity of beating Disney, the most influential market player.
It is essential to clarify the definitions of the strategies to analyze their difference and practical value. An acquisition is a transaction when one firm buys another and makes it a subsidiary within its business’s portfolio (Harris, 2018). Its main difference from the other optimizing operations is that the acquiring company takes control and decreases the acquired firm’s leaders’ rights. The power of decision-making given to another firm can lead to significant changes. Therefore human resources (HR) practitioners have to prepare employees for possible structural updates or even layoffs (Wickramasinghe & Karunaratne, 2009). The Pixar and Disney case shows that acquisition is a profound opportunity to access the industry’s latest technologies and innovations and grow by reaching new customers.
A merger is often applied with acquisition due to the similar type of operations they require. This approach can be described as combining two companies into one, with both sides’ shareholders’ rights remaining equal (Shook & Roth, 2011). Merging is usually beneficial due to the expanse of growth opportunities without losing control by any of the participants. However, the process requires a revision of employees’ quotes as combined divisions might become overcrowded. Thus HR practitioners should consider the impact on the workplace and keep the employees informed about significant modifications (Shook & Roth, 2011). A merger can force businesses to improve their production technologies or create innovations based on the collaboration of tools, skills, knowledge, and strategies the companies applied when operated separately (Cash et al., 2008). Moreover, internal networks will be necessary for successful communication for the merged parts, and innovative technologies can be applied and developed in that segment (Cash et al., 2008). A merger increases revenues create an opportunity for companies to join new markets, and reduces overall costs.
Downsizing is another radical approach to optimize the business and help it achieve sustainable growth, and it takes place inside a company. That strategic method is based on decreasing the number of employees, and it can be planned or urgent due to some emergency conditions (Shook & Roth, 2011). Besides, downsizing is challenging for HR managers as they are responsible for selecting the employees to release and for the workplace environment changes during the process (Shook & Roth, 2011). The approach is usually applied when a firm faces difficulties such as a decrease in market demand or costly and inefficient appliance of human recourses. The necessity of cutting the number of employees can also appear due to the implementation of innovations that automate human work (Nidumolu et al., 2009). It is a cheaper and more sustainable way of performing monotonous jobs. However, it might cost a company its employee’s loyalty.
The optimization methods to help businesses achieve their goals have several crucial differences necessary to consider during strategy creation. Merging and acquisition are the two most efficient approaches for rapid growth or diversity implementation for a company (Harris, 2018). These strategies have financial benefits, such as full prepayment. However, it is a complicated operation that includes substantial exit costs (Harris, 2018). The most significant difference between a merger and an acquisition is eliminating one company’s shareholders’ interest. From the HR practitioner’s end, merging might be less challenging as it would not harm workplace culture as a complete change of regulators would do (Shook & Roth, 2011). Downsizing is different from mergers and acquisitions as it does not involve any other companies and does not include complicated financial operations.
The influence of modern technologies and innovation development also varies depending on the chosen optimization strategy. The acquisition might decrease the variety of options to create new tools for the assessed company, while a merger might make space to collaborate and implement novelties (Cash et al., 2008). Moreover, innovative methods of management and production often include sustainability practices. Therefore acquisition and merging are profound methods to decrease the environmental damage due to the necessary changes in supply chains.
The reason for a company to select one approach from the described should be based on its long-term goals. The acquisition is the most convenient when a firm has difficulties entering the necessary market or has severe financial issues (Harris, 2018). Merging with other companies can be selected if there is a demand in getting additional technological and workforce support without losing the decision-making power (Wickramasinghe & Karunaratne, 2009). Downsizing is the approach to choose when there is an urgency to update a firm’s processes, such as the need for radical cost reduction (Shook & Roth, 2011). The selection of any optimization method requires executives to discuss possible outcomes with shareholders, managers, and HR practitioners to decrease severe consequences.
Acquisition, merger, and downsizing are strategic approaches applied by many modern businesses to achieve growth goals, expand to new markets, and reduce costs. Companies need to assess each method’s benefits and drawbacks before applying them due to the radical consequences they carry. Differences between acquisition, merger, and downsizing, their impact on the company’s employees, and their influence on overall technological and sustainable development are the crucial factors to consider by executives and shareholders while making decisions.
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