Acquisitions Business: The Principle of Acquisition Management

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Introduction

Acquisition management is also termed procurement management or contract management. It is the process within which a company obtains the resources required for the production of economic goods to be sold to its consumers. The formalized acquisition process of products and services has its foundation in military logistics. In this domain, the primeval practice of looting and foraging was eventually taken up by professional quartermasters, and purchasing departments, albeit very dissimilar to those of contemporary times, were developed. The crux of acquisition management is that buying decisions are made on economic goods, which cannot be divorced from the concept of scarcity. Resultantly, acquisition management is of an increasingly strategic significance to corporations, publicly held companies, and government bodies as well.

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Procurement management allows organizations to levy satisfactory terms in regards to quality and price in the acquired materials, to be ultimately utilized in the process of production. Publicly held companies, government organizations, and large organizations are the business entities that commonly implement acquisition management as it is still a novel professional concept, and they can reasonably spare the personnel to address it (Jemison & Sitkin, 2017). However, learning institutions are increasingly offering degrees, and post-graduate courses on Acquisitions Management and, therefore, acquisition management departments are projected to scale progressively, and organizations to derive more utility from their employees.

The Acquisition Management Principle

The primary acquisition management principle involves making calculated purchasing decisions based on a reliable and reasonable criterion set. While the involved criteria may differ from one organization to the next, decent acquisition management demands that highly sound judgment be utilized at all times a purchasing decision is made (Jemison & Sitkin, 2017; de Araújo et al., 2017). A sound criterion leads to a decent acquisition decision. It stems from the decent quality of materials sourced, a favorable discussed price, and reasonable assurance of production convenience and future costs.

Given the vital, multidimensional nature of acquisition management, it is imperative that organizations review and select business associates who are suitably equipped to meet and satisfy lasting business requirements. High-profile acquisitions require constant evaluation and implementation of future relations, and organizations should draft legally binding contracts to guarantee that potential suppliers are aware of their responsibilities, and to provide the specified, required input as per schedule. The manager of acquisitions is often the lead, as this position allows autonomy to conduct most of the procedural work in procurement, which provides accountability to upper management executives (Jemison & Sitkin, 2017). Executive management, however, often retains the decision-making capabilities and is often tasked with giving the final approval based on the provided information.

Characteristics of Acquisition Management

The full cycle of acquisition management initializes at the purchasing and sourcing judgment made by the interior control body of resources. There is then scheduling and control of the current work, warehousing and logistics, and, eventually, the dispersal of the finished product. The cohesion of material management processes symbolizes an often-vast network of numerous interconnected business relations and not just a linear chain of personal business interests.

Within a technologically advanced business environment, which is increasingly popular in the contemporary marketplace, acquisition management required a robust foundation in business information systems, or a similar computer applications program utilized within the organization. A contextual example is that several organizations modernly function through the electronic interchange of data. Due to this uptake of electronic data transfer, many organizations and merchants interact wholly via computer-transferred orders. The mandate for system management and review falls on the manager of acquisitions, who should ensure that all systems operate within acceptable parameters within the predetermined presets (Wilkinson et al., 2015). The overall management needs to incorporate various methods, as they will often vary between merchants and make it essential for the manager of acquisitions to have some background in the domain.

Evaluation of performance is also an integral yet different aspect of acquisition management. This is essential in ensuring that a business entity, which is often a profit-maximizing entity, gets the maximum utility from the materials sourced from merchants and suppliers. Owners and managers will often work with the manager of acquisitions to ensure that the procurement department implements sufficient strategies to enable the corporation to reap optimal benefits. As a result, performance reviews and cost analysis are commonplace within this organizational domain as the company seeks to improve on the overall return on capital invested for business processes.

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What is Most Important?

The statutes of Acquisition Management are consistently redesigning a business. Furthermore, the financial landscape where any company operates, if it is in a competitive market, is highly volatile and constantly changing as well. The primary principle of Acquisitions Management is simply an operational procedure to ensure the procurement of necessary materials to efficiently produce the goods or services required, regardless of the nature of the financial landscape. Consequently, the acquisitions management principle as a mundane tool of procurement has consistently evolved into a tactical business tool that is steadily becoming the most vital principle in the contemporary financial business landscape.

It is, however, no longer adequate that business entities simply source the essential economic materials necessary for routine organizational operations. Future accessibility of commercial materials is also crucial. Furthermore, the pricing consistency, and the relevance of the elements that are obtained now, and in the foreseeable future, should be secured to improve the organization’s competitive advantage overall. The procedure to supply economic materials itself should be designed to avail a competitive strategy to the business entity that, when joined with the procurement materials, will not only significantly lessen the incurred costs of the acquisition process, but also drop the price of the products inventories. This phenomenon, however, is only attainable at a value that is consistent with the organization’s commitment to its clients (de Araújo et al., 2017). Therefore, the financial landscape dynamics that necessitate the utilization of acquisition management provide the inherent principles of procuring materials at a relatively cheaper cost, future accessibility, and good overall value, with these elements remaining constant irrespective of the different methods in which acquisition is handled.

What is Projected to be Important in the Next Two Decades

With the current advent of technology, the most momentous adoption in this domain within the next two decades will undoubtedly be the incorporation of electronic procurement within acquisition management. Significant modification in acquisition management is the development of its role within organizational business procedures, from a pure operational device to integration with the core financial materials necessary for business functionality, and the production of its goods and services. In the contemporary market landscape, acquisition management is currently a critical strategic device employed by many business entities, in diverse markets, to weed out opponents and ensure its durable capability. The overly simple principle of acquisitions management is also its most significant advantage. This principle comprises a mundane operational process that has the distinctive role of acquiring industrial property for a business entity and is being currently utilized to act as many organizations’ competitive edge, and also as a risk management strategy.

Procurement management provides a unique implement that is currently being leveraged by many organizations as a competitive advantage by not only acquiring the required assets for critical business processes of producing goods and services but also similarly as a policy to improve overall organizational effectiveness. Acquisitions are no longer considered as a task to obtain the right materials solely, but also as a way to strategically reduce costs in both the procured assets, as well as the acquisition procedures themselves. In such instances, organizations can eventually convert these relatively low costs into much more improved outcomes.

A popular utilized tactic is the implementation of electronic procurement to reduce overall costs and introduce technology and its inherent benefits in the process. Prevalent research suggests that the application of electronic supply has a positive correlation to reduced operational costs. This utilization can cut the costs of purchase significantly by an 8 to 15 percent margin, with these savings being converted by a business entity to secure more competitive pricing of its goods and services (Rai, 2009). This is a significant example of how acquisitions management is utilized in the contemporary marketplace as a strategic tool.

A more recent, yet significant, development in technology has been realized with the advent of the internet of things (IoT). The introduction and purveyance of IoT have substantially influenced the procurement landscape. With the increased accessibility of lower-cost electronic structures, as well as the popularity of tools based on web interfaces, the costs linked with the implementation of electronic procurement within acquisitions management has monumentally reduced. Smaller organizations that may have been formerly unable to make use of electronic procurement infrastructure in their acquisition management procedures can now make use of the technology given the lesser capital investment required (Rai, 2009). The increased affordability of IoT infrastructure in acquisitions management has significantly contributed to improved uptake as well.

It can, therefore, be reasonably projected based on current trends that electronic procurement in Acquisitions Management will become quite significant in the next two decades. This is primarily because it is also entirely appropriate to mitigate the volatility in financial landscapes. Electronic procurement is highly relevant in global settings due to the interconnectedness of industries and business entities as it facilitates real-time information exchange between players in the industry. It can also be reasonably argued that electronic procurement can increase the relevancy of a business as it directly contributes to lower operational costs, resulting in a better priced, and therefore, more attractive final business product.

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Within the next two decades, it is wholly expected that electronic procurement will develop exponentially, parallel to the development of technology, and revolutionize itself to accommodate different consumer and buyer behaviors. There is increased popularity of transactions being conducted exclusively electronically, such as the electronic management of inventory and catalogs, online auctions and reverse auctions, electronic payment methods, and electronic order fulfillment (Wilkinson et al., 2015). All these ventures have gotten more persistent and would, therefore, prompt organizations to efficiently implement electronic procurement if they wish to stay abreast of the advancing economic performance driven by vendors and buyers who have embraced electronic procurement.

Acquisition management will be highly implemented as a risk management tool within the next two decades based on current showings. A contemporary example of such an implementation is Apple Inc., which has been a proponent of the idea of developing long-term acquisition deals with its suppliers to get computer components at subsidized prices. Apple has, throughout its operation, transformed from a company which the vast majority of the market perceived to simply sell lackluster gadgets at inflated prices, to one of the largest technology manufacturers in the world. The company also deals in a relatively diverse portfolio of products, ranging from phones, tablets, computers, laptops, music devices, and assorted accessories. This change resulted, in part, due to an active acquisition management implementation plan that significantly reduced their product prices (Wilkinson et al., 2015). This was underlined with the launch of the iPad, whose retail price was far lesser than many analysts had predicted, with little compromise to the overall quality of the product.

The impact of an effective acquisition management policy can be seen in the launch of the Apple MacBook line as well. The now popular notebook line initially launched at costly prices back in 2008. However, the very next year, Apple Inc. launched a much sleeker, better designed, and thinner MacBook, dubbed the MacBook Air, at a price that was much lower than its predecessor, much to the market’s pleasant surprise. This drastic price drop was solely facilitated by an excellent acquisition management implementation, coupled with the company’s unique ability to have enormous cash reserves through capitalization. That effectively made procurement management a strategic, tactical tool that could be used in lowering the MacBook prices, undercutting industry competitors, and fostering a loyal customer base.

Apple Inc. effectively tapped into its vast resources, as well as marketable securities, to secure supplies for years, and enable the corporation to reduce operational costs through its purchasing and supply activities. The company also acquired sufficient manufacturing capacity well beforehand, which had the effect of making production capacity scarce, or more overall expensive for its competitors. Consequently, the higher demand for production capacity led to Apple’s competitors driving up their product prices, while Apple lowered theirs. In contemporary market statistics, Apple is ranked as a leading flash memory chips buyer in the world (Wilkinson et al., 2015). This is also a contextual example of an acquisitions management strategy.

The efficacy of electronic procurement can be enhanced over the next two decades, allowing a competitive edge in the low-cost acquisition of materials, as well as implementation as an excellent risk management tool. Through the binding of suppliers to long-term deals, organizations effectively shield themselves from future improbabilities like shortages and other adverse supply changes, and price fluctuations. This would effectively assure corporations that they will have an undisturbed stream of materials for their inventories, which would allow stable projections and resource planning for product development and service rendering. Following the success of acquisitions management in contemporary markets, through industry leaders such as Apple Inc., more organizations realize the risks associated with future resource availability and price uncertainties. Committing vendors and suppliers to long-term deals ensures that a corporation can mitigate the risks relating to future resource accessibility, as well as fluctuating prices.

Ethical Issues with Acquisitions Management and their Organizational Effects

Acquisitions management has exponentially expanded in the contemporary market. Furthermore, more complexities have been introduced, as many companies seek to diversify the product and services lines and capture different markets (Defence Acquisition University, 2004). Many organizations rightfully view expansion and diversification as a profit-maximizing strategy, one that cannot be divorced from acquisitions management. However, with these expansions, and a consistent population increase, the healthcare industry has grown in parallel globally.

It is essential to understand that healthcare services have morphed into an independent industry due to a variety of factors. The primary one is the rapid global population growth. The correlation between a population increase and a corresponding increase in healthcare demand is well understood. Fluctuation in environmental variables, as well as the outbreak of novel diseases, has been a considerable factor driving the commercialization of the healthcare sector as well (Brown, 2010). However, commercialization clashes directly with the inherent principles of healthcare, which are to provide quality health services and ensure proper relations with patients and workers. On the other hand, the primary incentive for commercialization is profit maximization, which may compromise these principles (Leiblein et al., 2017). When delivery of care is compromised due to business decisions, the results may be catastrophic, and organizations can and should be sued, as well as a tarnished public image.

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With the rapid evolution of healthcare services, there has been an increased range of disparities of services delivered globally. Small local clinics and hospitals have been driven out of business, with regional centers opening up in an attempt to provide quality healthcare to larger target areas. The result is, however, a wider healthcare delivery disparity. When healthcare delivery is compromised, it becomes an ethical issue of social responsibility of corporations and governments (Gao, 2005; Defence Contingency Contracting, 2017). Companies in health care should arguably benefit from the profits from acquisitions management too, but healthcare delivery to the vast majority should be the biggest agenda. Profits from acquisitions management should ideally be re-invested to provide higher efficiency in health care delivery. A clear line ought to be drawn between acquisitions management and healthcare quality.

Patients are disproportionately affected by acquisitions. For instance, the reduction of staffing costs will reasonably translate into lesser attention given to patients. Furthermore, acquisitions management conducted with commercial reasons prioritized will also lead to relatively higher prices and make health care unaffordable for the vast majority. When business interests dominate discourse in healthcare delivery, this may be the deadliest disease of all. Extensive research suggests that when healthcare delivery becomes more of a business than a public service, there will be disproportionately more adverse effects for all stakeholders involved. The critical consideration should be that healthcare organizations, despite the need to turn profits in their acquisition management policies, should not lose sight of their primary purpose of providing affordable, quality care.

References

Brown, B. (2010). Introduction to defense acquisition management. Defense Acquisition University Press.

de Araújo, M. C. B., Alencar, L. H., & de Miranda Mota, C. M. (2017). Project procurement management: A structured literature review. International Journal of Project Management, 35(3), 353-377. Web.

Defence Acquisition University. (2004). Joint program management handbook. Defence Acquisition University Press.

Defence Contigency Contracting. (2017). Handbook: Version 5. Defence Procurement and Acquisition Policy, Contigency Contracting.

GAO. (2005). Defense ethics program: Opportunities exist to strengthen safeguards for procurement integrity. United States Government Accountability Office.

Jemison, D. & Sitkin, S. B. (2017). Acquisitions: The process can be a problem. Harvard Business Review. Web.

Leiblein, M. J., Chen, J. S., & Posen, H. E. (2017). Resource allocation in strategic factor markets: A realistic real options approach to generating competitive advantage. Journal of Management, 43(8), 2588-2608. Web.

Wilkinson, F. C., Lewis, L. K., & Lubas, R. L. (2015). The complete guide to acquisitions management. ABC-CLIO.

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