In the past the acquisition strategy for market entry was highly preferred as the “target firm represents a “bargain” for the acquirer, i.e., that the value of the assets acquired is lower than their replacement cost. Another possibility is that the investor can leverage its firm-specific advantages more effectively through an acquisition than through a Greenfield entry. (Hennart & Park, 1993) Other advantages of acquisition pertain to the acquisition of a potential competitors, the increase in the capacity of the business in terms of manufacturing capacity and the human resource. The use of unemployed buildings and, equipment and machinery, employment of unused channels and intermediaries as well as a high commitment to the market as a heavy investment is made through acquisitions to enter the market and cater to it. Moreover acquisition can also result in being a platform for further expansions.
Additional benefits pertain to the decrease in the time taken to access and penetrate the market as the existing company is able to provide the market knowledge, the product lines and the market experience. Often the competitors decrease due to acquisition while barriers to entry pertaining to restrictions on skills, technology and patents are also overcome. “Related to the issue of speed, the case of Gerber’s decision whether or not to acquire an existing company in Poland in order to enter the East European market demonstrates how firms may consider an IA in order to secure a first-mover advantage. In this case, Gerber was concerned with entering the market quickly in response to an announcement by Heinz that they were considering using Central Europe as a base of operations.”(Newburry & Zeira, 1997)
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