An additional, and often very important motivating factor for adding new businesses is to complement and strengthen the market position and competitive capabilities of one or more of its present businesses. Explain and provide three examples.

Question

What will be an ideal response?

Answer 1

Sometimes, companies need to complement and strengthen the market position and competitive capabilities of one or more of their present businesses. Three relatively recent examples of companies that made acquisitions with valuable strategic fit between the value chain activities of the two companies include:

1. In 2014, Apple strengthened its iTunes music business with the $3 billion acquisition of Beats Electronics and Beats Music, a company that produced headphones and provided streaming music services.
2. In 2015, Dutch-based Heineken, the world's third-largest brewer, broadened its slow-growing beer portfolio and increased its geographical reach via a purchase of a 50 percent stake in California-based Lagunitas Brewing Company, a regional craft brewer whose brands were growing at 58 percent per year due to changing beer consumption patterns in the United States. In 2016, Heineken purchased the remaining 50 percent share of Lagunitas Brewing Company.
3. In 2018, shareholders of the Walt Disney Company and 21st Century Fox agreed to a $71.3 billion purchase plan that gave Disney the bulk of the Fox media empire, expanding into industries whose technologies and products complemented its present media and entertainment businesses, opening up new avenues for reducing costs by diversifying into closely related businesses such as direct-to-consumer streaming of media content, and leveraging existing resources and capabilities by expanding into related industries where these same resource strengths were key success factors and valuable competitive assets.