This term paper evaluates acquisition as a mode of entry used by Vodafone, regarding the variables that affected the entry mode decision when taking over the competitor Mannesmann. In particular, the analysis of the variables shall lead to a clear conclusion why an acquisition was used in this case in order to enter the target market. Another question that will be answered in this term paper is whether Vodafone entered the market efficiently, given the circumstances.
For this purpose, the term of market entry mode is defined first of all. Then, an overview of the different market entry modes is provided in order to highlight the differences between them. After that, the variables affecting the entry mode decision are named and explained. Then the takeover process of the business case is described in a chronological order. In the next part the variables influencing the decision to use an acquisition as a mode of entry within the example are analyzed in order to evaluate the bid Vodafone submitted. Then the bid made by Vodafone will be evaluated on a basis of the available economic data. As a result the key factors are summarized.
In the last two decades globalization has become one of the most important topics in the world of business. More and more companies try to escape their home markets and enter into international markets to expand their businesses. As a consequence the question of the choice of foreign market entry mode gets more important, because it is linked to the success of the activities of a company in a target market.
One of these companies seeking to escape the home market was Vodafone in 1999 when it started a hostile takeover in order to bid for its competitor Mannesmann. In the end this strategic move went down in history as the biggest M&A-transaction ever performed in terms of the transaction volume in the world of business. Later the question arose whether the deal was a good strategic move or an excessive and costly bid within the growth-strategy which Vodafone follows at all costs.
Table of Contents
1 Introduction
2 Market entry modes
2.1 Definition
2.2 Overview of market entry modes
2.3 Factors affecting entry mode decision
2.3.1 Basics
2.3.2 External variables
2.3.3 Internal variables
3 The acquisition of Mannesmann by Vodafone
3.1 The Story
3.2 Analyzing the factors affecting the entry mode decision
3.1.1 External variables
3.1.2 Internal variables
3.2 Evaluation of the economic efficiency of the bid
4 Conclusion
Objectives and Topics
This paper examines the strategic decision-making process behind Vodafone's acquisition of Mannesmann in 1999, specifically analyzing the variables that influenced the choice of an acquisition as a foreign market entry mode and evaluating the economic efficiency of the bid.
- Theoretical definition and classification of foreign market entry modes.
- Identification of external and internal determinants influencing entry mode decisions.
- Analysis of the historical Vodafone-Mannesmann takeover case study.
- Evaluation of the economic performance and strategic rationale of the bid.
Excerpt from the Book
2.1 Definition
“A foreign market entry mode is an institutional arrangement that enables a company to transfer its products, technology, management, and other resources to a foreign country.” This method of business organization proposes performing cross-border value-creating activities. The idea of ‘foreign market’ goes beyond markets for intermediate or finished goods and services. Further it implies also factor markets of different types.
The choice of an appropriate entry mode for a special market is described as one of the most critical decisions in international business, because it affects all future decisions and operations in the chosen market. Additionally the impact of entry modes on the success of foreign operations in general is great.
Summary of Chapters
1 Introduction: This chapter outlines the growing importance of globalization and introduces the specific case study of Vodafone's acquisition of Mannesmann.
2 Market entry modes: This section provides a theoretical foundation by defining entry modes and classifying them based on resource commitment, risk, and control.
3 The acquisition of Mannesmann by Vodafone: This chapter details the historical narrative of the takeover and performs a critical analysis of the internal and external variables that drove the strategic decision.
4 Conclusion: The final chapter summarizes the findings, noting that while the takeover was a strategic success in terms of market entry, the financial execution was arguably inefficient.
Keywords
Globalization, Market entry mode, Vodafone, Mannesmann, Acquisition, M&A-transaction, Resource commitment, Risk exposure, Strategic move, External variables, Internal variables, Telecommunication, Economic efficiency, Competitive advantage, Market expansion.
Frequently Asked Questions
What is the core subject of this paper?
The paper focuses on the strategic choice of foreign market entry modes, using the historical hostile takeover of Mannesmann by Vodafone as a practical case study.
What are the primary themes discussed?
The core themes include the definition and classification of entry modes, the determinants of entry mode selection (external and internal factors), and the evaluation of M&A as a growth strategy.
What is the central research objective?
The main objective is to evaluate why an acquisition was chosen as the entry mode and to determine whether this specific market entry was executed efficiently from an economic perspective.
Which scientific methodology is employed?
The work utilizes a literature-based theoretical analysis of market entry modes followed by an applied case study analysis of the Vodafone/Mannesmann transaction.
What does the main body cover?
The main body moves from theoretical frameworks regarding market entry to a detailed chronological breakdown of the Vodafone takeover and an analysis of why specific variables favored an acquisition in that context.
Which keywords best describe this study?
Key terms include globalization, market entry mode, M&A-transaction, resource commitment, strategic management, and telecommunications.
Why did Vodafone choose an acquisition instead of other entry modes?
The analysis suggests that the size of the target market, the high product complexity, and a lack of suitable contractual partners or intermediaries necessitated a high-internalization strategy like acquisition.
How did the author evaluate the economic efficiency of the bid?
The author concludes the bid was economically inefficient because Vodafone eventually had to depreciate the goodwill of the acquired company, signaling that the initial purchase price was too high and growth prospects were overestimated.
- Arbeit zitieren
- Anonym (Autor:in), 2015, M&A as a mode of entry into the german market. The acquisition of Mannesmann by Vodafone, München, GRIN Verlag, https://www.hausarbeiten.de/document/320275
