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As the new millennium begins, there is an increasingly good chance that your company will be acquired, will acquire other firms with redundant business functions, or will merge with another company. Figure 1 shows the startling growth in mergers and acquisitions in a 10-year period from 1988 to 1998 in three high-growth business segments [1].

Perhaps even more important is the speed at which these mergers and acquisitions can occur. In the 1988 model, a fairly lengthy "due diligence" period could be anticipated. During this period, the acquiring entity or primary corporation in a merger would look very closely at the financial condition of the subordinate company as well as the condition of its physical plant and assets, its key indicators for delivery and logistics, its informa­tion systems infrastructure, and even its corporate cul­ture. In today's fast-moving business environment, this due-diligence activity can be compressed to a matter of two or three days. It is clear that all factors cannot be adequately addressed in this brief period, and you can expect everything from outdated business systems to major cultural and communications differences. Of course, once the merger or acquisition has been com­pleted, you can certainly anticipate that the integration phase will proceed at the same high speed. Where eight­ies business culture would tolerate a 6-to-12-month business integration period, today we are asked to be fully operational in 60 to 90 days! At this speed it's fair to say that only the strong survive.


As an APICS practitioner, you can play a vital role in helping your organization meet the challenges of the merger and acquisition phenomenon. In this paper we will draw on the APICS body of knowledge to craft a roadmap for the integration of global hierarchies. We call it a roadmap because there are many paths that an organization can take to globalization, depending on the underlying strategic initiatives that drive the corpo­rate growth. By examining these strategies, we can pin­point the necessary changes to you organization's infrastructure, business systems, culture, and your own individual skills.

To achieve true competitive advantage, merging orga­nizations cannot simply combine together, they must truly integrate and globalize. We define the process of "integration" as guiding the organization to achieve "stra­tegic fit"—by centralizing those processes and decisions that can best be assigned to a single location and by pro­viding the guidance to improve local decision-making in those areas that are best established on a local or regional level. We define the process of "globalization" as leverag­ing key global elements of the strategic fit to achieve com­petitive advantage. Organizations that do both will find that power of the global entity is truly greater than the sum of the individual business units.


In order to develop a strategy for integrating global hi­erarchies, we must first examine the circumstances that gave rise to the hierarchies in the first place. There are many complex reasons as to why companies seek to ex­pand from a single plant/single product environment to a multi-location/multi-product/niulti-business orga­nization, but in general such expansions can be catego­rized into the four types as shown in Figure 2. In the following discussion, we will examine the underlying strategies in each type [2], and present real-world ex­amples of the implementation of such strategies from our own client base.


Geographical Expansion

Companies are motivated to expand both regionally and internationally for a number of reasons. Factors might include a declining market in their primary geographic area; a strategic expansion to seek new customers for their products and services; a competitive need to achieve lower costs through increased economies of scale; an effort to locate closer to valuable natural resources or lower cost areas; and a desire to spread the business risk across a wider market base. Note that such an expan­sion may be regional, national, or international. One ex­ample of geographic expansion from our own client base is the Impaxx Label and Packaging Network. The company's charter is "to become the nation's premier integrated packaging supplier with both geographic reach and a full range of product capabilities"

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 13


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