On The Margins

(Masood Mortazavi)


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20041217 Friday December 17, 2004

[ Business ] Strategy or Commerce

In general, there are two modes of behavior when it comes to dealing with the other, whether it is a person, a community, a business entity or some other institution, say a government.

One mode of interaction focuses on strategy. The strategic perspective is somewhat asocial and relates to power. Acquisitions usually move from this perspective but they are not limited to it, particularly when it comes to their success. A model of economic behavior that emphasizes strategy and conflict will not always lead to good acquisitions.

To better understand when an acquisition is useful and when not, it is best to rely on a model that emphasizes the commercial aspects. ("Commercial" in the sense of something to do with "Commerce" or exchange of goods and services.)

Most vertical acquisitions, which used to be slapped with anti-trust rulings, were actually for purposes of improving exchange and reducing transaction costs. A classic example is the acquisition of Fisher Body by General Motors.

Horizontal acquisitions and expansions, however, may have more of a conflictual and strategic concern involved.

So, which of these two models fits the Oracle - PeopleSoft merger better?

2004-12-17 18:09:44.0 -- Comments [2] ; Permalink ; Trackback.

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I work at Sun Microsystems. The opinions expressed here are purely my own, and neither Sun nor any other party necessarily agrees with them.

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© Masood Mortazavi
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