Masood Mortazavi's Weblog

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.

Comments:

Vertical Domance: this reader may say! What looks like a horizontal convergance has to be looked at the 90 ofset angle. Competion nil. Dominance Major. Long Term Strangle Hold. Time will tell. But it will be costly : to the consumer. rtg

Posted by BOMBOVA on December 17, 2004 at 06:45 PM PST #

Massive Merger Activity Friday December 17, 2004 1:00PM PT Sprint and Nextel 'Tis the season for�mergers? Search is buzzing about the recent spat of corporate consolidations. A wide range of companies are involved -- from those producing medical devices to software and Internet security firms. All these companies pairing up reminds us of the year-end holiday party, only with better champagne. Oracle (33%) was finally successful in its long and arduous quest to acquire Peoplesoft (74%) with a final bid of 10 billion dollars. Will Larry Ellison be satisfied? Or will the San Francisco 49ers be next?

Posted by BOMBOVA on December 18, 2004 at 01:33 PM PST #