It seems that it's getting tougher and tougher to run that lemonade stand. Bobby, the neighbor, has gotten into the market
and driven prices down. Mom has asked for some money to help pay for the paper cups and lemonade mix. What will happen when
Jane decides to open her lemonade business?
Today, corporate America is in much the same situation and is asking the same questions. How does a corporation increase
competitiveness? They must use acquisitions and mergers to create strong, self-supportive structures; they must develop new
technology; and they must expand in domestic and international markets. The U.S. government must help by negotiating fairer
trade in foreign markets and by cutting the budget deficit.
Acquisitions and mergers are sometimes seen as a sign of corporate decay, but they are just one symptom, rather than a cause,
of this decay. Many mergers are a response to the cries of financially troubled companies to become part of a larger, more
competitive, asset base.
While involuntary mergers and hostile takeovers are usually not productive, responsible mergers increase competitiveness by
creating diversity and interdependence within the new firm. Diversity serves as a balance to cushion against slowdowns. Speaking
about his own corporation, Edward Hennessy said that Allied, which relied on oil and gas for 85 percent of its market, moved
away from commodities into aerospace and electronics with its acquisition of Signal. Allied-Signal thus balanced its dependence
on the fluctuating commodities market.
Responsible mergers do not simply shift assets from one corporation to another but concentrate on developing systems to
combine the two firms. Effective mergers are horizontal (where the product of one of the member firms serves as an ingredient
for the product of another) or have lean, tight structures which allow more central control rather than a complex conglomerate
structure. If Laura the lemon producer merges with Bobby, whose dad is a papercup manufacturer, they are making a responsible move.
Research and development is another necessity for competitiveness. New technology opens up new markets or makes a business
more efficient in existing ones. Education is a necessity for research. As John Roberts, chairman and chief executive officer
of American International Underwriters, said, education serves to simultaneously advance "the individual, the industry, and the
country."
For a large corporation to be successful today, it must be competitive in the global marketplace. The foreign market is
very appealing; it offers a high growth potential for Amencan firms introducing products in it.