Impact of Legislation, Regulations, Mergers and Acquisitions on Supply Chains (2, 2) Flashcards
What is competition law?
It is a fundamental idea that competition is good and more competition is better for society. The two key elements of the law are “Anti-Competitive Behaviour” which prevents organisations distorting normal market characteristics and “Prevention of Exploitation” to restrict an organisation which has a dominant market position.
What is the ISO?
The International Organisation for Standards is the world’s largest developer of voluntary international standards which provide up to date specifications for products, services and good practice. The objective of the organisation is to promote globalisation and make international trade easier.
What is jurisdiction?
The legal jurisdiction is which country’s court has the authority to decide on issues relating to the contractual relationship and should be negotiated and expressly written into contracts to avoid any doubt in the event of a dispute.
What are INCOTERMS?
Incoterms are published by the International Chamber of Commerce and are internationally recognised terms which give precise descriptions of responsibilities focussing on place, cost and risk.
Why might a government set an import tax or duty?
It is a barrier to international trade to make home produce more attractive.
What might a country do with respect to controlled goods and international trade?
Country’s often have licensing requirements for international trade of controlled goods. Controlled goods typically include firearms, chemicals, medicines, livestock and plants. Licensing requirements often depend on the use of the item and the origin and destination of the goods will be important.
What is the difference between a merger and an acquisition?
Merger - is where two organisations of roughly equal power decide to join forces. Usually a new organisation is formed with a new ownership and organisational structure.
Acquisition – is where an acquired organisation is integrated into the acquirer. This can be done willingly (friendly takeover) or unwillingly (hostile takeover)
What reasons are there for a merger or acquisition?
Growth – a faster route to achieving growth than organic growth
Synergy – the capabilities of the new organisation are far greater than the sum of its parts
Economies of Scale – greater production volumes drives efficiencies
Executive Aspiration – ambition of senior staff
Defensive Strategy – to prevent competitors making the acquisition and gaining strength
Capability – in order to buy knowledge or expertise e.g. Intellectual property
Why is there legislation around Mergers and Acquisitions?
Mergers and acquisitions are recognised as a quick route to market dominance. Once this position is achieved it means smaller players become unable to compete and cease trading, increasing further the dominance of the remaining business.
What are opportunities and threats of mergers and acquisitions to the buying organisation?
\+New investment \+Enhanced processes and capabilities \+Reduced costs \+Efficiencies and improvements \+Quality improvements \+Enhanced customer Service \+Extended Geographical Reach -Re-prioritising by new owners -Re-negotiation of contracts -Changes in pricing -Closure of local production units -Change in strategic direction -Impact of asset stripping
What is a venture capitalist?
A venture capitalist is a finance specialist who supports businesses through the injection of share capital in exchange for an equity stake in the business.
What is a MBO?
A management buyout is a form of acquisition where the management of an organisation buy shares. This is generally much less disruptive to the relationship than acquisition by a new owner.
What factors will influence the valuation of a business?
Age – how established the business is
Market Share – high market share is likely higher value
Profit – track record and projected future profit impact value
Assets – how many assets the company has
Revenues – sales or turnover of a business
