Adl's Acquisition of Custom Coaches

Topics: International economics, Foreign exchange market, Exchange rate Pages: 8 (3863 words) Published: May 5, 2013
With reference to the academic literature and using your analysis of relevant environmental factors, speculate how (the process) and why (the drivers) ADL identified Custom Coaches as a potential acquisition. In which areas are the expected benefits and synergies for both companies involved? The world bus manufacturing industry has seen a gradual upsurge in demand since the recent years with factors attributing to mainly two reasons. One, the rise in fuel prices coupled with recession have forced people to opt for cheaper forms of transport i.e. public transport (Unknown, 2004). Secondly, the mounting pressure from the increasing world population has had widespread impacts including rising demand for better public transport (BIC, 2013). These factors have led to a gradual but constant rise in demand for new and better buses. If reports are to be believed this industry is expected to be worth £27 billion by 2013 with a CAGR of 3.1% (Business Monitor International, 2012). However, the bus manufacturing industry is also met with several challenges ranging from environmental to legislative issues. These issues include reducing Carbon footprints and Greenhouse emissions and limited oil supply (Business Monitor International, 2012). These environmental and legal factors have forced the bus manufacturers to invest more in technology to produce more environment friendly and fuel-efficient buses (Stanley & Hensher, 2009). The highly consolidated bus industry has therefore undergone many changes including dissolution and new mergers and acquisition to meet the rising demand for better buses. The acquisition of Custom Coaches by ADL can be attributed to several factors. Already the largest bus manufacturer in the UK and one of the biggest in the world ADL had been keen on growing their business beyond international boundaries. Their expertise in building high quality hybrid buses have induced them to cater to developed market across the world. Until 2012 ADL coaches had already marked their presence in Europe, Canada, China, New Zealand and United States and were looking for opportunities to grow further (Alexander-Dennis, 2013)r. Australia being a developed country and an attractive market proved to be an ideal place for their next venture. ADL was posed with several choices of strategy for entering the Australian market. Greenfield strategy, though ensures maximum profitability, faces major threats from local competitors, is time taking and suffers from risks from venturing into an unknown market and cultural differences (Dubin, 1975; Wilson, 1980; Zejan, 1990; Hennart and Park, 1993). A joint venture on the other hand only ensures shared control over the shared investment and is time-bound. Svensson (1996) and Meyer (1997) argue that one of the quickest ways to enter a new market while minimising the risk of competition and cultural differences has been through acquiring a potential company in the existing market. ADL was faced with several choices of companies for acquisition. Manufacturers like Hino and MAN were more focused on truck manufacturing (Hino, 2013; MAN, 2013). Other manufacturers like Mercedes , Scania and Volvo (Scania, 2013; Mercedes Benz, 2013; Volvo, 2013) were global manufacteres which were too big to aquire. Custom coaches on the other hand did not only have a local presence but also offered the largest market share in the Australian bus manufacturing industry . This move not only helped ADL gained instant access to the already owned 24% market share of Custom Coaches but also helped it rule out a major competitor from the market. Already facing the wrath of legislation and environmental issues Australian coach manufacturers have been under constant pressure to manufacture more fuel efficient and environment friendly buses. ADL on the other hand has been a world leader in technology and has been widely acknowledged for it highly fuel efficient environment friendly hybrid buses...

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