The primary goal of a business combination is business expansion. A business combination, or when “operations of two or more companies are brought under common control” (Jeter & Cheney, 2012), can allow companies to expand. There are two types of expansion: internal expansion, which focuses on research and development to increase the success of the company, and external expansion, which focuses on increasing the success of the company by acquiring other firms. External expansion can be achieved through vertical integration, horizontal integration, or through a conglomerate combination. A business combination, or mergers, consolidations, and acquisitions, can be classified into three types – statutory mergers, statutory consolidations, and stock acquisitions. Here we will focus on how Samsung utilizes business combinations to increase its level of success and continue to be one of the world’s largest infotech firms. (Samsung: the next big bet, 2011)
Samsung is comprised of over 80 businesses, ranging from construction, insurance, marketing, textile and of course, electronics. Samsung Electronics not only assembles its electronic devices, but also manufactures many of the more expensive components of each device, even creating many of the costly parts required to manufacture Apple’s iPhone. Manufacturing the more costly and difficult to obtain parts of their devices allows Samsung to utilize operating synergies and reduce costs relating to negotiation and coordination between the supplier and manufacturer.
There are numerous ways with which Samsung could further utilize business combinations, such as merging with a similar electronics manufacturer in a country which they would like to increase their market share, or by merging with a supplier in another country that would allow it to avoid certain transportation costs. Electronic devices made my Samsung have become well
References: Jeter, D., & Chaney, P. (2012). Advanced accounting (5th ed.). Hoboken, NJ: John Wiley & Sons. Williams, C. (2013). Management: MGMT5 (5th ed.). Mason, OH: South-Western Cengage Learning. Campos, A. (2014, January 28). Why Samsung Will Outperform Despite Shrinking Profits. The Motley Fool. Retrieved from http://www.fool.com/investing/general/2014/01/28/why-samsung-is-having-a-terrible-time.aspx Yoo-chul, K Grobart, S. (2013, March 28). How Samsung Became the World’s No. 1 Smartphone Maker. Bloomberg Businessweek. Retrieved from http://www.businessweek.com/articles/2013-03-28/how-samsung-became-the-worlds-no-dot-1-smartphone-maker#p1 Worstall, T Huawei. (2012). 2012 Annual Report. Retrieved from http://www.huawei.com/ucmf/groups/public/documents/annual_report/hw_u_256032.pdf