Acquisitions: A Key to Success in an Internationalization Strategy




Globalization today presents substantial challenges for firms in East, South and Southeast Asia to compete on an international platform. However, some successful firms have strategically planned their businesses such that they get a head start on becoming key regional and global players in our increasingly global world. One such strategy to get a head start, according to Associate Professor Andrew Delios, is through international acquisitions.


Acquisitions are a fundamental aspect of an internationalization strategy – and for companies in Asia, the importance of acquisitions is only growing. Acquisitions can enable a company to build their international presence rapidly. Yet, this rapid expansion must also be matched by a value creation component, so that the acquisition is a source of enduring advantage for a company.

Singapore Airlines (SIA), like many other leading companies in the Asia Pacific, is one company that has been using acquisitions to build stakes in other regional carriers. Its recent high profile pursuit of Chinese Eastern airlines, to develop its presence in the greater China area, including on the high volume Hong Kong – Shanghai, is one such example. Yet, the costs of this bid, as well as competition from other carriers such as Cathay Pacific, illustrates some of the competitive and regulatory challenges that can accompany an acquisition strategy.


Key Considerations

We have found in our research that two out of three companies in Hong Kong, Singapore and mainland China, that undertake an acquisition, lose value in the short term as a consequence of that acquisition. The strong potential for a loss in firm value emphasizes the need to have a clear and present strategy for value creation in an acquisition. Before a firm decides to make an acquisition, it is important that its strategy considers four factors – Acquisition Drivers, Acquisition Strategy, Acquisition Pricing and Acquisition Implementation – to identify and realize the potential for value creation in the acquisition.

Acquisition Drivers

Acquisition drivers include four external drivers: political, economic, industry and technological; and three internal drivers: strategic, managerial and financial. Firms need to have a thorough understanding of these drivers before making an acquisition since these major drivers will represent a firm’s criteria for analyzing the suitability of a company for acquisition, as well as identifying the broader level economic and regulatory influences on the feasibility of an acquisition.

Acquisition Strategy

Firms also need to formulate a good acquisition strategy by setting clear and precise objectives for the acquisition in their strategy. The strategic considerations can be many, but a firm’s leaders should always consider how the acquired unit would add value to their own company. Value creation can come from the creation of greater market power, which allows a firm to be more independent in setting pricing in its industry. Value creation can come from an effective merging of the competencies and assets of the acquiring firm and the target to achieve competitive gains in the cost position or distribution capabilities of the merged company.

In some ways, the seeking of value creation in an acquisition strategy is simple: it comes from generating greater revenue from a higher price position or from greater levels of sales, or from decreasing costs by gaining rationalization or scope economies. What is simple is actually difficult, as leaders need to have a clear and well-communicated strategy on how the acquirer and target will fit together as a merged entity to realize those competitive gains in pricing, costs or sales.

Acquisition Pricing

To enhance the chances of success in an acquisition, a firm must have a clear understanding of their own financial strengths. It must also have a clear understanding of the various corporate finance methods available for acquisition and the structure of the purchase. Most importantly, it is important to consider what is the maximum price at which an acquisition can be effected. If a bidding war erupts, such as what happened when Singtel was pursuing Hong Kong Telecom in Hong Kong, it is easy to overpay for a target firm. A firm’s leaders should set a reservation price, which will not be exceeded in any subsequent negotiation or bidding war.

Acquisition Implementation

After a successful bid for a target firm, the real challenge begins, which is how to make the acquisition successful. Many acquisitions fail at the level of implementation, because much of the leaders’ energies are devoted to the challenges inherent to the pursuit of a target firm.

Leaders also need to consider implementation issues, such as what would be the new organizational structure of the merged entity, or what will be the incentives to keep key target employees in the merged firm. A successful acquirer will establish clear and distinct integration terms that will facilitate the merger of the two companies in a short period of time.

As with the successful implementation of any strategy, clear and direct communication of the leaders’ vision for the merged entities is fundamental to the success of the integration of the acquirer and the target.

Associate Professor Andrew Delios is Head of the Department of Business Policy at NUS Business School. He is an author (along with interim Dean of NUS Business School, Kulwant Singh) of Strategy for Success in Asia (Wiley).


“Acquisitions can enable a company to build their international presence rapidly.”

~ A/P Andrew Delios, Head of Business Policy, NUS Business School


Strategy in a Changing Environment



Gone are the days of traditional strategy that was static and organization-centric. The creation of a long-term vision of what customers it will serve and what goods and services it will sell to them has become ineffective against the backdrop of today’s changing environment. Visiting Professor Will Mitchell notes that business organizations need to replace “static strategy” with “dynamic strategies”.

Organizations that develop dynamic strategies are those that identify emerging opportunities quickly, and then bring together the people and resources necessary to seize the opportunities. Change is continuous and inevitable as businesses consistently review and move on to new opportunities when competition drives down profits.

Firms that adopt dynamic strategies are much more likely to thrive. Think Apple. Think Infosys. Think General Electric. Think Johnson & Johnson.

So how do firms create dynamic strategies for dynamic markets?


A High Aspiration Vision

With a dynamic strategy, it is important for businesses to adopt a high aspiration vision – one that is clear and focused in bringing results today, not tomorrow. This vision – and its underlying objectives – needs to be articulated throughout the organization so that there is a deep commitment to the current direction and activities. At the same time, while working toward achieving this current vision, the organization must also look towards to the next opportunity and ways to shape the next vision. Naturally, people throughout such organizations must be both committed and willing to make changes.


Supple Business Definitions

To make themselves more efficient and effective, dynamic strategy organizations use supple business definitions. This requires focused, yet flexible business units within the organization – units that are clear about their current role and function within an organization, yet flexible enough to adapt to the changes that make it competitive in the market.

With supple definitions, effective communication between and across business units necessarily becomes key to the organization’s success. Much of this communication is channeled by active career paths, in which people grow and move as their units evolve.

One of the ways that these firms create supple business definitions is to outsource selectively, while actively managing their out-sourcing partnerships. By managing sourcing channels as alliances, organizations can both increase their efficiency and decrease costs. In turn, with ongoing changes in the dynamic business strategy, the organization is able to change and adapt quickly by activating the necessary sourcing channels.

At the same time, out-sourcing does not substitute for internal expertise. Indeed a dynamic strategy business must retain and build sufficient internal expertise to be able to identify strong suppliers and build high performance relationships with them.


Low-Risk Experimentation

Dynamic strategy firms undertake constant low-risk experimentation to allow them to identify emerging opportunities. They do so by building on existing skills internally, engaging in focused expansion with strategic partners, and through exploratory acquisitions. Through these experiments, firms will be able to better judge their next move in response to the equally dynamic environment.


Create open markets

Successful organizations in a dynamic market create open markets inside and outside the firm to use capital, ideas, and talented people in their best applications, rather than simply optimizing their use in their current locations. Forward-looking firms plan their capital budgets and their human resource strategies based on forecasts of opportunities, rather than on trajectories of past practice.

To generate ideas and talent, dynamic strategists tap on their alliance partners and acquisition targets, while moving people who are successful in their current positions to new tasks. They keep their firms dynamic by rewarding people who share ideas, rather than hoard knowledge, thereby creating a long-run corporate value rather than isolated pockets of performance.


Seek resources

Rather than be contented with using their existing resources, firms with a dynamic business strategy are on a constant lookout for new resources that they need to take advantage of opportunities.

In the words of Gerard Kleisterlee, CEO of Philips, “We used to start by identifying our core competences and then looking for market opportunities. Now we ask what is required to capture an opportunity and then either try to get those skills via alliances [or acquisitions] or develop them internally.” (The Economist, 9 February 2002).

Dynamic strategy firms constantly scan emerging markets and are diligently aware of emerging market trends and of opportunities to create new market trends. They seek people who are excited about adaptation and growth, while encouraging existing personnel to develop opportunities.


Making it real?

Against a real world backdrop where deadlines are tight and people have conflicts, it is difficult to lead an organization that constantly reviews and recreates its vision while being agile enough to take advantage of emerging opportunities. But unless your firm has the luxury of having sustainable market power in a protected competitive environment, failing to create a dynamic strategy will render you obsolete in the near future.

Visiting Professor Will Mitchell is a Lim Kim San Distinguished Visitor at NUS Business School and J. Rex Fuqua Professor of International Management, at Duke University’s Fuqua School of Business.


“Unless your firm has the luxury of having sustainable market power in a protected competitive environment, failing to create a dynamic strategy will render you obsolete in the near future.”

~ Professor Will Mitchell, Lim Kim San Distinguished Visitor at NUS Business School


Leadership the Key To Strategy Success?



Leaders in every organization know that it is important to have a business strategy; it brings a company to success, and it helps leaders decide what’s working, and what needs fixing. In his book ‘Strategy for Success in Asia’, Professor Kulwant Singh shares that “leaders who think strategically will be better able to identify and exploit opportunities, avoid widespread risks, and develop strategies that can enhance the probability of success for their firms.” Yet, not every organization with a business strategy succeeds. What gives? Here, he elaborates.


In our globally dynamic world where there are multiple external factors affecting the success of one’s organization, the multiple roles leaders play in an organization and the multiple paths that leaders can choose from to bring a firm to success, it is difficult to pinpoint to the exact factors that cause the success of an organization. The reality is that many factors determine success. Unfortunately, this may lead organizations to attribute success to a laundry list of factors that collectively, do not necessarily enhance success.

The danger in focusing on a laundry list is that by indicating that everything influences firm success to some extent, it suggests that nothing is of particular importance.

Such an organization may be seen as one that focuses on short-term opportunities or on correcting mistakes, which is unlikely to result in sustained success in complex and rapidly changing environments.



The first and most basic proposition is that senior leadership is responsible for the strategy and success of their organization. Effective leaders understand that they have two primary responsibilities – to develop and implement strategy.

Leaders must recognize that these responsibilities cannot be delegated. Having developed the strategy, leaders should also be heavily involved in implementation, to keep track of progress, problems, and contingencies. This allows leaders to intervene and put the implementation back on track or modify the strategy if need be.

Some leaders make the mistake of not allocating enough time to develop a strategy, preferring to deal with operational and routine matters that do not contribute to a firm’s long run success. They then let their middle or junior managers develop the strategy, or adopt the strategy that the firm has been taking all along. This results in leaders becoming detached from their strategy.


Development & Implementation – Two separate activities?

With changes in the environment, competitors and customers, the common thought is to adjust and adapt the implementation strategies to respond to these changes. As a result, firms may deviate from their intended strategy.

When the development of a strategy and its implementation are seen as two separate activities, firms run the risk of deviating from their intended strategy.

Firms may formulate different strategies, but not implement them. A strategy that is developed but not implemented is not a firm’s strategy. Similarly, an intended strategy that a firm deviates from in the process of implementation is not a firm’s strategy. The only strategy that a firm has is the strategy it implements.

The primary means for preventing this problem is thus for leaders to regard strategy formulation and implementation as a single process; and leaders need to be involved in this single process.

Any alternative way of thinking about strategy formulation and implementation carries the high risks of separation, lack of integration, and failure.


Customers. Competitors. Competencies.

Strategy is about setting goals, and outlining how a firm will use its competences to offer greater value to customers than competitors. A firm should establish its strategy on the basis of how it can use its competencies to satisfy its customers more effectively than competitors. When developing their strategy, leaders must consider the political, economic, social-cultural and technological characteristics of the environment in which they are operate.

It is important that strategy development efforts start by focusing on the value firms can create for customers. Customer satisfaction is the ultimate test of the effectiveness of the strategy. In short, if customers are not satisfied, firms will not succeed in the long run. The challenge is for firms to focus on satisfying current customers and their changing needs. At the same time, firms will recognize that not all customers should be served. Good strategies will indicate customer groups that should be targeted and those that should be avoided.

It is also important for strategy to recognize the threat of actual or potential competition. Competition draws customers away by offering alternatives. So while customers may determine firm success, competitors will determine firm profitability by determining market prices. An effective strategy dictates how a firm will avoid, eliminate or overcome competition.

To do so, a firm needs to have an understanding of its core competencies – a combination of resources, routines, skills and knowledge that allow firms to perform critical operations that create value for customers. Firms need to focus on these competencies to ensure that they remain valuable and provide the competitive advantage for the firm. While doing so, they would also need to evaluate competencies required in the future so that investments are made in time to drive future competencies, rendering them the competitive advantage in the long run.

Professor Kulwant Singh, Interim Dean, NUS Business School


“The first and most basic proposition is that senior leadership is responsible for the strategy and success of their organization.”

~ Prof Kulwant Singh, Interim Dean of NUS Business School


GANO Building Alumni Communities


The NUS Business School Global Alumni Network Office (or GANO) is a newly-established office set-up in April 2007 to further enhance engagement and interaction between the School and its more than 27,000 alumni.

“GANO appreciates its alumni and is committed to creating more platforms for them to form friendships and network in Singapore and abroad.”
~ Mr Aw Beng Teck, Director of GANO

The Office has been tasked to reconnect and cultivate relations with alumni, with the view of adding value to the work and lives of alumni, promoting and enhancing relationships among alumni, and involving alumni in the life and activities of the School.

At the same time, the Office acts as a conduit and catalyst for alumni to contribute to the School. This could be in the areas of branding, where alumni become the School’s brand ambassadors, or in student recruitment, internship, placements, mentoring, recruitment interviews and industry talks. Alumni do also give back financially to benefit the School and the student body.

Another important function of GANO is to provide secretariat support for the three existing Business School alumni associations, namely, the NUS Business School Alumni Association (NUSBSA), the MBA Alumni-NUS and the NUS Business School Mandarin Alumni. GANO also serves as an interface for students and alumni to meet and interact.

Led by Mr Aw Beng Teck, GANO’s team of five has since its inception been actively involved with the alumni associations, as well as with the alumni and student bodies at large. Close to 60 activities, ranging from formal ones like industry talks and seminars to informal ones like networking sessions and even outings to the movies, were organized in 2007. These activities provide networking and learning opportunities for alumni, where old friendships are renewed and new ones forged.

Working in conjunction with the Corporate Development and Communications Office, the Office supported an NUSBSA’s fund-raising initiative in July 2007. Two board members of the association, Simon Phua (BBA Hons 1976) and Peter Koh (BBA 1979) spearheaded a charity Golf Challenge that raised close to a quarter of a million dollars for the school.

GANO has also worked closely with the alumni to benefit society. It played a key role in the YMCA-NUS Business School Volunteer Service Management Program (VSMP). Members of NUSBSA are involved as facilitators and mentors in the program, which serves to build capacity in the VWO sector. GANO is currently facilitating the involvement of our alumni based in Southern China who have made a donation towards building a primary school for local residents in Jiangxi Province.

Asked about the plans for the coming year, Mr Aw envisioned a year filled with even more networking and learning opportunities. “GANO appreciates its alumni and is committed to creating more platforms for them to form friendships and network in Singapore and abroad. We look forward to seeing more of our alumni join our activities, bond and form communities that support each other in learning an din life, and making a contribution to society.