A strategic dilemma every corporation might face at some point has to do with the difficult decision of expanding its business through the acquisition of another company. In many cases, this type of direct investment , like in the 2000 acquisition of Nabisco by Kraft, the second only to Swiss-based Nestle in the food world market, purchasing a business unit or an entire corporation is a strategic investment choice of major importance for all stakeholders. In fact, experienced managers around the globe, like Kraft Chief Executive Officer Roger Deromedi, attest that a company has to investigate and evaluate the opportunity of acquiring another company thoroughly before its Board of Directors reach such a decision.



When a marketing manager thinks of opportunity or problem tracing it is imperative to begin by uncovering its overlapping characteristics. For this reason it is considered absolutely necessary to conduct what businesses refer to as "situation analysis." This type of research is an informal study of what information is available in the specific area. It can help define the problem/opportunity and specify what additional information-if any-is needed. Such industry-related reports, like McKinsey's, are of great importance and value in order to obtain and maintain a closer look of the specifics of the industry under focus and its environment. Specifically, the industry's background and trends, the level of the industry's consolidation, customer fragmentation, technological upgrading, international market forces, the ability of a company's personnel to understand the customers' needs and the significant economies of scale, are some of the areas this report has to cover. In addition, conducting an environmental analysis and examining the socioeconomic factors of the market(s) in question can assist those who are about to take a decision to identify the key success factors that have to be considered in depth and improved/expanded if the company examined is actually acquired. Also, this type of preliminary research has been also referred to as a SWOT Analysis, since it is important to identify the strengths, weaknesses, opportunities and threats that such a business decision entails.

Later in the process, a competitive analysis has to take place so as to recognize the strengths and weaknesses of those already competing inside the specific market. As global competition has resulted in a fierce competitive environment over the recent years, new product / service developments have to offer the needed "added-value" a customer wishes to receive, even before the potential buyer realizes the existence of the specific need. This differential advantage for the purchasing company can be the actual brand name, social role or excellent customer relationship status the company acquired has within its local market. Like in the case of Kraft and Nabisco, the latter had a very strong brand name and enjoyed high levels of identification within the Southern Mediterranean region. By purchasing a company that has a successful history and is valued by the market players, today's businessmen find themselves in highly profitable areas with the minimum amount of direct investment apart from money.