The advantages of an acquisition are that it would be quick to implement; it would allow Zip-6 to preempt its competitors; and it would be less risky than a Greenfield venture (Hill, 2001). In particular, it would be quick to implement as Zip-6 will be acquiring a company that’s already established and will not need to start from the ground up. In the same regard, because an acquisition will allow Zip-6 to rapidly establish a presence in the foreign country, they will be in a position to preempt competitors who may also be interested in entering the same market in the foreign country. As well, since the company to be acquired is already established, this will pose less risk for Zip-6 as they will be acquiring not only the company but all of its assets and its market as well.
On the other hand, the disadvantage of an acquisition is that it may not add value for Zip-6 and instead may serve as a liability if the acquisition is not managed or implemented properly. In particular, some of the obstacles to a successful acquisition would include an overpayment of the acquired firm; culture clashes between the acquired firm and the acquiring firm; unexpected roadblocks during the implementation of integration efforts; and existing problems in the acquired company that the acquiring company may not be aware of.
With regards to a Greenfield venture, the advantage for Zip-6 is that this will allow the company to establish its wholly owned subsidiary where it will be able to impose its own organizational culture and management style. There will also be less risk of unpleasant surprises. However, because a Greenfield venture takes a longer time to establish, the aggressive competitors of Zip-6 might preempt them. In addition, a Greenfield venture may be riskier than an acquisition as the company may encounter difficulties from not having contacts in the foreign country.
In this case, Zip-6 would do better by acquiring Chang Dow. After all, Chang Dow has been working with them for a long time so there shouldn’t be any major adjustments necessary with regards to the operations and the organizational culture. In addition, an acquisition will prevent disruptions in Zip 6’s operations in South Korea.
References
Hill, C. W. L. (2001). International business: Competing in the global marketplace: Postscript
2001. McGraw-Hill Higher Education.
