Question by Olusegun Adu on Apr 6, 2014
Q. Are acquisitions and joint ventures by EMNC companies an effective way of overcoming barriers to entry that exist in certain markets?
Sure thing. Acquisitions are used to overcome entry barriers all the time. Consider for instance the acquisition of the Zenith watch and watch movement brand by EBOHR the Chinese company that is a sister of the Rossini brand. EBOHR initially tried to develop its own Switzerland based watch business under a new brand called CodeX. However, it soon realized that there was more to gaining acceptance by watch buyers than designing and manufacturing watches in Switzerland to be able to put “Swiss Made” on the watches. Heritage and history mattered a great deal for high end watches. Thus, the acquisition.
It’s not just in luxury products like high-end watches that acquisitions can provide entry. In the humble tea bag business brands matter too and they take time and money to build. Tata Tea was in a hurry and the best way to gain entry in to the global market place was through acquiring Tetley, the second largest tea brand in the world.
Acquisitions also provide access to technology. Thus the acquisition of the RCA TV business by LG Electronics was to get a hold of RCAs patents. Apollo Tyres acquired Dunlop Africa to get the technology for manufacturing radial tyres. Godrej Consumer Products Limited (GPCL) acquired Kinky of South Africa to be able to acquire technology for making quality hair care products for African hair. Without these technologies, LG Electronics, Apollo Tyres, and GPCL would be shut out of the respective markets.