Objectives

• You will be able to explain how businesses can reinvest their profits to grow and expand

• You will be able recognize the reasons that cause firms to merge

• You will be able to identify two different types of mergers

Growth Through ReinvestmentGrowth Through Reinvestment• depreciation = non cash charge for the

general wear and tear on capital goods

• Cash flow = the bottom line, the real measure of profits– Can be allocated to investors (as dividend) or

reinvested in the business

Growth Through MergersGrowth Through Mergers

• Reasons for merging:1. grow faster — desire to be a bigger

business quickly

2. efficiency—only need one CEO, CFO etc.

3. need for new product lines ex: phone companies bought cable tv

companies to offer internet & phone as one package

4. Catch up w/ or eliminate rivals ex: --Royal Caribbean and Celebrity Cruise

merged to double in size to catch up to Carnival

--Staples tried to buy Office Depot but the gov’t said NO—it would reduce competition too much

Types of MergersTypes of Mergers

• Horizontal Horizontal --2 or more firms that produce the same kind of product

--ex. Exxon and MobileFord and VolvoDisney and MiramaxBell Atlantic & GTE = Verizon

• VerticalVertical--firms involved in different steps of

manufacturing join together

--Ex: oil company owns oil field--Ex: oil company owns oil field

refineries refineries

gas stationgas station

ConglomerateConglomerate

• A firm that has @ least 4 businesses

EX: PfizerEX: Pfizer

——makes prescription meds (Lipitor and Viagra), makes prescription meds (Lipitor and Viagra),

chewing gum (Trident, Dentyne), chewing gum (Trident, Dentyne),

razors (Schick), razors (Schick),

cough drops (Halls),cough drops (Halls),

breath mints (Clorets and Certs) breath mints (Clorets and Certs)

and antacids (Rolaids)and antacids (Rolaids)

Antiperspirants, Deodorants, & Colognes• Old Spice• Secret

Baby & Child Care• Charmin• Children’s Pepto• Clearblue Easy• Dreft• Luvs• Pampers• Pampers Kandoo• Pampers UnderJams• Puffs

Batteries• Duracell

Body Wash & Soap• Camay• Ivory• Olay• Old Spice• Safeguard• Zest

Beauty – Makeup/Skincare• CoverGirl• Max Factor• Braun• Gillette Complete Skincare• Olay

Dish Washing• Cascade• Dawn• Ivory• Joy

Feminine Care• Always• Tampax

Hair Care/ Color• Aussie• Clairol• Head & Shoulders• Herbal Essences• Infusium 23• Pantene

Health Care• Align• Braun• Clearblue Easy• Fibersure• Metamucil• Pepto-Bismol• Prilosec OTC• PUR• Vicks

Household Cleaners• Bounty• Febreze• Mr. Clean• Swiffer

Laundry & Fabric Care• Bounce• Cheer• Downy• Dreft• Era• Febreze• Gain• Ivory• Tide

Oral Care• Braun• Crest• Crest Glide• Crest Whitestrips• Fixodent• Gleem• Scope• Oral-B

Shaving• Braun• Gillette Fusion• Gillette M3Power• Gillette SatinCare• Gillette Venus

Snacks• Pringles

Consumer brands

•Acuvue •Actifed •Ambi •Aveeno •Bactidol •Band-Aid •Benadryl •Benecol •Bengay •Benylin •Bonamine •Caladryl •Carefree •Clean & Clear •Coach •Coach Professional •Coach Sport •Codral •Combantrin •Compeed •Conceptrol •Cortaid •Cortef

•Delfen •Desitin •Dolormin •E.P.T. •Efferdent •First-Aid •Gynol •Healthy Woman •Imodium •Johnson's Baby •Johnson & Johnson Red Cross •Jontex •K-Y •Lactaid •Listerine •Listermint •Lubriderm •Luden's •Micatin •Monistat •Motrin •Motrin Children

•Myadec •Mylanta •Nasalcrom •Neko •Neosporin •Neutrogena •Nicoderm •Nicorette •Nizoral •Nu-Gauze •O.B. •OneTouch •Pediacare •Penaten •Pepcid •Pepcid AC •Polysporin •Ponstan •Priligy •Purell •Quantrel •REACH •Reactine

•Regaine •Rembrandt •Remicade •RoC •Rogaine •Rolaids •Shower to Shower •Simply Sleep •Sinutab •Splenda •St. Joseph •Stayfree •Steri-Pad •Stim-u-dent •Sudacare •Sudafed •Tucks •Tylenol •Tylenol Baby •Tylenol Children •Unicap •Vania •Visine •Zyrtec

MultinationalsMultinationals

• Corporation that has manufacturing or service operations in a # of different countries

Ex: GM, Ford, Nabisco, Mitsubishi, and Sony

In India