Week 5

#5. Acquiring another organization in the same industry and Merging with another organization: effects of globalization, exchange rate risks, and mitigating exchange rate-risks.

An acquisition is when a company looks to purchase another in the same industry, in our situation the Baderman’s Island Resort wants to purchase another resort in a different location in hopes to expand their business. There are different risks and rewards that could come either acquiring or merging with another company in another country.

One of the biggest risks for the resort company is how will it affect the company’s global plan. The Baderman Island Resort wants to expand their current locations and build more resorts in other areas to better serve their customers. The issue that could arise from building resorts in other countries is the exchange rate. When the company looks to purchase land and materials for the new project they may run into a problem where the exchange rate does not favor them. The country that they are looking to locate to may have a lower exchange rate that would make purchasing land and materials costly. This in turn would mean that the company would have to raise their rates for customers to offset the building costs. The company may also have to deal with the government of the host country. They may want to charge the company higher taxes and rates for the opportunity to put a resort there.

An issue that may come from merging with another resort would be acquiring the debt that the company may have, and dealing with the current staff. The staff of the resort may not want to work for Baderman’s if they wages are different or if the policies change. The debt that Baderman’s may acquire might mean that the company either has to make staff cuts or raise their rates. This is where the global plan of the company could also be affected, the company prides itself on the way it keeps its prices affordable for its guests and issues like exchange...