Mergers & Acquisitions

Should a firm attempt to have fewer or more suppliers?

It depends on the situation the client is in terms of availability of materials and such as well as the number of vendors out there. A firm should balance between not putting all the proverbial eggs in one basket by using only one or two vendors and using too many and thus making administration and logistics more complicated (eSmallOffice, 2013)(Entrepreneur, 2013).

The “sweet spot” is probably 3 or 4 vendors although it can be more if more are required to reliably get all the materials but less may be needed can provide what is needed on time and in a reliable fashion and at a good cost. In short, there shouldn’t be more vendors than needed while at the same time, there shouldn’t be too few to protect against problems with vendors (eSmallOffice, 2013)(Entrepreneur, 2013)..

What are the advantages and disadvantages of each approach?

As noted above, using a small number makes for easier administration since the number of accounts and contacts necessary is much better. However, if that small number of vendors are inconsistent and/or incomplete in their service, the problems can outweigh the benefit of the simplicity. Keeping more vendors is better because it diversifies the sources or goods and service and makes it easier to replace shortages and address problems found with other vendors. However, too many vendors causes complexity, requires constant re-evaluation to make sure the right vendors are beign used and more amount of “hands in the cookie” jar and most of those hands are not employees of the firm, which can present a problem (eSmallOffice, 2013)(Entrepreneur, 2013)..

The figures below indicate the number of mergers that took place in the savings and loan industry over a 12-year period.

Year Mergers Year Mergers

2000 46-2006 83

2001 46-2007 123

2002 62-2008 97

2003 45-2009 186

2004 64-2010 225

2005 61-2011 240

a. Calculate a 5-year moving average to forecast the number of mergers for 2012.

From 2007 to 2011 (the last five years before 2012), the total mergers per year went up by 117. The rolling average by which the mergers increased per year by 29.25 mergers a year, that being from 2007 to 2008, 2008 to 2009, 2009 to 2010 and 2010 to 2011.

b. Use the moving average technique to determine the forecast for 2005 to 2011. Calculate measurement error using MSE and MAD.

3126.16 (MSE) and 51.12 (MAD)

c. Calculate a 5-year weighted moving average to forecast the number of mergers for 2012. Use weights of 0.10, 0.15, 0.20, 0.25, and 0.30, with the most recent year weighted being the largest.

d. Use regression analysis to forecast the number of mergers in 2012.

References

Entrepreneur. “How to Find and Work With Suppliers | Entrepreneur.com.” Business

News & Strategy For Entrepreneurs | Entrepreneur.com. N.p., 4 Oct. 2013. Web.

4 Oct. 2013. .

eSmallOffice. (2013, October 4). Don’t Let Suppliers Control Your Business. Small Business Owner Resource Center|Business Guide – eSmallOffice. Retrieved October 4, 2013, from http://www.esmalloffice.com/SBR_template.cfm?

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