A Study Of Acquisitions And Core Competences In Chongqing Taiji Corp

Strategic acquisition, targeted on generating synergetic effects between the acquirer and target, is becoming a mainstream of acquisitions in China. This paper studies how to rationally position a strategic acquisition and assess an acquisition's performance through a typical case-Taiji Group's acquisition actions.Instead of tracing the traditional analytical method of M&A, this paper firstly bases the study on "resource-based theory" for strategic management, especially the "core competence" concept. Meanwhile, this paper incorporates Porter's theory of analyzing links between strategy and external environment. A company's strategy is determined by the external environment and its core competence, the latter generating sustained competitive advantages. Since an acquisition is a tool of achieving the corporate strategy, a successful acquisition should definitely maximize the company's core competences.Disapproval of common praises on Taiji Group's acquisitions of TongJunGe and Southwest Pharma., this paper draws a new conclusion from an empirical study that Taiji Group will fail to synergize the different kinds of resources in the medicine industry by these acquisitions. R&D and marketing ability are two fundamental kinds of "core competence" for a pharmaceutical company. Taiji Group will find it difficult to transfuse its strong marketing ability into TongJunGe due to different operating models between both sides, as well as difficult to upgrade its relatively-weak R&D ability from the acquisition of Southwest Pharma.. Although Taiji Group pursues relative-diversity in the medicine industry, it ignores the principle of specialization and "the core competence", which will reduce the possibility of achieving synergy and then "economy of scope" after acquisitions.This paper concludes that the criterion to judge whether an acquisition can generate strategic synergy is the possibility of spreading and enhancing the acquirer's "core competences", rather than relativity of business scope between the acquirer and the target. A successful acquisition is an effective combination of both sides' competences instead of a simple combination of their business scopes.