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In 2014, Apple confirmed an acquisition/takeover of headphone maker and music streaming service Beats Electronics for a reported fee of $3 billion dollars - Leaving Cert Business - Question 5 A - 2018
Question 5 A
In 2014, Apple confirmed an acquisition/takeover of headphone maker and music streaming service Beats Electronics for a reported fee of $3 billion dollars. As part o... show full transcript
Worked Solution & Example Answer:In 2014, Apple confirmed an acquisition/takeover of headphone maker and music streaming service Beats Electronics for a reported fee of $3 billion dollars - Leaving Cert Business - Question 5 A - 2018
Step 1
Explain what is meant by a takeover.
Answer
A takeover refers to one business purchasing a controlling stake (51% or more of voting shares) in another business, which enables them to 'acquire' it. Takeovers can be friendly or hostile, with hostile takeovers often going against the wishes of the existing management.
Step 2
Outline two advantages of a takeover as a method of business expansion.
Answer
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Increased Sales/Acquire New Products: An acquisition allows the purchasing business to expand its product offerings, leading to increased sales and profits. For example, Apple’s takeover of Beats by Dr. Dre allowed them to incorporate Beats headphones into their product portfolio.
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Market Share Gain: An acquisition can help a business obtain a larger market share within an industry. After acquiring Beats, Apple increased its presence in both the headphones sector and the music streaming sector.
Step 3
Outline one disadvantage of a takeover as a method of business expansion.
Answer
- High Cost Associated with an Acquisition: Takeovers can be financially burdensome, as they often require purchasing a significant percentage of shares. For instance, Apple paid $3 billion to acquire Beats, which is a considerable financial commitment.