Overall Analysis
Comparison and Contrast
Assess Internal and External Growth Opportunities
In comparing the situation between Sprint Nextel and LEI, many similarities appear. First of all, each firm found itself in a situation where competition threatened survival. For Sprint to grow, additional spectrum space was needed to build a competitive 4G network. For LEI, the potential loss of its primary supplier would cut revenues by almost 45% (University of Phoenix, 2008). For Sprint, the external growth opportunity was found in Nextel. Nextel held a strong subscriber base from the business consumer segment and provided the popular push-to-talk technology (“And then there were four,” 2004). For LEI, the external growth opportunity is to acquire its primary supplier and eliminate the risk of lost revenue.
To financially make these deals work, the internal financial structure must be analyzed. For Sprint, the deal was $35 billion worth of stock. The shareholders of Nextel received 1.3 shares of the new stock for every Nextel share held (“Sprint acquires Nextel,” 2004). For LEI, the proposal could include a portion paid in cash and a larger portion paid through LEI stock. LEI could retain earnings and reduce the dividend per share. In the last two years, the dividend per share has doubled. With the growth opportunity, stockholders may approve such a plan. Another example for LEI in terms of growth opportunities and cross-border growth strategies is that of DiamlerChrysler.
Challenges of Cross-Border Growth Strategies
LEI and DaimlerChrysler are two companies that have turned to acquisitions and mergers in an attempt to expand their business in the global market. Currently, an Exclusive Supply Agreement between LEI and Shang-Wa compares to a similar situat ...