Case Study Short Essay Examination Questions

question 48

Essay

Case Study Short Essay Examination Questions
Albertson's Acquires American Stores-
Underestimating the Costs of Integration
In 1999, Albertson's acquired American Stores for $12.5 billion, making it the nation's second largest supermarket chain, with more than 1000 stores. The corporate marriage stumbled almost immediately. Escalating integration costs resulted in a sharp downward revision of its fiscal year 2000 profits. In the quarter ended October 28, 1999, operating profits fell 15% to $185 million, despite an increase in sales of 1.6% to $8.98 billion. Albertson's proceeded to update the Lucky supermarket stores that it had acquired in California and to combine the distribution operations of the two supermarket chains. It appears that Albertson's substantially underestimated the complexity of integrating an acquisition of this magnitude. Albertson's spent about $90 million before taxes to convert more than 400 stores to its information and distribution systems as well as to change the name to Albertson's. By the end of 1999, Albertson's stock had lost more than one-half of its value (Bloomberg.com, November 1, 1999).
:
-In your judgment,do you think acquirers' commonly (albeit not deliberately)understate integration costs? Why or why not?

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Definitions:

EEG

Electroencephalogram, a non-invasive method to record electrical activity of the brain through electrodes placed on the scalp, used in the diagnosis and study of neurological disorders.

Attention Problems

Challenges in maintaining focus on tasks or activities, leading to difficulties in learning and task completion.

Cognitive Map

A mental representation of one's physical environment and spatial organization.

Insight

Insight is the capacity to gain an accurate and deep intuitive understanding of a person or thing, often leading to a creative or problem-solving breakthrough.