Nowadays, the trend in companies establishing strategic alliances has become more apparent as compared to the trend in 1980s and 1990s.
Companies have viewed that diversity in the global market has been increasing rapidly and such formation of alliances may help them achieve a fast and a long-term profitable growth for their businesses. The establishment of strategic alliances is a technique of expansion and diversification, accomplished through the strategic implementation of merger and of acquisition.
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Merger and acquisition are two different terms that are often interchanged because the purposes in determining these two strategic implementations are often very similar. These two methods start with the acquisition strategy where a company attempts to find an appropriate company to merge with.
Accordingly, a merger occurs as two companies agree to stand as a new single company where the original identity is maintained. On the other hand, acquisition occurs as a company purchases and takes over another company to venture into a new separate business.
Most companies who decide to merge with or acquire another company have the goal of ensuring stability and growth of their businesses in the future. However, every company also has distinctive goals that relate to their business.
A company may decide to merge or acquire to save its collapsing business, to operate with reduced competition, or to diversify its services or products. In the process of merging and acquiring, these goals of the companies are coupled with advantages and potential disadvantages as well.
This paper aims to discuss the potential benefits that Zale Corporation will obtain as it pursues its plan of merging with or acquiring Blue Nile, Inc. In addition, this paper aims to analyze each of the company by providing a company backgrounder and a comparative financial statement analysis, which includes liquidity analysis, activity analysis, profitability analysis, and capital structure analysis.
Furthermore, this paper aims to provide a company valuation of Blue Nile, Inc. as well as information on mergers and acquisitions that Zale Corporation need to consider prior to pursuing its plans.
A. Zale Corporation
Zale Corporation is one of the largest specialty retailers of fine jewelry. Morris Zale, Ben Lipshy, and William Zale founded the company in 1924. It is now operating 2,203 retail locations throughout the United States, Puerto Rico, and Canada. More so, Zale Corporation has established several different business units. These include:
Zales Jewelers, also known as the “Diamond Store,” is recognized nationally as an authority in fine jewels. It has grown into an international jewelry corporation relying on its commitment to excellence as well as its strong traditions. The focus of Zales Jewelers is to provide a range of choices for the majority of jewelry customers. Apart from fine jewelry, it also offers brand-name watches, which provides customers a variety of merchandise at a scope of price points.
The stores of Zales Outlet are tied-up with the national marketing programs of Zales Jewelers. Thus, it has gained recognition with customers. It competes with well-known retailers; however, it tops the fine jewelers of the outlet market. Zales Outlet offers a diversified range of merchandise including certified diamond engagement rings, colored gemstones, platinum jewelries, and Swiss watches from famous makers. It has established a loyal customer base that specifically seeks for tremendous value of discontinued styles.
The target market of Gordon’s Jewelers is the upper moderate customers who seek a complete selection of diamonds and fine jewelry. Gordon’s Jewelers has created an expert sales team that offers a rare combination of value, service, and quality to its customers. Its marketing strategy includes direct mail and newspaper inserts and regional television features. The stores of Gordon’s Jewelers are designed in an appealing environment with friendly sales staff.
Peoples Jewelers is the largest national jewelry retailer in Canada. Its focus is to provide a varied selection of fine jewelry and brand-name watches at affordable prices. Peoples Jewelers has developed its exclusive 100-facet Peoples Canadian Diamond Collection, which is mined, cut, and polished in the Northwest Territories. It ensures its customers that the hottest trends in jewelries including titanium, stainless steel, gemstones in all colors, gold fashions, circle pendants, and cultured pearls are offered in its stores.
Mappins Jewelers also caters to customers in Canada who seek classic fine jewelry and watches. Mappins offers a varied range of merchandise from engagement rings to modern and contemporary jewelry. The marketing programs of Mappins establish strong commitment to excellence as well as strong traditions. Its television campaigns aim to carry out gift-giving programs while its direct mail campaigns aim to provide special values and strong communication with customers.
Piercing Pagoda started from a single retail location to chains of kiosks. It is the largest specialty kiosk retailer of extensive selection of gold charms, rings, body jewelry, bracelets, earrings, chains. It also offers stainless and silver jewelry.
Piercing Pagoda was acquired by Zale Corporation in 2000 to broader the range of customers specifically in the younger customer category.
Zale Corporation believes that this market appreciates quality jewelry at level price points. In return, the acquisition of Piercing Pagoda has opened the opportunity to capitalize on the resources of Zale Corporation and modernize the look of Piercing Pagoda in order to provide its customers with more desirable products.
ZLC Direct is the online base of the brands of Zale Corporation, which provides e-commerce web stores for both Zales and Gordon’s Jewelers. It provides direct access to customers who prefer to purchase quality merchandise on the Internet. The quality and service found in the stores of Zale Corporation is also exhibited in the sites of ZLC Direct as it also offers value, excitement, and convenience for online shoppers of today.
Zale Corporation has established its mission of being the best fine jewelry retailer in North America. Its goal is to innovate and market unique jewelry assortments as well as to offer superior customer experience. Zale Corporation is committed to establishing strong and lasting relationships with its customers and at the same time build value for its shareholders. It assures its talented workforce of continues success through trainings and rewards as well as permanency of jobs.
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