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(ii) Explain what might have happened to Dobbies’ share price if Sir Tom Hunter and Apax Partners had pursued their interest in the company.
Tesco weren’t the only ones interested in Dobbies, Apax Partners and Sir Tom Hunter were also interested on it. Because of speculations the share prise rose. Because both of them renounced their first idea the price of the share fell again. I believe that if they had waited some time more before announcing that they weren’t interested, the share price would have increased even more.
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(c) To what extent will Tesco be able to exploit economies of scale as a result of the takeover?
I don’t believe that Tesco will be able to really exploit economies of scale, as I don’t believe that the real motive of the takeover was to enjoy of economies of scale. I think the principle motive was to diversify, as like this, they reduce risks. Tesco and Dobbies wouldn’t be really able to buy in bulk, as they sell really different things, Tesco is in the grocery sector and Dobbies is in the garden sector. On the other hand, they might be able to reduce costs because if Tesco already have some places to store its products before selling them and have some ways to distribute them, they can simply add Dobbies’ products to it and not pay for other methods of distribution or other store places, so with this they could be able to reduce costs.
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(d) Analyse the benefits to Tesco taking over Dobbies.
There are various benefits to Tesco taking over Dobbies. This was the first significant deal outside the grocery sector, so they were able to diversify, in order to reduce risks because they might fear a loss of market share due to large competition and as a result they tried to explore new and different opportunities, and this was Dobbies, as they are in an already attractive and growing market. Tesco said that the acquisition of Dobbies would give it access to a market for which it was not catering at present and it reflected a strategy of developing the company’s non-food operations. Andrew Higginson, the Tesco finance director, said that the supermarket saw potential to expand the range of environmentally-friendly products in Dobbies, adding that it offered a ‘big emerging market’ in consumer spending. Overall I believe that Tesco did a good deal taking over Dobbies, asd it is the UK’s third largest garden center chain, with 21 store based mainly in Scotland and the north of England.
(8)
Silvia Sans Y-12
