Strategic Media Analysis News: Samsonite to buy High Sierra assets for $110 million Source: Bloomberg / Dated: 2012-07-17 This summary is about an acquisition activity conducted by the Samsonite International S. A. to High Sierra Sport Company for US$110 million on 18-July-2012. The two company’s background and the luggage industry and market trend will be stressed. Also, the purpose, strategy and the benefit of the acquisition and recommendation will be discussed in both theoretically and practically. Samsonite International S. A. s the world’s largest travel luggage company founded by Jesse Shwayder in 1910 in Denver, Colorado. Samsonite acts as a designer, manufacturer, distributor and marketer of luggage, bags and travel accessories. The company aimed at being a market-leading position by their scale, advertising and product innovation, strong sourcing and distribution ability and high quality products. According to Tim Parker, CEO of Samsonite, they will acquire more new international brands to expand their luggage market this year. High Sierra Sport Company is established in 1978, a U. S. ased manufacturer and distributor with products targeted to skiers and snowboarders and lifestyle consumers. The luggage consumption is highly related to the travel industry. In 2009, the demand of luggage dropped significantly due to the economic downturn. The global luggage industry is currently under strong competition. The U. S. is the largest global luggage market; however, the Asia-Pacific market is expected to have a great potential growth. Samsonite acquire High Sierra is to segment and explore their younger demographic business to gain better access to sporting goods retailers.
This strengthened their brand and product offering immediately in the North American causal bag market and doubles the size of the region’s luggage market. Besides, they can establish a brand extension, broaden product base, global distribution, sporting goods retail network and launch the High Sierra’s brand in Asia, Europe and Latin America. Samsonite always believed that acquisition can accelerate their growth. So, they have imposed and prepared a long term planning to accomplish it.
Internally, Samsonite has applied niche strategy and customizes their products with local market tastes and multiple price point. Moreover, they invest heavily in product development and innovation which extend their lead over its rivals. Externally, since 2000, Samsonite predicted that Chinese and other Asian market have long-term economic prospects, thus, they secured their supply chain by acquiring its partner’s 50% interest in Chia Tai Samsonite (HK) Ltd and 100% owns the Chinese subsidiary. This strategy helps their international expansion plan by strengthen their foothold in Asia for long-term.
Samsonite speed up their acquisition due to the low borrowing cost, healthy company financial situation and the growing affluent of middle-class consumer in China with strong travel demand. In 2011, they planned to open 300 stores in China and up to 1800 worldwide outlets in 2012. On 16 Jun 2011, Samsonite raised funds by listing in Hong Kong. In July 2012, Samsonite further improved their financial flexibility by funding US$300 million from HSBC Bank USA to continue their acquisition activities to expand their global platform and investment.
In conclusion, Samsonite’s acquisition plan is very concrete with clear direction and sustainability in long term. Through acquisition, Samsonite can expand quickly with sufficient size and competitive strength in cost, bargaining power and control over suppliers. Also, time and effort in developing new resources and capabilities can be saved. Technology transfer creates synergy effect in product’s development. Competitors’ growth such as Tumi will be threatened or suppressed. However, acquisition is expensive, may contain unnecessary adjunct businesses and cultural conflict.
Therefore, well developed management system and skill is required. Reference : Alice Zhao, R2012, ‘Samsonite packs up High Sierra’, The Standard, 19 July, viewed 26 July 2012, Carpenter, M. , Sanders, G. , Rice, J. & Martin. N. (2010) Strategic Management: A Dynamic Perspective. Pearson Australia Denver, 2000, ‘Samsonite Announces Acquisition of 50% Interest in China Joint Venture’, The Free Library, 11 July, viewed 26 July 2012, High Sierra 2012, High Sierra, viewed 26 July 2012, Laura Wood, Research and Markets 2010, ‘Global Luggage Market Report: 2010 Edition’, Business Wire, 14 March 2011, viewed 26 July 2012,
Samsonite 2011, 2011 Annual Report, viewed 26 July 2012, Samsonite 2012, Discloseable Transaction Acquisition of the assets of High Sierra Sport Company 2012, viewed 26 July 2012, Samsonite 2012, Samsonite increases credit facility to US$300 Million to improve financial flexibility, viewed 26 July 2012, Samsonite 2012, Samsonite, viewed 26 July 2012, Vinicy Chan, R 2012, “Samsonite Says Tumi Makes Sense as Target n $1 Billion M &A Hunt’, Bloomberg, 20 Jan, viewed 26 July 2012, Vinicy Chan, R 2012, ‘Samsonite to buy High Sierra assets for $110 million’, Bloomberg, 17 July, viewed 26 July 2012,