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Transcript of © 2013 Cengage Learning. All rights reserved. CHAPTER 11 GLOBAL2 PENG © Kevin Lee/Bloomberg via...
© 2013 Cengage Learning. All rights reserved.
CHAPTER 11
GLOBAL2 PENG
© K
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© 2013 Cengage Learning. All rights reserved.
CHAPTER 11 LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Define alliances and acquisitions.
2. Articulate how institutions and resources influence alliances and acquisitions.
3. Describe how alliances are formed.
4. Outline how alliances are dissolved.
© 2013 Cengage Learning. All rights reserved.
CHAPTER 11 LEARNING OBJECTIVES
After studying this chapter, you should be able to:
5. Discuss how alliances perform.6. Explain why firms undertake acquisitions
and what performance problems they tend to encounter.
7. Articulate what you can do to make global alliances and acquisitions successful.
© 2013 Cengage Learning. All rights reserved.
LO1: DEFINE ALLIANCES AND ACQUISITIONS
Strategic Alliances
Voluntary agreements of cooperation between firms involving exchange, sharing or co-developing products, technologies, or services.
© 2013 Cengage Learning. All rights reserved.
LO1: DEFINE ALLIANCES AND ACQUISITIONS
LO1: STRATEGIC ALLIANCES
Contractual alliances – associations between firms that are based on contract, with no sharing of ownership.
Co-marketing Research and development (R&D) Contracts Turnkey projects Strategic suppliers Strategic distributors Licensing/franchising
© 2013 Cengage Learning. All rights reserved.
LO1: STRATEGIC ALLIANCES
Equity-based alliances – based on ownership or financial interest between firms.
Strategic investment Cross-shareholding Joint ventures
© 2013 Cengage Learning. All rights reserved.
LO1: MERGERS AND ACQUISITIONS
Merger – combination of operations and management of two firms to establish a new legal entity;
accounts for only 3% of all M&As.
Acquisition – transfer of the control of operations and management from
one firm (target) to another (acquirer).
© 2013 Cengage Learning. All rights reserved.
LO1: MERGERS AND ACQUISITIONS
© 2013 Cengage Learning. All rights reserved.
LO2: INFLUENCE OF INSTITUTIONS
© 2013 Cengage Learning. All rights reserved.
LO2: FORMAL INSTITUTIONS
Antitrust concerns – antitrust authorities more likely to approve
alliances than acquisitions.
Entry requirements – many governments place limitations on foreign firm’s mode of entry.
© 2013 Cengage Learning. All rights reserved.
LO2: INFORMAL INSTITUTIONS
Normative pillar –firms copy other reputable organizations
to establish legitimacy.
Cognitive pillar – internalized, taken-for-granted values that
guide alliances and acquisitions.
© 2013 Cengage Learning. All rights reserved.
LO2: RESOURCES AND ALLIANCES
Alliances must create value.
© 2013 Cengage Learning. All rights reserved.
LO2: RESOURCES AND ALLIANCES
Alliances can decrease value.
© 2013 Cengage Learning. All rights reserved.
LO2: RESOURCES AND ALLIANCES
Rarity – relational (collaborative) capabilities, the ability to manage inter-firm
relationships, may be rare.
© 2013 Cengage Learning. All rights reserved.
LO2: RESOURCES AND ALLIANCES
Inimitability: Alliances may make it easier to observe
imitate firm-specific capabilities. Learning race – a race in which
partners aim to learn the other’s tricks.
Trust and understanding between allies is difficult to imitate.
© 2013 Cengage Learning. All rights reserved.
LO2: RESOURCES AND ALLIANCES
Organization – some successful alliances are organized in a way that is difficult to replicate.
© 2013 Cengage Learning. All rights reserved.
LO2: RESOURCES AND ACQUISITIONS
Value: Nearly 70% of acquisitions fail. Only identifiable group of winners is
shareholders of target firms. Rarity:
For acquisitions to add value, one or all of the firms involved must supply rarity to the acquisition.
© 2013 Cengage Learning. All rights reserved.
LO2: RESOURCES AND ACQUISITIONS
Inimitability: Firms that excel in post-acquisition
integration possess hard-to-imitate capabilities.
Organization: How are merged firms organized to take
advantage of benefits of acquisition while minimizing the costs?
Strategic fit Organizational fit
© 2013 Cengage Learning. All rights reserved.
LO3: FORMATION OF ALLIANCES
© 2013 Cengage Learning. All rights reserved.
LO3: FORMATION OF ALLIANCES – STAGE ONE
Can growth be achieved strictly through market transactions, acquisitions, or alliances?
To grow through market transactions, the firm must independently confront competitive challenges. Acquisitions have unique drawbacks.
© 2013 Cengage Learning. All rights reserved.
LO3: FORMATION OF ALLIANCES – STAGE TWO
Contract or equity approach?
Equity relationship allows firms to learn tacit capabilities. Equity relationships allow firms to have some control over joint activities. Contracts do not.
© 2013 Cengage Learning. All rights reserved.
LO3: FORMATION OF ALLIANCES – STAGE THREE
Specify a format that is either equity- or contract-based.
© 2013 Cengage Learning. All rights reserved.
LO4: DISSOLUTION OF ALLIANCES
© 2013 Cengage Learning. All rights reserved.
LO5: PERFORMANCE OF ALLIANCES
Four key factors:
Equity Greater equity stake may mean firm is more
committed, likely to result in higher performance.
Learning and experience Has a firm successfully learned
from its partners? Experience often used as a proxy.
© 2013 Cengage Learning. All rights reserved.
LO5: PERFORMANCE OF ALLIANCES
Four key factors:
Nationality Dissimilarities in national culture may create
strains in alliances.
Relational capabilities Alliance performance may
fundamentally boil down to soft, hard-to-measure relational capabilities.
© 2013 Cengage Learning. All rights reserved.
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LO6: WHY MAKE ACQUISITIONS?
Reduce Value
Add Value
© 2013 Cengage Learning. All rights reserved.
LO6: WHY MAKE ACQUISITIONS?
Reduce Value
Add Value
© 2013 Cengage Learning. All rights reserved.
LO6: ACQUISITION FAILURES
© 2013 Cengage Learning. All rights reserved.
LO6: CROSS-BORDER ACQUISITION FAILURES
© 2013 Cengage Learning. All rights reserved.
LO7: MAKING GLOBAL ALLIANCES AND ACQUISITIONS SUCCEED
© 2013 Cengage Learning. All rights reserved.
DEBATE: ACQUISITIONS vs. ALLIANCES
Acquisitions: One-off deals. Must incorporate both the good and bad parts of the acquired firm.
Alliances: Cost less. Allow for learning opportunities from working together.
© 2013 Cengage Learning. All rights reserved.