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mqm 385

merger
the joining of two independent companies to form a combined entity
acquisiton
the purchase or takeover of one company by another
horizontal integration
process of merging with a competitor at the same stage of the industry value chain
Main reasons for horizontal integration
reduction in competitive industry- takes competition out of the market
lower costs- economies of scale ( larger production) – increase bargaining power
increased differentiation- offer new products
why firms engage in acquisitions
-access new markets and distribution channels
-gain access to a new capability or competency
– preempt rivals
strategic alliances
voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products or services
mangerial hubris
a form of self delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary
reasons for mergers (3)
1-principal agent problems
2- the desire to overcome competitive disadvantage
3-superior acquisition and integration compatibility
relational view of competitive advantage
strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries
why do firms enter strategic alliances
Strengthen competitive position
-Apple vs. Amazon
Enter new markets
-Local partner for global growth
-Microsoft partners with Yahoo on search
Hedge against uncertainty
-Real options approach
–Roche invests in Genentech 1990 & buys it in 2009
Access critical complementary assets
-Pixar partners with Disney
Learn new capabilities
-GM & Toyota (NUMMI) – formed in1984
–Who won the learning race? Probably Toyota….
Governing Strategic Alliances
contract agreements for Non-equity Alliances
-Explicit Knowledge
Equity Alliances
-Tacit Knowledge
-Corporate Venture Capital
Joint Ventures
Non-equity Alliances
partnership based on contracts between firms. the most frequent forms are supply agreements, distribution agreements, and licensing agreements. (explicit)
explicit knowledge
knowledge that can be codified for example information, facts, instructions, recipes. knowing about a process or product
Equity Alliances
partnership in which at least one partner takes partial ownership in the other ( tacit)
tacit knowledge
knowledged that cannot be codified. concerns knowing how to do a certain task. acquired through active particpation.
corporate venture capital (CVC)
equity investments by established firms in entrepreneurial ventures
Joint Ventures
a standalone organization created and jointly owned by two or more paretn companies( both explicit and tacit)
acquiree
company that is being taken over
acquirer
company that is taking over another company
Alliance Management Capability
a firms ability to effectively manage three alliance-related tasks concurrently, often across a portfolio of many different alliances.

-Partner Selection and Alliance formation
-Alliance Design and Governance
-Post-formation Alliance Management
-Partner Compatibility

Partner Selection and Alliance formation
the expected benefits of the alliancne must exceed its cost.
partner capatibility
the cultural fit between different firms
partner commitment
the willingness to make available necessary resources and to accept short term sacrifices to ensure long term rewards.
Alliance Design and Governance
choose an appropriate governance mechanism from: non-equity contract, equity alliance, or joint venture. inter organizational trust is huge to an alliance success.
Post-formation Alliance Management
the third phase in a firms alliance management capability concerns the ongoing managment of the alliance. sorce of competative advatage.
Build-Borrow-or-Buy framework
conceptial model that aids strategists in deciding whether to pursue internal development(build), enter a contract arrangement or strategic alliance(borrow), or acquire new recorces cap and and competencies (buy)
Globalization
Advantages of Expanding Internationally
Gain Access to a Larger Market- economies of scale
Gain Access to Low-cost Input Factors- raw materials / labor
Develop New Competencies- learn new ideas
Location Economies
location economies
benefits from locating value chain activities in the worlds optimal geographies for a specific activity wherever that may be
Disadvantages of Expanding Internationally
The Liability of Foreignness
Loss of Reputation
Loss of Intellectual Property
CAGE Distance Framework
National Culture (know Hofstede’s dimensions)/Cultural distance
Administrative and Political Distance
Geographic Distance
Economic Distance
national culture
programming of the mind that differentiates human goups
Modes of Entry
Integration Responsiveness Framework
International Strategy
Multi-domestic Strategy
Global-standardization Strategy
Transnational Strategy
Integration Responsiveness Framework
ststrategy framework that juxtaposes the pressuuurs an mne faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advant when competing globally
international strategy
involves leveraging home based cocre competencies by selling the same products or services in both domestic and forign markets
multi domestic strategy
intent that local consumers will perceive them to be domestic companies
global strandariation strategy
to take advantage of economies of scale, produce at cheapest, closest place possible
transnational strategy
attepts to combine the benefits of localization strategy with globalstadadization
Death of Distance Hypothesis
assumption that geographic location alone should not lead to firm level competitive advantage because firms are now more than ever able to source inputs
National Competitive Advantage
worldshisp in specific industries. best cars in Germany, computers in china and twain ect. Australia – mining
Porter’s Diamond Framework(explains national competitive advantage) why some countries are better at things than others
Factor Conditions- natural resources, human capital, ect
Demand Conditions-
Competitive Intensity in Focal Industry
Related and Supporting Industries/Complementors
Public Stock Company
an important institutional rrangement in modern, free-market economies. it provides goods and services as well as employment, pays taxes, and increases the standard of living.
State Charter
issued by the state to a company’s shareholders so it can do business.
Shareholders
owners, who legally own stock in the company
Board of Directors
governs and oversees the firms managment
Management
hire, supervise, and coordinate employees to manufacture products and provide services.
Employees
manufacture products and provide services.
Risk Capital
Limited Liability
the investors are responsible only for the capital specifically invested, not in other investments or personal wealth.
Transferability of Ownership
trading of shares of stock on exchanges such as the NYSE and NASDAQ. Easy transferability.
Legal Personality
the company or non- living entity is regarded as similar to a person with legal rights and obligations
Separation of
Ownership and Control
stockholders are the legal owners of the company, they delegate decision making to managers.
Corporate Governance
system of mechanisms to direct and control and enterprise in order to ensure that it pursues its strategic goals successfully and legally.

Agency Theory (Principal — Agent Conflict)

Board of Directors, Inside Directors, and Outside Directors

Other Governance Mechanisms

Management

Business Ethics

Agency Theory
a theory that views the firm as a nexus of legal contracts
Inside and outside directors
inside- CFO, COO, etc
outside- not employees of the firm. senior executives from other firms or professionals
moral hazard
a situation in which information asymemetry increases the incentive of one party to take undue risk
shared value creation framework
a model proposing that managers have a dual focus on shareholder value creation and value creation for society
global strategy
part of a firms corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world

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