The Case of Forbes Marshall
Case 5 – Forbes Marshall
1.Why did FM engage in alliances instead of acquisitions? Does their practice in alliance represent alliance management capabilities? An alliance is an approach which allows two companies to pool their resources together together to form a combined force in the marketplace. By engaging in alliances FM was able to retain their individual entity but compete against competitors as a larger, unified business force with the alliance. An acquisition would see FM absorbing the other company. Alliances are less risky than acquisitions as they are negotiable, co-operative and easier to walk away from. They bringing two firms together with mutual interests but different strengths to work on projects to benefit both. FM’s strengths lie in their interpersonal relationships. Due to FM’s value-focused approach to building their ability to managing alliances and consistency, they have seen success in their alliances.
2. Why did FM acquire a stake in Codel instead of allying with them? There a number of factors which contributed to this. Unlike FM’s other allies, Codel was a relatively small and young company, with an already established liaison office in India. The company had proved to be open to sharing technology, based on trust. Trust and personal
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3. What are the synergies across alliances?
Marketing & Sales – Spirax’s sales strategy of selling an item to provide payback to its customer. This positioning of making the customers feel like they need the products brought success to the alliances. There was heavy customer interaction and personal relationships involved. Logistics – As FM was slow in processing small orders and inefficient, the alliance helped them improve their speed and inefficiencies. Research & Development and Manufacturing – The alliance enables a two-way technology transfer and the opportunity to hire and grow with skilled workers from top institutions.
Management Control Systems – FM replicated the highly effective management systems of Spirax Marshall.
4. Should FM ally with Spirax in other countries, expand itself or grow through acquisition? In markets which are characterized by high entry barriers such as regulatory constraints, establish competitors and are highly volatile, and alliance may be preferred as they will allow FM to leverage the existing knowledge and resources through collaboration. However, when barriers to entry are low, FM can gain a strong foot hold in the market and grow through an acquisition. As FM is strong now, they could also leverage the knowledge they have gained through previous acquisitions and use this to expand in other countries, working of their own brand and they can be successful with continued innovation and investment in Research and development.