© 2013 cengage learning. all rights reserved. chapter 11 global2 peng © kevin lee/bloomberg via...

© 2013 Cengage Learning. All rights reserved.

CHAPTER 11

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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.


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.


LO1: DEFINE ALLIANCES AND ACQUISITIONS

Strategic Alliances

Voluntary agreements of cooperation between firms involving exchange, sharing or co-developing products, technologies, or services.


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


LO1: STRATEGIC ALLIANCES

Equity-based alliances – based on ownership or financial interest between firms.

Strategic investment Cross-shareholding Joint ventures


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).


LO1: MERGERS AND ACQUISITIONS


LO2: INFLUENCE OF INSTITUTIONS


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.


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.


LO2: RESOURCES AND ALLIANCES

Alliances must create value.



Alliances can decrease value.



Rarity – relational (collaborative) capabilities, the ability to manage inter-firm

relationships, may be rare.



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.



Organization – some successful alliances are organized in a way that is difficult to replicate.


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.


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


LO3: FORMATION OF ALLIANCES


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.


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.


LO3: FORMATION OF ALLIANCES – STAGE THREE

Specify a format that is either equity- or contract-based.


LO4: DISSOLUTION OF ALLIANCES


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.


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.


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LO6: WHY MAKE ACQUISITIONS?

Reduce Value

Add Value


LO6: ACQUISITION FAILURES


LO6: CROSS-BORDER ACQUISITION FAILURES


LO7: MAKING GLOBAL ALLIANCES AND ACQUISITIONS SUCCEED


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. chapter 11 global2 peng © kevin lee/bloomberg via...

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