8. Aquisitions

Question 1

What is Organic Development?

Answer 1

Where a strategy is pursued by building on own capabilities or developing an organization’s capability further. This is essentially the ‘do it yourself’ method.

Question 2

What are the advantages of Organic Development?

Answer 2

Knowledge and learning can be enhanced spreading investment over time makes it easier to finance no availability constraints strategic independence and less risk of a culture clash.

Question 3

What are Mergers and Acquisitions (M&A)?

Answer 3

Mergers and acquisitions are concerned with the combination of two (or more) organizations. An acquisition is achieved by purchasing a majority of shares in a target company. A merger is the combination of two previously separate organizations to form a new company.

Question 4

What are the strategic motives for M&A?

Answer 4

Extension of the reach of a firm in terms of geography products or markets. Consolidation to increase scale efficiency and market power. Enhancing technological know-how or other capabilities.

Question 5

What are the financial motives for M&A?

Answer 5

Financial efficiency tax efficiency and asset stripping or unbundling.

Question 6

What are the managerial motives for M&A?

Answer 6

Personal ambition and bandwagon effects.

Question 7

What are strategic alliances?

Answer 7

Strategic alliances/partnerships are an additional way for cooperation. They include scale alliances access alliances complementary alliances and collusive alliances.

Question 8

What are the types of strategic alliances in terms of ownership?

Answer 8

Equity alliances involve the creation of a new entity that is owned separately by the partners involved (Joint Venture). Non-equity alliances are typically looser alliances without the commitment implied by ownership.

Question 9

What are the key factors in choosing the method of strategy development?

Answer 9

Urgency/ uncertainty/ type of capabilities and modularity of capabilities.

Question 10

What are the key elements in managing M&A and alliances?

Answer 10

Strategic fit organizational fit correct valuation appropriate integration and appropriate exit strategies.

Question 11

What are the key takeaways of M&A and alliances?

Answer 11

There are three broad methods for pursuing a growth strategy: mergers and acquisitions strategic alliances and organic development. Acquisitions can be hostile or friendly. Motives for mergers and acquisitions can be strategic financial or managerial. The acquisition process includes target choice valuation and integration. Motives for strategic alliances include scale access complemen