Chapter 14 Flashcards
Global strategies:
Strategies utilising resources and operations spread across the world
Types of advantages for global firms
- Global scale
- Global arbitrage
- Global knowledge integration
- Global clients
- Risk diversification
Global scale (advantage)
Reduce costs in product development, production, procurement and distribution
Global Arbitrage (advantage)
Access a wider range of inputs, including labour, natural resources, and capital
Global knowledge integration (advantage)
Engage innovation boy tapping unto and integration knowledge resources
Global clients (advantage)
Deliver consistent services for clients operating in multiple countries
Risk diversification (advantage)
Reduce the corporate risk profile
Economies of scale:
Reduction in unit costs achieved by increasing volume
Arbitrage:
Exploitation of differences in prices in different markets
Overseas listing:
Raising capital by listing on a stock exchange abroad
Centres of excellence:
Specialized centres for innovation that serve the entire MNE
Global key accounts:
Customers served at multiple sites around the world, based on a centrally
negotiated contract
Risk diversification:
Reduction of the risk profile of a company by investing in different countries
and industries
Organic growth:
Setting up new operations by relying primary on the existing resources of the
firm
Organic growth (opportunity and challenge)
Opportunity: Growing and sharing the firmÄs internal resources
Challenge: Speed of growth limited by existing resources
Growth via partnership: (opportunity and challenge)
Opportunity: Access to wide range of complementary resources
Challenge: Coordination across divers partnerships
Growth via acquisition (opportunity and challenge)
Opportunity: Control over acquired resources
Challenge: Integration of acquired units and across them
Partnerships:
Collaborations with other firms offering complementary resources
Operational collaboration:
A firm of strategic alliance that includes collaboration in operations,
marketing or distribution
R&D JV:
Joint venture aiming to develop next generation technologies
Business unit JV:
A JV in which existing business units from two firms are merged
M&A:
Popular shorthand for ‘merges and acquisitions’
Acquisition:
The transfer of the control of operatives and management from one firm (target) to
another (acquirer), the former becoming a unit of the latter
Merger:
The combination of operations and management of two firms to establish a new legal
entity
Cross-border M&As:
M&As involving companies based in different countries
Carve-out acquisitions:
Acquisitions of parts of another company that previously were not
clearly defined organisational units
=> selling non-essential divisions helps companies to focus and improve efficiencies as well as profitability
Motives for acquisitions:
Synergistic motives
Hubris motives
Managerial motives
Synergistic motives
- Leverage superior organizational capabilities
- Enhance market power
- Reduce costs by eliminating duplicate units and exploiting scale economies
- Access to complementary resources
- Tax avoidance effects, for example by moving the company to a location with lower corporate taxation
=> Value created by combining two organizations that together are more valuable than the two organizations separately
Hubris motives
Managers’ overconfidence in their own capabilities
Managerial motives
Self- interested actions, such as prestige, empire building and bonuses
Due diligence:
The assessment of the target firm’s financial status, resources and strategic fit
=> investigating, verifying and analyzing a deal, before finalising it
Strategic fit:
The effective matching of complementary strategic capabilities
Organizational fit:
The similarity in cultures, systems and structures
Post-acquisition integration:
The process that aims to integrate two formerly independent firms
after an acquisition
Input foreclosure:
Practice of a vertically integrated form to cut off a competitor from key
suppliers
Output foreclosure:
Practice of a vertically integrated firm to cut off a competitor from key
customers
Acquisition premium:
The difference between the acquisition price and the market value of target firms
Divestments:
Sales or closure of business units or assets
Divestment (or divestiture) involves a company reducing its scope by getting rid of parts of its business
Globalfocusing:
A strategic shift from diversification to specialisation which increases the
international profile
Static efficiency:
Benefit to consumer without considering technological change or new entities
=> Good services are produced at minimum cost while consumer welfare is maximised without focusing on long-term innovation or technological changes
Dynamic efficiency:
Benefits created in the long run considering technological change and new
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