Chapter 8: Strategic Alliances Part 1 Flashcards
Strategic Alliance
def
- When two or more businesses form a partnership for a business venture or a project for mutual benefits
- Share resources, customers and knowledge on technology to gain competitive advantage
Advantage
Easily Enter a New Market
- Share exposure and customer and spend less on marketing their presence
- Have access to supplier
Advantage
Reduce Number of Competitors
- Work alongside rather than against
- Become less vulnerable especially when they are new in the market
Disadvantage
Take on weakness of partner
- Lack of management expertise, unmotivated staff or high costs
Disadvantage
Increased conflict over decisions making
- Decision over allocation of business resources
Outsourcing
- The practice of hiring a third party to perform some business functions
Acquisition
- Is a corporate action where a company buys most of another firm’s ownership stakes to assume control of it
Hostile Acquisition
- Purchase attempted without the consent of existing directors and management
Tender Offer
- Propose to buy at a fixed price higher than the market rate to motivate shareholders to sell their share
Buy Through Stock Market
- Buy enough shares through the stock market to control the company
Proxy Fight
- Persuade enough shareholders to vote to replace the management with one that will approve the acquisition
Bear Hug
- Make an offer through public announcement to buy company’s board and take over the company without approaching the board of directors first
- This is to force the board of directors to accept offers they may not like through pressure and media
Friendly Acquisition
- Purchase of majority of shares is part of an agreed and consented negotiation of board of directors, and full disclosure to existing shareholders
Joint Venture
- Businesses involved form a new independent company using resources from all alliance partners and each partner owns a percentage of the new merged company
- New company for joint venture or a short term project
- Partner with local partner of target country: knowledge of culture, consumers preferences, laws and regulations
Merger
- When shareholders of two companies becomes shareholder of a new merged company
H - When 2 companies produces similar goods in the same industry merges
V - When 2 firms of different stages produces the same good merges
Conglomerate - When 2 firms that operates in different industry merges
Franchising
- An arrangement where franchisor provides a licensed privilege to franchisee the rights to use its trademark and business systems to operate a business
Franchisor
- Expand at a lower cost
- Enjoy franchising fees and royalty
Franchisee
- Immediately start a business at lower risk using brand recognition of an established company and proven business model
Disadv:
- Both can interfere with one another, hence lack of control
