Corporate strategy, strategic alliances, mergers and acquisitions Flashcards

1
Q

What is the Build-Borrow-or-Buy Framework?

A

A corporate strategy tool that helps companies decide whether to build capabilities internally, borrow them through partnerships, or buy them by acquiring another company.

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2
Q

Give an example of when a company might choose to build.

A

A tech company developing its own artificial intelligence software internally to maintain full control over the technology.

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3
Q

When should a company choose to build capabilities internally?

A

When the company has the necessary in-house resources, knowledge, and time; when protecting proprietary technology is critical.

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4
Q

When should a company choose to borrow resources?

A

When the company lacks time, expertise, or resources to build internally but prefers not to acquire another company, or when flexibility is needed.

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5
Q

Provide an example of a borrowing scenario.

A

A pharmaceutical company forming a joint venture with a biotech firm to access advanced drug development technology.

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6
Q

When is it appropriate for a company to buy capabilities?

A

When immediate access is needed, the capabilities are critical to the long-term strategy, or it is more cost-effective than building or borrowing

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7
Q

Example of a buying scenario.

A

A consumer goods company acquiring a small startup that has developed a new innovative product line.

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8
Q

What does relevance mean in the Build-Borrow-Buy Framework?

A

The degree to which a firm’s internal resources can address the resource gap effectively.

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9
Q

What is tradability in the context of the Build-Borrow-Buy Framework?

A

The ability to obtain needed resources through external agreements or contracts, allowing for ownership transfer or use.

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10
Q

Define closeness regarding resource partners in the Build-Borrow-Buy Framework.

A

The proximity needed to the external resource partner, which can be achieved through equity alliances or joint ventures.

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11
Q

What role does integration play when considering a buy option?

A

It assesses how well the targeted firm can be integrated if acquired, particularly under conditions of low relevance and high need for closeness.

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12
Q

What are strategic alliances?

A

Formal agreements between two or more companies to collaborate on specific business objectives while remaining independent.

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13
Q

Why do companies enter strategic alliances?

A

To strengthen competitive positions, enter new markets, hedge against uncertainty, access complementary assets, and learn new capabilities.

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14
Q

What are the three types of strategic alliances?

A

Non-equity alliances (contractual partnerships)
Equity alliances (partial ownership)
Joint ventures (new, jointly owned entities)

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15
Q

What is essential for successful alliance management?

A

Partner compatibility, trust, and ensuring that expected benefits exceed costs

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16
Q

What is the goal of post-formation alliance management?

A

To create VRIO (Value, Rarity, Imitability, Organization) resource combinations that lead to competitive advantage.

17
Q

What is a merger?

A

The joining of two independent companies to form a combined entity, usually through a friendly process.

18
Q

Why do firms pursue horizontal integration through mergers?

A

To reduce competitive intensity, lower costs, and increase differentiation.

19
Q

What is an acquisition?

A

The purchase of one company by another, which can be friendly or hostile.

20
Q

Why do firms engage in acquisitions?

A

To access new markets and distribution channels, overcome entry barriers, access new capabilities, and preempt rivals.

21
Q

What are some common issues associated with M&A?

A

Many M&A deals do not create competitive advantage, often failing to realize anticipated synergies and potentially destroying shareholder value.

22
Q

What was a key factor in the failure of the DaimlerChrysler merger?

A

A lack of integration, leading to missed synergies and a persistent cultural clash between the two companies.

23
Q

What lessons can be learned from the DaimlerChrysler case?

A

The importance of addressing cultural differences, achieving operational integration, and the need for strong leadership in mergers.