E2, Ch 9: Strategic Alliances, M&As Flashcards
build
internal organic growth through development
borrow
external growth through a contract/strategic alliance
buy
external growth through acquiring new resources/capabilities/competencies
when there is a strategic resource gap, first we must ask how relevant are internal resources?
if the relevance is HIGH…
if the relevance is LOW…
…we BUILD internal development
…we consider how trade-able the resources we want are
if our internal resources are of low relevance, we then ask how trade-able are the resources we want?
if trade-ability is HIGH…
is trade-ability is LOW…
…we BORROW through a strategic alliance
…we consider how close we are to a resource partner
if trade-ability is low, we consider how close we are to a resource parter.
if closeness is HIGH…
if closeness is LOW…
…we consider how well we can integrate with the target firm
…we BORROW through strategic alliance
if we ARE close to a resource partner, we must consider how well we can integrate with a target firm?
if integration is HIGH…
if integration is LOW…
…we acquire/buy
…revisit build-borrow-buy options/reformulate strategy
internal resources are relevant if… (2)
they are SIMILAR to what the firm needs
they are SUPERIOR to those of competitors (VRIO helps determine superiority)
tradability implies the resource can be sourced through a contract that..
transfers ownership or allows use of resource
moderate closeness can be achieved through… (2)
equity alliances & joint ventures
M&As are complex and costly; they should be used only when
extreme closeness is needed
consider borrowing (strat alliance) BEFORE M&A
conditions required for integrating a target firm through mergers and acquisitions (M&As) (2)
- low relevancy and tradability
- high need for closeness
strategic alliance
voluntary arrangement between firms involves sharing of knowledge, etc. to develop processes/products
why do firms enter strategic alliances? (5)
- strengthen competitive position
- enter new markets
- hedge against uncertainty
- access critical complementary assets
- learn new capabilities
firms wish to strengthen competitive position by (2)
- changing industry structure in firm’s favor
- influencing standards
firms wish to hedge against uncertainty through
a real-options perspective
firms wish to access critical complementary assets such as
marketing/manufacturing/after-sale service
firms which to learn new capabilities through (2)
- co-opetition: cooperation among competitors
- learning races: a firm that learns more quickly is motivated to exit
real options perspective
larger investment broken down into smaller decisions allowing firm to obtain information in stages, at each stage deciding whether to make further investment
alliance management capability includes 3 key tasks
- partner selection and alliance formulation
- alliance design and governance
- post-formation alliance management
although alliances seem to be necessary, between __% and __% are not successful
30, 70
alliances can be governed by the following 3 mechanisms
- non-equity alliance
- equity alliance
- joint venture
non-equity alliance
based on contract; most knowledge; explicit knowledge exchanged
(ex. licensing or distribution agreement)
equity alliance
one partner takes partial ownership of another
- governed through equity investment
- middle of the road
