inter-firm relationships

Question 1

Inter-firm relationships

Answer 1

Connections, collaborations, and interactions between different companies or organizations.

Types include supplier and buyer relationships, strategic alliances, joint ventures, licensing and franchising, and mergers and acquisitions.

Aimed at achieving mutual benefits, such as cost reduction, quality improvement, innovation, market expansion, and resource sharing.

Play a crucial role in accessing resources, sharing knowledge, reducing costs, mitigating risks, and capitalizing on opportunities in the business landscape.

Question 2

Joint venture characteristics

Answer 2

Combination of assets from two or more parent firms placed into a separate business entity

Limited scope and duration

May not affect competitive relationships

Examples: R&D, joint production of single product
(Toyota and Mazda 2018)

(JV timing similar to M&As (correlation over 0.95) – driven by same factors affecting total investment activity)

Question 3

motives of joint venture

Answer 3

– Knowledge acquisition is goal of at least 50% of JVs
– best for “learning by doing” with complex processes
– Risk reduction
– expansion of activities with smaller required investment
– International aspects
– reduces risk of foreign expansion (some nations require firms to take a local partner)

Question 4

Joint venture, Reasons for failure (70% disbanded early)

Answer 4

– Technology never developed
– Inadequate preplanning
– Disagreement over basic objectives
– Managers refuse to share expertise with counterparts from other firm

Question 5

joint venture, Requirements for success

Answer 5

– Participants have something of value to JV
– JV should be carefully pre-planned
– Agreement should provide flexibility
– Should include provisions for termination
– Key executives involved in implementation

Question 6

Strategic Alliance characteristics

Answer 6

– Informal or formal agreement between two or more firms to cooperate in some way
– Created due to industry uncertainty and ambiguity. Changes in value chains, new technology, etc.
– Need not create new entity
– Relative size of firms may be highly unequal
– Difficult to anticipate consequences
– relationships between partners evolve, firm boundaries blur
– Firms pool resources and expertise hoping for synergy from learning capabilities, etc.
– Allow firms much flexibility

Question 7

explain the Strategic alliances Example: Uber – Spotify (2014)

Answer 7

Uber’s partnership with Spotify allows users to connect to their Spotify accounts and stream their favourite tunes while riding in an Uber.
Creates a more personal connection for Uber riders, and gives the firm a new competitive advantage over other ride sharing offerings.
From a strategic marketing and public relations standpoint, both parties win.
Uber and Spotify are both able to increase their reach to various audiences, while increasing brand recognition and awareness, and capitalizing on the benefits each brand has to offer.

Question 8

strategic alliances Requirements for success

Answer 8

– Well defined strategic objectives
– Organization relationships should facilitate communication to share decision making
– High level management should be involved
– There must be positive incentives to overcome tension
– SA governance must adapt to different types of alliances
– SAs must seek out growth opportunities to augment core capabilities

Question 9

summary of Acquisitions

Answer 9

– Rapid augmentation of firm capabilities
– Consequences are long lasting
– Often costly due to takeover premium
– Challenges of combining organizations

Question 10

summary of joint ventures

Answer 10

– Reduce relative size of investments and risks
– Create new entities and relationships
– Can develop learning and new opportunities

Question 11

summary strategic alliances

Answer 11

– Broaden range of potential opportunities
– Relationships are more ambiguous
– greater need for communication

Question 12

Rationale for investor in Minority equity investments

Answer 12

– Investments in promising start-ups can yield high returns and substantial long term benefits
– Information source about growth opportunities
– Method for learning about industries and firms
– Identification of new managerial talent
– May expand markets for investor’s products

Question 13

Rationale for recipient in Minority equity investments

Answer 13

– May gain knowledge from investing firm
– Increases financing resources
– May bring visibility

Question 14

examples of Minority equity investments

Answer 14

– Microsoft’s investment in Dell (2013) - PCs
– Google’s minority investment in Lending Club (2013) – peer to peer lending
– Walmart’s investment in JD.com (2016) - Chinese online grocery retailer

Question 15

what are Licensing agreements

Answer 15

– Method of expanding market for firm’s product, or gaining acceptance for new product
– Licensee may gain by adding successful product
– High immediate returns for licensor in market, but may create future competitor
– Typically used for clothes, luxury goods, food, software

Example: disney licencing

Question 16

what is co-branding

Answer 16

Co-branding means using two brand names on the same product

The point of co-branding is to combine the market strength, brand awareness, positive associations, and cachet of two or more brands to compel consumers to pay a greater premium for them.
It can also make a product less susceptible to copying by private-label competition.

Example. Nike+: A Nike Inc and Apple Inc partnership that has connected activity tracking technology in athletic gear withiPhone apps and the Apple Watch.

Question 17

what is franchising

Answer 17

> Contracts between franchisor (parent) and franchisee that grant rights to use name, brand, etc. within specific area
Widely used in geographically dispersed industries (e.g. Nisa, McDonald’s)
Reduces monitoring costs – franchisees’ returns are tied to performance
Potential conflicts
– Franchisor has risk of franchisee not conforming to standards
– Franchisee may prefer to use different vendors
– Disagreements with respect to size of franchisee’s exclusive area

Example: McDonald’s