Intercompany relationships

Question 1

Explain the differences between horizontal, vertical, and diagonal intercompany
relationships by means of examples.

Answer 1

1. Vertical connection (Supplier - Company - Competitor); HERE (map provider) - Bosch and BMW (OEM)
2. Horizontal connection (Company - Competitor_) - BMW and Daimler mobility services cooperations (joint venture with regard to digital services), but compete while making cars.
3. Diagonal connections (Company - Industry outsiders) HERE: Intel has invested in HERE.

Question 2

Name tree options/instruments to establish intercompany relationships via behavioral
coordination

Answer 2

1. Agreements:
   - cooperation agreements;
   - control agreements;
   - profit transfer agreements;
2. Supervisory bodies
3. Family relations

Question 3

Name tree options/instruments to establish intercompany relationships via structural
change.

Answer 3

1. Joint companies
2. Shareholdings :
   - minority shareholding
   - blocking minority shareholdings;
   - majority shareholdings
3. Asset aquisition

Question 4

Explain the tree forms of agreements that are typically applied in intercompany
relationships

Answer 4

• cooperation agreements;
• control agreements;
• profit transfer agreements;

Question 5

Explain two options for companies to invest in other companies.

Answer 5

• Invest in the existing subsidiary of the partner;
• Joint investment in an existing, third - party company
• Foundation of a new, legally independant conmpany

Question 6

Name the 5 objectives of intercompany connections.

Answer 6

• Share risks
• Combine resources
• Improve market position
• Reduce costs
• Shorten periods

Question 7

Explain the procedure for entering into intercompany relationships.

Answer 7

1. Strategy development ( Choice of the type of cooperation, target partner profile)
2. Screening (preselection of companies)
3. Due Diligence ( SWOT of preselected company)
4. Negotiation (Purchase price, purchase conditions, legal and tax regulations,
   banks, antitrust authorities)
5. Transaction execution (Purchase or exchange of shares)
6. Integration ( Integration of organization, corporate culture, production, data
   processing)
7. Controlling (Control of the integration process, documentation of lessons
   learned)

Question 8

Explain the difference between cooperation and concentration

Answer 8

• Cooperation (laison of 2 or more companies, economic and leagaly independent):
  business associations
• Concentraion (economic independence is lost)

Question 9

Explain the difference between cooperation and concentration

Answer 9

- Cooperation (laison of 2 or more companies, economic and leagaly independent): 
business associations;
consortium;
cartels;
franchise companies;
cooperatives;
joint ventures;

• Concentraion (economic independence is lost):

corporate groups;
merged companies;

Question 10

Positive/ Negative on Competition

Answer 10

Positive:

• If there is a dominant player in the market and second is small, while joining - positive effect
• Standards - product quality + another company can use a standart;
• New product can be developed by joining recources and competencies of different companies : cooperation increases number of products.

Negative:

• If relationship leads to dominant position - negative effect
• If companies with similar products cooperate - product variety will shrink.

Question 11

Cartels

Answer 11

Want to maximise the profit of the companies in cartel.

They rely on what they promised to do.

• price cartel
• quantity cartels
• Condition cartel
• Submission cartel
  regional cartel

Question 12

Franchise company

Answer 12

Work with legaly independent franchisees:

Legal independence - yes; Economic - a bit bound to each other

McDonalds
Eismann
Subways
Dunkin Donuts

Question 13

Cooperatives

Answer 13

In a cooperative, operational subfunctions are performed for all members of the
cooperative:

Question 14

Joit venture

Answer 14

Legal Independence and Economic Independence

Company A + Company B = Joint venture

Question 15

Corporate groups/ Group of companies

Answer 15

Legaly independant; Economically dependant

1. Parent company: 1 or more companies (subsiduries), which are dependent on the parent company and its management/ Involved in day - to - day operation
2. Holding company group: holds enough shares of the another company, that it can control policies, oversee management decision. Not involved in day-to-day policies, but influence strategies.

Management holding - to have impact on the business, set targets.

Financial holding - investment, does it make sense to resell

Strategy holding - influence the strategy