Strategic Alliances, Mergers and Acquisitions Flashcards
What is strategy in a business context?
A plan of action designed to achieve a long-term or overall aim.
How do firms achieve growth?
hrough the Build-Borrow-Buy framework:
Build: Internal organic growth through development
Borrow: External growth via contracts/strategic alliances
Buy: Acquiring new resources, capabilities, and competencies
What are the main issues in the Build-Borrow-Buy framework?
Relevancy: Suitability of existing internal resources
Tradability: Availability of targeted resources externally
Closeness: Proximity needed to external partners
Integration: Ability to integrate acquired firms
What defines relevant internal resources?
Resources that are similar to or superior to those needed to address a resource gap.
How can firms support borrowing resources?
Through contracts that transfer ownership or allow the use of resources, such as licensing and franchising.
What types of alliances achieve closeness?
Equity alliances and joint ventures.
When are mergers and acquisitions (M&As) typically pursued?
When extreme closeness is necessary, despite their complexity and cost.
What are strategic alliances?
Voluntary arrangements between firms to share knowledge, resources, and capabilities.
Why do firms enter strategic alliances?
To strengthen competitive position, enter new markets, hedge against uncertainty, access complementary assets, and learn new capabilities.
What are the three types of strategic alliances?
non-equity alliances: Partnerships based on contracts
Equity alliances: Partial ownership between partners
Joint ventures: Standalone organizations jointly owned by companies
What are the stages of alliance management capability?
Partner selection and alliance formation
Alliance design and governance
Post-formation alliance management
What is essential for post-formation alliance management?
Creating VRIO resource combinations through relationship-specific investments, knowledge-sharing, and trust.
What is the difference between a merger and an acquisition?
A merger combines two independent companies into a single entity, usually friendly, while an acquisition involves purchasing one company by another, which can be friendly or hostile.
Why do firms pursue horizontal integration?
To reduce competitive intensity, lower costs, and increase differentiation by merging with competitors.
What are common reasons for firms to acquire other firms?
To access new markets, overcome entry barriers, acquire new capabilities, and preempt rivals.
