When to Ally and When to Acquire Flashcards
T or F: Because 82% of US companies (interviewed) believe that acquisitions and alliances are two different ways of achieving the same growth goals, these companies also considered the alternative the last time they executed an alliance or acquisition
False
only 24% considered alternative
even worse, only 14% had specific policy guidelines/criteria for choosing between the two
What are the three general important factors to consider in choice of alliance or acq?
- Synergies
- Resources
- Marketplace
What are the 4 growth options (with another company)?
- merger
- acquisition
- equity alliance
- non-equity alliance
Three kinds of synergies?
- Modular
- Sequential
- Reciprocal
modular synergies
when they manage resources independently and poo! only the re-sults for greater profits.
Modularly interdependent resources generate modular synergies
Example: An airline and a hotel chain plan a collaboration that will allow hotel guests to earn frequent flyer miles,
sequential synergies
Firms derive sequential synergies when one company completes its tasks and passes on the results to a partner to do its bit.
The resources of the two firms are sequentially interdependent.
Example: when a biotech firm that specializes in discovering new drugs, like Abgenix, wishes to work with a pharmaceutical giant that is more familiar with the FDA approvals process, such as AstraZeneca
reciprocal synergies
Firms generate reciprocal synergies by working closely together and executing tasks through an iterative knowledge-sharing process.
Not only do firms have to combine resources, but they have to customize them a great deal to make them reciprocally interdependent.
what kind of partnership: modular synergies?
non-equity alliances
what kind of partnership: sequential synergies?
equity alliances
what kind of partnership: reciprocal synergies?
acquisitions
merger
A merger occurs when two separate entities combine forces to create a new, joint organization.
what is a key takeaway with regards to alli or acq?
knowing when to use which strategy may be a greater source of competitive advantage than knowing how to execute them
what are the kinds of resources that you need to consider when picking alli or acq? (3)
- Hard resources
- Soft resources
- Extent of redundant resources
What are the four market factors that you need to consider?
- Technology related uncertainties
- Product related uncertainties
- Customer adoption risks
- Competitive landscape
what kind of partnership: low relative value of soft to hard resources (ie more hard resources)?
non-equity alliances
