Ch. 9: Alliances, Mergers, Acquisitions (Corporate)

real options perspective

approach to strategic decision making that breaks down a larger investment decision into smaller decisions that are staged sequentially over time allowing the firm to gain additional information.

build borrow or buy framework

conceptual model that aids strategists in deciding whether to pursue internal development, enter a contract arrangement, or acquire new resources, capabilities, or competencies

co-opetition

cooperation by competitors to achieve a strategic objective

corporate venture capital

equity investments by established firms in entrepreneurial ventures

explicit knowledge

knowledge that can be codified, information, facts, instructions

tacit knowledge

knowledge that can not be codified, knowing how to do a certain task

non-equity alliance

partnership based on contracts between the firms. Supply agreements, licensing agreements.

equity alliance

partnership in which at least one partner takes ownership in the other

alliance manager

provides alliance training and development

benefits of horizontal integration

reduced competition in industry, lower costs, increased differentiation

alliance leader

responsible for day to fay management, possesses technical knowledge

alliance champion

responsible for high level support and oversight

learning races

situations which both partners in a strategic alliance are motivated to form an alliances for learning, but the rate at which the firms learn may vary. The firm who accomplishes its goal first is likely to exit the alliance.

relational view of competitive advantage

strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries

merger

the joining of two independent companies to form a combined entity

horizontal integration

the process of merging with competitors, leading to industry consolidation

acquisition

the purchase or take over of one company by another, can be friendly or unfriendly

gain access to new markets, new capabilities, or preempt rivals

Why do firms do acquisitions?

strengthen competitive position, enter new markets, hedge against uncertainty, access critical complementary assets, learn new capabilities

Why do firms enter strategic alliances

alliance management capability

a firm's ability to manage three alliance related tasks; partner selection, alliance design and governance, and post formation alliance management

managerial hubris

a form of self delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary

strategic alliances

a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products or services

hostile take over

acquisition in which the target company doesn't wish to be acquired