Exam 3 Ch.9

What are the three reasons we still want M&A's?

1. Overcome competitive disadvantage 2. Superior acquisition and integration capability 3. Principle-agent problem

Alliances management capabilities are based on what three phases?

1. Partner selection and alliance formation 2. Alliance design and governance. 3. Post-formation alliance management.

What percent range of all alliances yield disappointing results?

30-70%

What is the Alliance management capability?

A firm's ability to effectively manage 3 alliances related task concurrently.

Who merged in order to overcome competitive disadvantage?

Adidas acquired Reebok in 2006 to more effectively compete with Nike.

What is partner selection and alliance formation?

Ascertain that expected benefits exceeds costs. Must select the best possible alliance partner.

What happens in a equity alliance?

At least one partner takes partial ownership Allow the sharing of tacit knowledge Partners exchange personnel to acquire tactic knowledge. Corporate venture capital Tends to produce stronger ties and trust

When governing strategic alliances, what is contractual agreements for non-equity alliances?

Based on contracts

Managerial hubris also known as self-delusion is the belief of what?

Belief in their own capability despite evidence to the contrary.

Kraft acquired who in the UK?

Cadbury

When there is reduction in competitive intensity, when are the benefits of it?

Changes underlying industry structure Increase bargaining power from suppliers and buyers Stable industry and more profit Needs government approval

Who is Kraft's rival?

China

What is Alliance design and governance?

Choose and agree upon governance structure.

What is a merger?

Combining two independent companies. Friendly approach Generally smaller in size

What is the dedicated alliance function?

Coordinate alliance-related tasks at corporate level. Knowledge base about how to manage alliance Best to develop a relational capability.

What are joint ventures?

Created and owned by two or more companies. i.e. Hulu owned NBC,ABC, and Fox.

Many mergers and acquisitions do what?

Destroy shareholder value.

How does horizontal integration lower costs?

Economies of scale Enhancing economic value creation

What is post formation alliance management?

Effectively manage the ongoing relationship

Joint ventures are used for what?

Enter foreign markets

What is corporate venture capital?

Established firms invest in new startups

In a join venture you get long-term commitments that help with what?

Exchange both tactic knowledge and explicit knowledge.

What are the drawbacks associated with horizontal integration?

Failure Reduced flexibility Increased potential for legal repercussions

What happens in vertical strategic alliances?

Firms tend to share explicit knowledge that are codified.

A large sales force equals?

Fixed cost

A joint venture is the stepping stone to what?

Full integration

Kraft's acquisition forced who to look at their strategy?

Hershey because 90% of revenues come from the U.S.

How did Kraft acquire them?

Hostile takeover in 20 Billion dollar deal

What is critical in alliance design and governance?

Inter-organization trust

Joint ventures are the least or most common of the 3 types of alliances?

Least common

What is the benefit of entering new markets?

Local partner for global growth

What is the principle agent problem?

Managers have incentives to diversify through M&As to receive more prestige, power, and pay and it is not for the shareholder value appreciation.

What is the benefit of strategic network?

Network achieves goals that cannot be done by only one firm.

When kraft bought Cadbury what was the main benefit?

New distribution in emerging markets internationally and domestic.

What are the three alliance governance structures?

Non-equity contractual agreements Equity alliances Joint venture

What is equity alliance?

One firm takes partial ownership in the other.

Horizontal integration is crucial to what industries?

Ones with high fixed costs i.e. pharmaceutical industry

What happens in a licensing agreement?

Partners exchange codified knowledge regularly.

When there is value, it often goes to the acquiree, meaning the acquirers tend to do what?

Pay a premium

What strategic alliance shows access critical complementary assets?

Pixar partners with disney

When you merge with competitors, what is horizontal integration?

Process of merging and acquiring competitors.

What is a acquisition?

Purchase or takeover of a company. Friendly or unfriendly Hostile takeover

What approach do you take for the hedge against uncertainty?

Real options approach

What are the benefits associated with horizontal integration?

Reduce competitive intensity Lower costs Boost differentiation Access to new markets

What does strategic alliance bring to the table?

Sharing knowledge, resources, and capabilities. Leading to competitive advantage.

What is a strategic network?

Social structure of multiple organizations and the links among the nodes.

What is a joint venture?

Standalone organization owned by 2 or more firms.

In 2005 who was the largest shareholder of Disney after a acquisition of Pixar for $7.4 billion?

Steve jobs

Why do firms enter strategic alliances?

Strengthen competitive position Enter new markets Hedge against uncertainty Access critical complementary assets Learn new capabilities

Increased differentiation includes what?

Strengthens competitive advantage through finding new products and services.

What did Cadbury have?

Strong position in emerging economies such as India.

What are the most common forms of non-equity alliance contracts?

Supply agreements Distribution agreements Licensing agreements

What does changing underlying industry structure mean?

Taking out excessive capacity from rivals Increased industry consolidation

The firms that have superior M&A capabilities tend to what?

They identify, acquire, and integrate target companies.

Early alliance serves as a vehicle to match what?

Two parties' complementary assets and eventually led to the acquisition.

What is a strategic alliance?

Voluntary arrangements between firms.

What is a hostile takeover?

When you try to buy majority share in a company and buy them that way.

What is partner commitment?

Willingness to share resources & long-term view.