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Pixar entered a strategic alliance with Disney for financial and distribution purposes. This helped Disney rejuvenate its product lineup by obtaining rights to newly created pixar characters Later, Disney acquired Marvel, and later the creators of StarWars, Lucasfilm.

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Disney's acquisitions of Pixar, Marvel, and Lucasfilm

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acquisitions and alliances

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Firms have 2 critical strategic options to pursue common interests, enhance competitiveness, and increase revenues. What are they?

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the joining of two independent companies to form a combined entity. typically are friendly, the target firm WANTS to be acquired.

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merger

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the purchase or takeover of one company by another. can be friendly or unfriendly.

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acquisition

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when a target firm does not want to be acquired

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hostile takeover

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the process of merging with competitors, leading to industry consolidation a type of corporate strategy that can improve a firm's strategic position in a single industry

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horizontal integration

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-Reduction in competitive intensity -Lower costs -Increased Differentiation

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3 main benefits to a horizontal integration strategy

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strengthening bargaining power, reducing the threat of entry, and reducing rivalry among existing firms

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Horizontal integration can favorably affect several of Porter's five forces for the surviving firms:

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reduces competitive intensity lowers costs increases differentiation

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How horizontal integration through M creates value

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potential integration failure reduced flexibility increased potential for legal repercussions

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Costs of horizontal integration through M

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economies of scale

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How does horizontal integration help firms lower costs?

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to gain access to new markets and distribution channels to gain access to a new capability or competency to preempt rivals

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3 main reasons firms make acquisitions

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Kraft was interested in Cabury's position internationally. the acquisition allowed Kraft greater access to convenience stores, gives it a new distribution channel, and opens up a new market.

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Kraft's hostile takeover of Cadbury

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Reasons include: 1. Principal-agent problems 2. the desire to overcome competitive disadvantage 3. Superior acquisition and integration capability

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Mergers and acquisitions typically destroy rather than create shareholder value, so why do we see so many mergers?

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managers are supposed to act in the best interest of the shareholders but sometimes they choose acquisitions bc of a desire for prestige, power, and pay.

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principal-agent problems

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

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managerial hubris

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this can allow companies to gain a competitive advantage

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desire to overcome competitive disadvantage

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sometimes acquisitions can lead to a competitive advantage.

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Superior acquisition and integration capability

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voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. contracts can be small with no bearing on competitiveness to billion dollar joint ventures. only considered STRATEGIC if it has the potential to affect a firm's competitive advantage

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strategic alliances

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

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rational view of competitive advantage

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

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5 common reasons firms enter strategic alliances

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approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time. This approach allows the firm to obtain additional information in pre-determined stages

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real options perspective

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cooperation by competitors to achieve a strategic objective

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co-opetition

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situations in which both partners in a strategic alliance are motivated to form an alliance for learning but the rate at which the firms learn may vary; the firm that accomplishes its goal more quickly has an incentive to exit the alliance or reduce its knowledge sharing

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learning races

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non-equity alliances equity alliances joint ventures

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alliances can be governed by the following mechanisms - contractual agreements for:

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most common type of alliance Partnership based on contracts between firms. The most frequent forms are supply agreements, distribution agreements, and licensing agreements firms share explicit knowledge these are flexible and easy to initiate and terminate. also can be temporary in nature and sometimes produce weak ties between partners which can result in a lack of trust and commitment

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non-equity alliance

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knowledge that can be codified (info, facts, instructions, recipies); concerns knowing about a process or product

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explicit knowledge

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at least one partner takes over partial ownership in the other partner. less common than non-equity bc they often require larger investments. allow for the share of tacit knowledge tend to produce stronger ties and greater trust between partners than non equity alliances frequently are stepping stones to full integration through a merger or acquisition "try before you buy"

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equity alliances

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cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task

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tacit knowledge

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equity investments by established firms in entrepreneurial ventures. falls under the broader rubric of equity alliances

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corporate venture capital (CVC)

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a standalone organization created and jointly owned by two or more parent companies. ex. Hulu exchange of both tacit and explicit knowledge is typical lest common

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joint venture

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advantages: strong ties, trust, commitment disadvantages: long negotiations, significant investments, undoing a JV can take time and involve high costs, shared knowledge could be misappropriated, rewards must be shared between partners

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advantages/disadvantages of joint ventures

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a firm's ability to effectively manage 3 alliance related tasks concurrently, often across a portfolio of many different alliances these 3 are: -partner selection and alliance formation -alliance design and governance -post formation alliance management

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alliance management capability

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related-linked diversification

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Disney became the world's leading media company to a large extent by pursuing a corporate strategy of

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by strengthening the bargaining power of the surviving firm vis-a-vis suppliers and buyers

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how does horizontal integration within an industry affect the surviving firms?

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there is a reduction of excess capacity in the market

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which of the following is a result of horizontal integration in terms of porters 5 forces model?

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by lowering competitive intensity in the industry overall

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how did the recent horizontal integration in the US airline industry provide benefits to the surviving carriers?

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increases the potential for legal repercussions

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which of the following is a disadvantage of horizontal integration corporate strategy

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fill gaps in its competency lineup

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google engaged in a number of smaller acquisitions of tech ventures. It did this in order to

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Acquisition and integration capabilities were not equally distributed across firms.

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While Cisco Systems has been successful in selecting and buying both big and small technology ventures, HP had to write off some of its recent technology acquisitions. Which of the following statements best explains this scenario?

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relational view of competitive advantage

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The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries.

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The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.

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What does the relational view of competitive advantage propose?

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It enabled HP to compete head on with Cisco's videoconferencing solution.

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How did the strategic alliance between HP and DreamWorks Animation SKG affect HP?

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The bargaining power of suppliers, the content providers, increased from Amazon's perspective.

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How did Apple's e-book business model affect Amazon?

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some of the firm's proprietary know-how may be appropriated by the foreign partner.

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A drawback involved in using cross-border strategic alliances to enter new foreign markets is that:

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real-options perspective

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A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.

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real options perspective

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In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates _____.

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It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.

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How does taking a real-options perspective by entering strategic alliances help incumbent firms?

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building downstream complementary assets can be expensive and time-consuming.

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When entering a foreign market, it is advisable for a new venture that has a core competency only in R to form a strategic alliance with a local partner because:

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has the incentive to reduce its knowledge sharing

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In a strategic alliance, the firm that learns faster:

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non-equity alliance

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A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances, that connect different parts of the industry value chain.

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A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc

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Which of the following best illustrates a non-equity alliance?

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double reporting lines.

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A drawback of joint ventures is that they are characterized by:

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joint ventures

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Which of the following types of strategic alliances is the least common in terms of frequency?

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selecting the best possible partner

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The process of alliance management begins with _____.

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alliance champion

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In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight.

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alliance manager

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In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development?

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alliance leader

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In Eli Lilly's Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance?

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focusing on developing an alliance management capability in isolation

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Which of the following is an ineffective practice in alliance management?

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the VRIO framework

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A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?

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consider an outright acquisition

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When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to:

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When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

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When should mergers and acquisitions (M) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement?

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Disney compensated more easily for losses from flops.

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Under CEO Robert Iger, Disney has followed an acquisition-led growth strategy. Which of the following was a result of this corporate strategy?

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