mqm 385 – Flashcards
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merger
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the joining of two independent companies to form a combined entity
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acquisiton
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the purchase or takeover of one company by another
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horizontal integration
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process of merging with a competitor at the same stage of the industry value chain
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Main reasons for horizontal integration
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reduction in competitive industry- takes competition out of the market lower costs- economies of scale ( larger production) - increase bargaining power increased differentiation- offer new products
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why firms engage in acquisitions
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-access new markets and distribution channels -gain access to a new capability or competency - preempt rivals
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strategic alliances
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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
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mangerial hubris
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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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reasons for mergers (3)
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1-principal agent problems 2- the desire to overcome competitive disadvantage 3-superior acquisition and integration compatibility
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relational view of competitive advantage
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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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why do firms enter strategic alliances
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Strengthen competitive position -Apple vs. Amazon Enter new markets -Local partner for global growth -Microsoft partners with Yahoo on search Hedge against uncertainty -Real options approach --Roche invests in Genentech 1990 & buys it in 2009 Access critical complementary assets -Pixar partners with Disney Learn new capabilities -GM & Toyota (NUMMI) - formed in1984 --Who won the learning race? Probably Toyota....
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Governing Strategic Alliances
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contract agreements for Non-equity Alliances -Explicit Knowledge Equity Alliances -Tacit Knowledge -Corporate Venture Capital Joint Ventures
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Non-equity Alliances
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partnership based on contracts between firms. the most frequent forms are supply agreements, distribution agreements, and licensing agreements. (explicit)
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explicit knowledge
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knowledge that can be codified for example information, facts, instructions, recipes. knowing about a process or product
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Equity Alliances
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partnership in which at least one partner takes partial ownership in the other ( tacit)
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tacit knowledge
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knowledged that cannot be codified. concerns knowing how to do a certain task. acquired through active particpation.
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corporate venture capital (CVC)
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equity investments by established firms in entrepreneurial ventures
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Joint Ventures
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a standalone organization created and jointly owned by two or more paretn companies( both explicit and tacit)
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acquiree
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company that is being taken over
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acquirer
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company that is taking over another company
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Alliance Management Capability
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a firms ability to effectively manage three alliance-related tasks concurrently, often across a portfolio of many different alliances. -Partner Selection and Alliance formation -Alliance Design and Governance -Post-formation Alliance Management -Partner Compatibility
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Partner Selection and Alliance formation
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the expected benefits of the alliancne must exceed its cost.
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partner capatibility
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the cultural fit between different firms
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partner commitment
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the willingness to make available necessary resources and to accept short term sacrifices to ensure long term rewards.
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Alliance Design and Governance
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choose an appropriate governance mechanism from: non-equity contract, equity alliance, or joint venture. inter organizational trust is huge to an alliance success.
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Post-formation Alliance Management
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the third phase in a firms alliance management capability concerns the ongoing managment of the alliance. sorce of competative advatage.
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Build-Borrow-or-Buy framework
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conceptial model that aids strategists in deciding whether to pursue internal development(build), enter a contract arrangement or strategic alliance(borrow), or acquire new recorces cap and and competencies (buy)
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Advantages of Expanding Internationally
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Gain Access to a Larger Market- economies of scale Gain Access to Low-cost Input Factors- raw materials / labor Develop New Competencies- learn new ideas Location Economies
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location economies
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benefits from locating value chain activities in the worlds optimal geographies for a specific activity wherever that may be
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Disadvantages of Expanding Internationally
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The Liability of Foreignness Loss of Reputation Loss of Intellectual Property
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CAGE Distance Framework
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National Culture (know Hofstede's dimensions)/Cultural distance Administrative and Political Distance Geographic Distance Economic Distance
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national culture
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programming of the mind that differentiates human goups
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Integration Responsiveness Framework
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International Strategy Multi-domestic Strategy Global-standardization Strategy Transnational Strategy
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Integration Responsiveness Framework
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ststrategy framework that juxtaposes the pressuuurs an mne faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advant when competing globally
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international strategy
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involves leveraging home based cocre competencies by selling the same products or services in both domestic and forign markets
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multi domestic strategy
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intent that local consumers will perceive them to be domestic companies
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global strandariation strategy
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to take advantage of economies of scale, produce at cheapest, closest place possible
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transnational strategy
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attepts to combine the benefits of localization strategy with globalstadadization
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Death of Distance Hypothesis
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assumption that geographic location alone should not lead to firm level competitive advantage because firms are now more than ever able to source inputs
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National Competitive Advantage
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worldshisp in specific industries. best cars in Germany, computers in china and twain ect. Australia - mining
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Porter's Diamond Framework(explains national competitive advantage) why some countries are better at things than others
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Factor Conditions- natural resources, human capital, ect Demand Conditions- Competitive Intensity in Focal Industry Related and Supporting Industries/Complementors
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Public Stock Company
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an important institutional rrangement in modern, free-market economies. it provides goods and services as well as employment, pays taxes, and increases the standard of living.
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State Charter
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issued by the state to a company's shareholders so it can do business.
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Shareholders
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owners, who legally own stock in the company
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Board of Directors
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governs and oversees the firms managment
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Management
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hire, supervise, and coordinate employees to manufacture products and provide services.
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Employees
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manufacture products and provide services.
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Limited Liability
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the investors are responsible only for the capital specifically invested, not in other investments or personal wealth.
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Transferability of Ownership
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trading of shares of stock on exchanges such as the NYSE and NASDAQ. Easy transferability.
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Legal Personality
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the company or non- living entity is regarded as similar to a person with legal rights and obligations
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Separation of Ownership and Control
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stockholders are the legal owners of the company, they delegate decision making to managers.
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Corporate Governance
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system of mechanisms to direct and control and enterprise in order to ensure that it pursues its strategic goals successfully and legally. Agency Theory (Principal -- Agent Conflict) Board of Directors, Inside Directors, and Outside Directors Other Governance Mechanisms Management Business Ethics
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Agency Theory
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a theory that views the firm as a nexus of legal contracts
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Inside and outside directors
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inside- CFO, COO, etc outside- not employees of the firm. senior executives from other firms or professionals
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moral hazard
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a situation in which information asymemetry increases the incentive of one party to take undue risk
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shared value creation framework
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a model proposing that managers have a dual focus on shareholder value creation and value creation for society
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global strategy
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part of a firms corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world
