CHAPTER 11

GLOBAL PENG

Chapter 11 LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1.Define alliances and acquisitions2.Articulate how institutions and resources

influence alliances and acquisitions3.Describe how alliances are formed4.Outline how alliances are dissolved5.Discuss how alliances perform6.Explain why firms make acquisitions and what

performances problems they tend to encounter

7.Articulate what you can do to make global alliances and acquisitions successful

LO1: DEFINE ALLIANCES AND ACQUISITIONS

Strategic alliances – voluntary agreements between firms involving exchange, sharing or co-developing

products, technologies or services.

LO1: DEFINE ALLIANCES AND ACQUISITIONS Acquisition – transfer of the control of operations and management from one firm (target) to another (acquirer) Merger – combination of operations and management of two firms to establish a new legal entity

LO2: INFLUENCE OF INSTITUTIONS

Formal institutions

Antitrust concerns – antitrust authorities more likely to approve alliances than

acquisitions. Entry requirements – many governments

place limitations on foreign firm’s mode of entry

LO2: INFLUENCE OF INSTITUTIONS

Informal institutions

Normative pillar –firms copy other reputable organizations to establish legitimacy.

Cognitive pillar – internalized, taken-for-granted values that guide alliances and

acquisitions.

LO2: INFLUENCE OF RESOURCES

Alliances can create or diminish value

Reduce costs, risks and uncertainties.Access complementary assets and learning opportunities.Use alliances as real options.

Choosing wrong partners.Potential partner opportunism.Risk of helping nurture competitors (learning race).

LO2: INFLUENCE OF RESOURCES

Resources and Alliances

Rarity – relational

(collaborative) capabilities, the

ability to manage inter-firm

relationships, may be rare.

Inimitability – alliances may

make it easier to observe and imitate firm-

specific capabilities.

Organization – some successful

alliances are organized in a

way that is difficult to replicate.

LO2: INFLUENCE OF RESOURCES

Resources and Acquisitions

Do acquisitions create value?

Firms involved must supply rarity to the acquisition.

Successful post-acquisition

integration is hard to imitate.

How are the firms organized to benefit from

acquisition?

LO3: FORMATION OF ALLIANCES

LO4: DISSOLUTION OF ALLIANCES

LO5: PERFORMANCE OF ALLIANCES

Equity

Learning and experience

Nationality

Relational capabilities

It is the combination of these factors that jointly indicates the odds for success of strategic

alliances.

LO6: ACQUISITIONS

LO6: ACQUISITIONS

DEBATE: MAJORITY JV vs. MINORITY JV

Majority: Implementation is difficult. Partners in emerging economies often resent Western dominance. At times, 50/50 management control is granted, even though MNE has majority equity.

Minority: Valuable as real option. Becomes more valuable as conditions become more uncertain. Recommended toehold instruments.

LO7: MAKING GLOBAL ALLIANCES AND ACQUISITIONS SUCCEED