Strategic Alliances/M&A/Strategic Leadership

Question 1

Relationship between Mergers and Acquisitions and performance

Answer 1

Target firm stockholders tend to benefit by an average of 25% while the acquiring firm doesn’t benefit. Idea of survival technique. Use free cash flow for acquisition instead of dividend. Size of firm is a predictor of CEO salary. On average new firms bring zero economic value to the acquiring firm and some CEO’s may think they can beat the odds.

Question 2

Does executive leadership impact firm performance?

Answer 2

Yes, and it accounts for about a 15% change in performance just with a leadership change.

Question 3

Challenges at the Bottom of the pyramid

Answer 3

Challenges- Very low buying power and margins will be low. Distribution is difficult since the poorest countries are generally remote. Contracts are followed and patents are respected. High cultural distance with needs being very different.

Question 4

Opportunities at the Bottom of the pyramid

Answer 4

Opportunities- Some companies have become very innovative and successful in home market. Enormous market driven by volume not margin. Poverty reduction. Reputation for companies that help people at the bottom of the pyramid.

Question 5

Facilitating entry and exit for strategic alliances

Answer 5

Low-cost entry into new industries
Partner provides instant access and legitimacy
Low-cost exit from industries
Partner is an informed buyer
Managing uncertainty
Alliances may serve as real options
Low-cost entry into new geographic markets
Partners provide local market knowledge, access
and legitimacy with governments and customers.

Question 6

Types of Mergers and Acquisition activity

Answer 6

Vertical	
Horizontal
Product Expansion	
Market Extension	
Conglomerate

Question 7

Differences between specific levels of corporate diversification

Answer 7

Limited Diversification-
Single business- 95% of sales in single business
Dominant business- 70% to 95% in single business
Related Diversification-
Related constrained- all business related on most dimensions
Related linked- Some businesses related on some dimensions
Unrelated Diversification- Business not related

Question 8

Difference between 3 types of corporate diversification

Answer 8

Product Diversification- operating in multiple industries
Geographic Market Diversification- Operating in multiple geographic markets
Product Market Diversification- Operating in multiple industries and geographic markets