Chapter 4: Development Methods: Cooperation Or Alliances Between Enterprises Flashcards
(53 cards)
1
Q
Strategic alliance definition
A
Where two or more organisations share resources and activities to pursue a strategy. It is a tool to achieve specific objectives
2
Q
Features of strategic alliances
A
- There is no hierarchical relationship between cooperators
- Loss of some organizational autonomy
- Blurring the boundaries of the organization
- Interdependence
- Achieving a specific goal
3
Q
Motives for strategic alliances
A
- Economic motives
- Strategic motives
- Other factors
4
Q
Economic motives for strategic alliances
A
- Economies of scale
- Economies of scope
- Learning economies
- Reduced transaction costs
5
Q
Strategic motives for strategic alliances
A
- Acces to resources and capabilities
- Entering or developing an industry or country
- Reduce the level of competition in an industry
- Taking advantage of vertical integration
- Getting the right size to compete in a global market
- Differentiate vs Competitors
6
Q
Other motives for strategic alliances
A
- Political factors
- Defensive reasons
- Trends
7
Q
Advantages of alliances
A
- Combining operational efficiency with flexibility of agreement
- Easiness to break up
- Possibility of having complementary R&Cs
- Reduces risk and uncertainty
8
Q
Advantages of alliances with respect to internal development
A
- The organizational complexity of integrated companies is avoided
- Each partner can concentrate on managing their key activities
- Exit barriers are reduced
9
Q
Advantages of alliances with respect to market transactions
A
- Greater stability to carry out shared activities
- Reduction of risks of entry
- Reduction of transaction costs
10
Q
Advantages of alliances with respect to mergers and acquisitions
A
- Reducing problems of cultural and organizational integration
- Easier to deal with competition law issues
- It is a more reversible commitment
11
Q
Disadvantages of alliances
A
- Possibility to reinforce a competitor
- Loss of autonomy in decision making
- Time and financial costs
- Managerial complexity
- Possibility of divergent interests
- Possible lackof trust and commitment
12
Q
Types of cooperation agreements or alliances
A
- Contractual agreements
- Shareholder agreements
- Inter-organizational networks
13
Q
Types of contractual agreements
A
- Long-term contracts on specific activities
- Franchise
- Licenses
- Subcontracting
- Spin-off
- Consortium
14
Q
Long-term contracts on specific activities characteristics
A
- Simpler form of cooperation
- Two companies carry out specific activities together
- Starts an ongoing relationship between the parties of the contract
- Generally, it focuses on a single activity
- It can lead to a wide range of activities
- Each company usually has a similar weight in the agreement
15
Q
Franchises definition
A
Type of contract in which one company assigns to another the right to market goods and services in a given geographical area and under certain conditions in exchange for direct or indirect economic compensation
16
Q
Franchises characteristics
A
- The franchiser provides marketing rights
- The franchisee is the owner of the business and who makes the necessary investments
17
Q
Franchise types
A
- Distribution franchise: transfer of marketing rights
- Service franchise: it gives the idea of service and how to provide it
- Industrial franchise: mixes license and franchise contracts
18
Q
Advantages of franchises
A
- To the franchiser: quick availability of the distribution network, no investment risks, good result in international markets
- To the franchisee: access to the franchisor’s competitive advantage, prestigious brand, support from the franchisor
19
Q
Disadvantages of franchises
A
- To the franchiser: lower ability to control, possible loss of brand image, missmanagement
- To the franchisee: excessive dependence on the franchiser, possible understanding problems between parties, too high royalties and fees
20
Q
Licenses definition
A
Contract by which one company grants another the right to use its industrial property rights for a fee
21
Q
What licenses include
A
- Patents, design, copyright, know-how, technical information, IP rights
- Supply of materials, technical assistance, technological advances
22
Q
Licenses characteristics
A
- Not all authors consider it a form of cooperation
- Licensing company can gain access to international markets
- The licensee company may have access to competitive products or processes
- Excessive technological dependence, disincentive to own innovation
23
Q
Subcontracting definition
A
A company commissions another one to carry out certain production or service provision activities, according to pre-established instructions, with the principal company retaining final economic responsibility
24
Q
Reasons for subcontracting
A
- Cost optimization
- Increase in capacity
- Lack of needed resources or capabilities
- Conditions imposed by governments in countries of origin in cases of internationalization
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Advantages of subcontracting
- Reduce production costs
- More flexibility to address changes in demand
- Focus on core business
26
Types of subcontracting
- Cascade: the auxiliary companies subcontract in turn, activities to other companies
- Advanced: the subcontractor participates in the conception, design and quality of the product
- Co-contracting: the subcontractor provides financial support to the main firm
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Conclusions about subcontracting
- It favors vertical integration
- Each partner remains independent
28
Spin-off definition
It involves the encouragement and support from a large company, to its own qualified workers to leave the company and create their own business, often retaining control through equity
29
Spin-Off characteristics
- The purpose is the independence of one of the company’s department or division
- The activities are subcontracted to the new created company
- It can be considered as a form of corporate restructuring or disinvestment
- it is made up of former workers of the organization. HQ has confidence and knows their skills
- Because of the resulting collaboration, it is a form of cooperation
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Headquarter’s role in spin-offs
- Supporting the new project financially and technically
- Relocation of staff
- Vertical and complementary relationship
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Consortium definition
Alliance betweenseveral companies that establish a form of contract through which the long-term relationship is formalized and mutual organization integrated
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Consortium characteristics
- Plurality of partners, carrying out large-scale activities
- The consortium is in charge of the delegated activities
- Can be dissolved when the task or need for its creation is completed
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Consortium objectives
- To develop a single and indivisible project that exceeds the individual possibilities of the companies
- Sharing costs of investment, risks and benefits to LP
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Consortium legal forms
- Economic interest groups: set up with their own legal personality
- Temporary union of companies
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Shareholder agreements definition
The collaboration project involves the acquisition of shares by at least one of the participating partners
36
Objectives of shareholder agreements
- Start a new company
- Strengthen the interaction between partners
- Provide support
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Types of shareholder agreements
- Joint-venture
- Minority shareholder agreement
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Joint-venture definition
Agreement by which two or more independent companies create a new company to develop through it a collaborative venture
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Joint-venture characteristics
- Own legal entity
- The partner companies provide the financial investments, personnel, technology and assets
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Joint-venture objectives
- Related to any business activity, such as production, marketing or R&D
- It does not usually carry out core or essential activities of the parent companies
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Joint-venture advantages
- Flexible, effective, fast and less expensive mechanism
- Minimizing transaction costs
42
Minority shareholder agreement definition
Acquisition of a minority stake in one company by another or swap of shares between companies
43
Minority stake minority shareholder agreement characteristics
- A company acquires a stake in the equity of another company on a minority basis to support its business project
- It is interested in the results of the project and it is continously involved
- No purpose of control
- Financial, technological, industrial or commercial assistance is provided
- The main company benefits from laying the foundation for future acquisition
44
Share swap minority shareholder agreement characteristics
- Each company maintains control of its business
- The alliance established is usually long-term
- Sometimes, it includes exchange of representatives in the boards of directors
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Inter-organizational networks definition
Intermediate organisational form between the maret and the company characterised by the plurality of cooperation agreements between various participants
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Inter-organizational networks characteristics
- Collaboration agreements are links that create networks
- There is a multiplicity and plurality of agreements
- Each company focuses on the activities where it has its competitive advantage
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Types of inter-organizational networks
- Vertical: agreements between companies along the value chain
- Horizontal: alliances between similar companies on the same stage of the value chain
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Advantages of inter-organizational networks
- Increased efficiency in the participating companies
- Complementary of activities/markets
- Improvement of the competitive position - differentiation
- Increase in international scope, without having to build own structure
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Disadvantages of inter-organizational networks
- Each company seeks its position within the network
- Each company tries to reposition to gain benefit from the network
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Steps of cooperation agreements
- Formulation process
- Management of the alliance
- Outcome of the alliance
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Formulation process in cooperation agreements
- Choice of alliance as best strategic option
- Choice of partners
- Design of collaboration agreement
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Management of the alliance in cooperation agreements
- Attitudes: trust, commitment, flexibility
- Systems: Objectives and goals, resources and support, personnel policy, organisational design, dissemination of information, conflict resolution, control systems
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Outcome of the alliance in cooperation agreements
Success: meeting of objectives, partner satisfaction
