Chapter 9 Flashcards
What are the three possibilities for growth?
Corporate executives can achieve growth through three possibilities:
organic growth through internal development
external growth through alliances
external growth through acquisitions
Whats the build-borrow-or-buy framework?
The build-borrow-or-buy framework provides a conceptual model that aids firms in deciding whether to pursue internal development (build), enter a contractual arrangement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy). This framework is illustrated below. Note that here resources are defined broadly to include capabilities and competencies.
What are the 4 questions of the strategic resource gap?
(1) Relevancy. How relevant are the firm’s existing internal resources to solving the resource gap?
should pursue internal development.
(2) Tradability. How tradable are the targeted resources that may be available externally?
(3) Closeness. How close do you need to be to your external resource partner?
(4) Integration. How well can you integrate the targeted firm, should you determine you need to acquire the resource partner?
What is alliance management capability?
Alliance management capability refers to a firm’s ability to effectively manage three alliance-related tasks concurrently: (1) partner selection and alliance formation, (2) alliance design and governance, and (3) post-formation alliance management
What are the three positions of a dedicated alliance function?
(1) The alliance champion, a senior, corporate-level executive, responsible for high-level support and oversight. They are responsible for making sure that the alliance fits within the firm’s existing alliance portfolio and corporate-level strategy.
(2) The alliance leader, which has the technical expertise and knowledge needed for the specific technical area and is responsible for the day-to-day management of the alliance.
(3) The alliance manager, which serves as an alliance process resource and business integrator between the two alliance partners and provides alliance training and development
What is horizontal integration?
Horizontal integration is the process of merging with a competitor at the same stage of the industry value chain. This is a type of corporate strategy that can improve a firm’s strategic position in a single industry. Firms should horizontally integrate if the target firm is more valuable inside the acquiring firm than as a continued standalone company.
What are the three reasons why we see so many M&A?
(1) Principal-agent problems. Managers want to grow their firms through acquisitions; they want to build a bigger empire with prestige and power.
(2) The desire to overcome competitive disadvantage. Sometimes, M&A rather than being motivated by the gain of competitive advantage, are motivated by the desire to overcome competitive disadvantage. Which can lead to the opportunity to actually compete with firms with a competitive advantage.
(3) Superior acquisition and integration capability. Although, on average, M&A can result to a loss of shareholder value, some firms still manage to create shareholder value through M&A. They are consistently able to identify, acquire, and integrate target companies to strengthen their competitive positions.
