Lectures Flashcards
(17 cards)
Alliance definition
long-term voluntarily collaboration between two or more organizations to exchange resources to achieve individual and common objectives
- Implications:
o Voluntary, they choose to do so
o Common, they have common objectives and individual objectives
o Dependent, at the moment they form the alliance they are dependent
Common failures of Alliances
- Cooperation and competition
a. More = less puzzle, the more pushy you are the more likely you will create less value together. 50%/50% = 200,- vs 75%/25% = 100,- - Lack of hierarchy/coordination
a. There is no boss, an alliance lack a natural hierarchy
b. Alliance design should however provide flexibility, adaptability and steer behaviors toward collaboration - Misunderstanding of unique challenges
- Lack of institutionalization of alliance know-how and know-what
Alliance development framework
(1) Alliance strategy:
a. Buy, ally, or make decision (lecture 1)
b. RBV logic > access to VRIN resources
(2) Partner selection (fit)
a. Resource complementarity,
b. Strategic fit
c. Organizational fit
d. Operational fit
e. Cultural fit
f. Human fit
(3) Alliance negotiation
a. The power vs trust game
b. Distributive vs integrative
(4) Alliance design
a. Issues at over- and under governance
b. 3 Levels are sufficient
(5) Alliance launch
a. Issues with ignoring complexities with regard to transition from design to management
b. Transition should be done during the launch
(6) Alliance management
a. Issues of inertia, not responding to change
(7) Alliance evaluation
a. Issues of management decisions
b. Emergent outcomes, Delta klm >
(8) Alliance termination
a. Issues of too early termination
Common reasons for M&A failure
- Misevaluation of needs
- Strategic or organizational misfit
- Poor due diligence
- Negotiation errors
- Integration process challenges
- Regulatory environment
- Other external factors
Mergers and acquisition framework
(1) Strategic analysis:
a. Main drivers:
i. Managerial self-interest: compensation or CEO Hubris
ii. Environmental factors: uncertainty of peer isomorphism
iii. Firm characteristics: M&A experience, cash flow
b. Define M&A strategy and goals > Synergies (1+1=3 effet)
i. Synergy types:
1. Internal (efficiency)
2. Market power (market power)
3. Relational (dyadic relationships)
4. Network (structural position)
5. Non-market (legitimacy)
(2) Target selection
a. Strategic fit: easier to do from outside
b. Organizational fit: hard to know from outside (previous alliance can help)
(3) Due diligence
a. Investigation on selected target
b. Objective: identify if synergy can be realized
c. Valuation of price
i. Asset-based
ii. Market-based
iii. Cashflow-based
(4) Negotiation
a. Constructing a fair price, you always pay premium + cost of integration
(5) Integration
a. The degree of interaction and coordination of the two firms involved
b. Typically takes years
(6) Outcome
a. Value creation vs destruction
Synergy types
i. Synergy types:
1. Internal (efficiency)
2. Market power (market power)
3. Relational (dyadic relationships)
4. Network (structural position)
5. Non-market (legitimacy)
Contingent integration framework
- low autonomy + low strategic interdependency = holding
- high autonomy + low strategic interdependency = preservation
- low autonomy + high strategic interdependency = absorption
- high autonomy + high strategic interdependency = symbiosis
Preservation: To keep the identity and autonomy of the target firm. Value in growth
Absorption: rapid consolidation and rationalization, value in operational synergies
Symbiotic: balance between interdependencies and autonomy, slow and find synergies
M&A outcomes
M&A Outcomes:
- Premium, return on payed price
- Innovation, effect on innovation inputs and outputs
- Turnover, employee turnover etc
- Divestitures, sale of assets, facilities, business units etc
Alliance portfolio vs Network organization
Alliance portfolio: looks at organizational relationships from the perspective of the focal organization (Car perspective)
Network Organization: Looks at the broader array including indirect relationships (Helicopter view)
Reasons for engaging in networks
Reasons for engaging in networks:
- gaining novel resources (exploration)
- using existing resources efficiently (exploitation)
- increasing market power (power)
- enhancing visibility in the market (status)
Network management
Network management:
- Framing, trying to influence the roles the actors play in the network
- Activating, identifying potential actors to see if it would improve the network
- Mobilizing, building commitment
- Synthesizing, organizing and controlling to create a productive habitat
Success with alliance portfolio:
- Understanding of bilateral alliances
- The design
- Coordination
Learning traps:
Exploit > learning trap: I am focused on developing new services/ innovation, however you forget to reap the benefits
Exploration > Competency trap: excel at one thing, but you forget to innovate.
The configuration of the portfolio should support the strategy.
- In a dynamic environment you want non-equity-based, loose relationships
- In a learning environment you want equity based, strong relationships.
Redundancy partner
partner heterogeneity, and weak ties foster exploration objectives (Research)
Non-Redundancy partner
partner homogeneity, and strong ties foster exploitation objectives (Development and distribution)
Structural configuration is needed for
Competency and learning traps require structural configurations at the firm level (temporal, structural, parallel)
