International Business Strategy301LON

Mergers, Acquisitions&

Strategic Alliances

Unit: 10 Knowledgecast: 1

• Integrate and apply strategic approaches to practical situations in various types of organisations

• Assess current developments in the organisational environment and alternative responses related to strategy

• Resolve management problems in the area of strategic management by evaluating alternative outcomes

Module Learning Outcomes

The importance of collaborative arrangements

The number of strategic alliances is growing at an average of approximately 25% per year and it has almost doubled in the past 10 years and is expected to increase even more in the future (Zineldin, Dodourova, 2005; Hall, 2008).

On average, the top 500 global companies each participate in 60 major strategic alliances (Dyer, Kale and Singh, 2001).

Need for M&A and Strategic Alliances

“It is no longer an era in which a single company can dominate any technology or business by itself. The technology has become so advanced, and the markets so complex, that you simply can’t expect to be the best at the whole process any longer” (Fumio Sato, Toshiba’s CEO)

Strategic alliances in the airline industry

LG’s strategic alliances

Source: http://www.lge.com/about/corporate/corporateinfomation.jsp

Definitions

Merger “can be defined as the coming together of two or more enterprises to form a new enterprise” (Cowling et al., 1980: 1)

An acquisition occurs when the management of an acquiring firm makes a direct offer to the shareholders of the target firm, taking control of it.

In Mergers the assets of two previously separate firms are combined to establish a new legal entity. Acquisitions are when assets of the acquired company are absorbed by the acquirer and the target company disappears (Buckley and Ghauri, 2002).

Definitions

Strategic Alliances are:“associations important to alliance partners and formed to further their common interests” (Mockler, 2000:1).

Are agreements between firms in which each commits resources to achieve a common set of objectives (Bains and Company).

Differences between M&A and alliances

remain independent

In both cases organisations contribute with a specific set of resources and competencies creating value for both; supposedly more value than what they would have created on their own. Both share the benefits.

definite

high level of control

temporary

lower level of control

same corporate parent single entity

M&A Alliances

Motives for M&A and strategic alliances

Entry to new markets or market segments The achievement of economies of scale, scope and

synergies Low cost of labour Share investments / risks Access to new technology, know-how and techniques Acquisition of resources and competences Development speed Legislation Host country may require some local ownership Agency theory: managers self interest, vanity, power,

status(Kitching, 1967; Aaronovitch and Sawyer, 1975; Meeks, 1977; Fairburn and Kay, 1989; Green, 1990; Bleeke and Ernst, 1993; Schweiger, Csiszar, and Napier, 1993; Pritchett, Robinson and Clarkson, 1997; Capron, 1999; Inkpen, Sundaram, and Rockwood, 2000; Seth, Song and Pettit, 2000; Mockler, 2000; Testa, and Morosini, 2001; Griffiths and Wall, 2001; Thompson, 2001; Buckley and Ghauri, 2002)

Performance of Strategic Alliances

Group discussionWhat are the main motives why most M&A and alliances

fail?

Activity

Why is it that more than 50% Fail?

Strategic analysis and choice

Implementation

Post-agreement Process

Pre-agreement Process

Performance of M&A and Strategic Alliances

• Integrate and apply strategic approaches to practical situations in various types of organisations

• Assess current developments in the organisational environment and alternative responses related to strategy

• Resolve management problems in the area of strategic management by evaluating alternative outcomes

Knowledgecast Summary

End of Module Assessment – Evaluating internationalization

Strategy (Management Brief) (Unit 10)

Preparation – Preparing the Final Draft

This session will provide you with the opportunity to discuss your final draft with your module tutor and ensure all your questions are

answered as you finalize your submission.

Although this is an independent piece of work giving and receivingfeedback from your peers is an essential skill, which will be of greatvalue in the workplace.

Be prepared to provide constructive feedback on other’s work andreceive feedback which can inform your progress.

Seminar

Module ReviewIn this session you will be required to give feedback on the

module via the usual course evaluation mechanisms. This may include aconsideration of the following questions.

1. Which of the units of the module have been most interesting to you?

2. How will your study of international business strategy affect your future business practice?

3. What do you consider to be the challenges for those involved in international business strategy?

Group Activity