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Mergers, Acquisitions & Strategic Alliances

International Business Strategy 301LON. Mergers, Acquisitions & Strategic Alliances. Unit: 10 Knowledgecast : 1. Module Learning Outcomes. Integrate and apply strategic approaches to practical situations in various types of organisations

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Mergers, Acquisitions & Strategic Alliances

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  1. International Business Strategy 301LON Mergers, Acquisitions&Strategic Alliances Unit: 10 Knowledgecast: 1

  2. Module Learning Outcomes • 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

  3. 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).

  4. 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)

  5. Strategic alliances in the airline industry

  6. LG’s strategic alliances Source: http://www.lge.com/about/corporate/corporateinfomation.jsp

  7. 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).

  8. 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).

  9. Differences between M&A and alliances M&A Alliances remain independent same corporate parent single entity temporary definite lower level of control high level of control In both cases organisations contribute with a specific set of resources and competenciescreating value for both; supposedly more value than what they would have created on their own. Both share the benefits.

  10. 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)

  11. Performance of Strategic Alliances More than 50% fail

  12. Activity • Group discussion • What are the main motives why most M&A and alliances fail?

  13. Performance of M&A and Strategic Alliances Why is it that more than 50% Fail? Post-agreement Process Pre-agreement Process Strategic analysis and choice Implementation

  14. Knowledgecast Summary • 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

  15. Seminar 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 receiving feedback from your peers is an essential skill, which will be of great value in the workplace. Be prepared to provide constructive feedback on other’s work and receive feedback which can inform your progress.

  16. Group Activity Module Review In this session you will be required to give feedback on the module via the usual course evaluation mechanisms. This may include a consideration 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?

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