Assignment of strategic management

On
Corporate strategy, strategic alliances and merger &acquisition

Submitted To:
Ma’am Tayaba Zafar

Submitted By:
Atia Khalid BBFE-17-32
BBA (IBF)

6th semester (evening)

Session: 2017-2021
CORPORATE STRATEGY,
STRATEGIC ALLIANCES AND
ACQUISITIONS
How Firms Achieve Growth
Corporate executives have three options at their disposal to drive firm growth: organic growth
through internal development, external growth through alliances, or external growth through
acquisitions. Laurence Capron and Will Mitchell developed an insightful step-by-step decision
model to guide managers in selecting the most appropriate corporate strategy vehicle. Selecting
the most appropriate vehicle for corporate strategy in response to a specific strategy challenge
also make successful implementation more likely.

Build-Borrow Buy Framework

The Build-Borrow Buy Framework provides a conceptual model that aids firms in deciding
whether to pursue internal development, enter a contractual arrangement or strategic alliances, or
acquire new resources, capabilities, and competencies. Firms that are able to learn how to select
the right pathways to obtain new resources are more likely to gain and sustain a competitive
advantage. Note that in the Build-Borrow Buy Model, the term resources is defined broadly to
include capabilities and competencies.
This model shows the Build-Borrow Buy decision Framework
Strategic Alliances
Strategic Alliances are voluntary arrangements between firms that involves the sharing of
knowledge, resources, and capabilities with the intent of developing processes, products, or
services. The use of strategic alliances to implement corporate strategy has exploded in the past
few decades, with thousand forming each year. As the speed of technological change and
innovation has increased, firms have responded by entering more alliances. Globalization has
also contributes to an increase in cross-border strategic alliances.
Strategic alliances may join complementary parts of a firm’s value chain, such as R&D and
marketing, or they may focus on joining the same value chain activities. Strategic alliances are
attractive because they enables firms to achieve goals faster and at lower costs than going it
alone. In contrast to M&A strategic alliances also allow firms to circumvent potential legal
repercussions including potential lawsuits filed by U.S. federal agencies or the European Union.
According to this traditional view of competitive advantage Medical Services and capability
frequently are embedded in strategic alliances that span firm boundaries

Why do firms enter strategic alliances

To affect a firm's competitive advantage and alliances must from is a positive effect on the form
economic value set in throw increasing value and lowering cost
This logic is reflected in the common reasons firms enter alliances
 Strengthens competitive position
 Enter new markets
 Hedge against uncertainty
 Access critical complementary assets
 Learn new capabilities

Governing Strategic alliances

Strategic alliances lie in the middle of the make or buy continuum. Alliances can be governed by
the following mechanisms
 Non-equity alliances
 Equity alliances
 Joint ventures

Non-equity alliances
The most common type of alliances is a non-equity alliances which is based on contract between
firms the most frequent form of non-equity alliances are supply agreement distribution
agreements and licensing agreements as suggested by their names these contractual agreements
are vertical strategic alliances connecting different parts of the industry value chain in a known
equity alliances from 10 to share explicit knowledge that can be codified patents user manual
fact sheets and scientific publications are always to capture explicit knowledge which concerned
the notion of knowing about a certain process or product

Equity alliances
In an equity alliances at least one path and take partial ownership in the other partner equity
alliances are less than contractual non-equity alliances because they often required larger
investment because they are based on partial ownership rather than contracts equity alliances are
used to signal stronger commitment more over equity alliances a law for the Shading of tacit
knowledge that cannot be codified. Tacit knowledge concern knowing how to do a certain task it
can be acquired only through actively participating in the process in an equity alliances there for
the partner frequently exchange personal to make the acquisition of tacit knowledge possible

Joint venture
Joint venture is a stand-alone organization created and jointly owned by two or more parent
companies partner contribute equity to a joint venture they are making a long term commitment
exchange of both explicit and ticket knowledge Dhruv interaction of personal is typical joint
ventures are also frequently used to enter foreign markets where the host country requires that a
partnership to gain access to the market in exchange 4 advanced technology and know-how in
term of frequency e joint venture are the least common of the three types of strategic alliances
The advantage of the joint venture are the strong ties trust and commitment that can result
between the partner however they can Intel long negotiation and significant Investments if the
alliances does not work out as expected and doing the joint venture can take some time and
involve considerable cost after the race is that knowledge share with the new partner should be
misappropriated by opportunistic behaviour finally any divorce form the elaboration must be
share between the partners.

Alliances management capabilities

Strategic alliances create a paradox for managers although alliances appears to be necessary to
complete in many Industries between 30 and 70% of all strategic alliances do not deliver the
expected benefits and are considered failure by at least 1 alliances partner given the high failure
rate effective Alliance management it is critical to gaining and sustaining a competitive
advantage facility in high Technology industries
Alliance management capability is a firm's ability to effective manage three Alliance related task
currently open across portfolio of many different alliances
 Partner selection and Alliance formation
 Alliance design and governance
 Post formation Alliance management
Merger and acquisition
Describe the joining of two independent companies to form a combined entity 10 to be friendly
in Merger the two forms agree to join in order to create a combine entity in the life event
promotion business for example life Nation merged with Ticketmaster.
An equation describe the Purchase for takeover of one company by other acquisition can be
friendly or unfriendly Disney acquisition of Pixar for example was a friendly one in which both
management teams believe that joining the two companies was a good idea when a target firm
does not want to be acquired the acquisition is considered of hostile takeover British Telecom
company Vodafone acquisition of Germany base Mannesmann a diversified conglomerate
withholding in Telephone and internet services and estimated value of 150 billion dollar was a
hostile one.
In defining margin and acquisition size can matter as well the combining of two forms of
compare table size is often described as a Merger even through it might in fact be an acquisition.

Why do firms merge with competitors?

In contrast to vertical integration which concerned the number of activities are form participate
in up and down the industry value chain horizontal integration is the process of merging with the
competitors at a same stage of the industry value chain horizontal integration is a type of
Corporate strategy that can improve a firm's strategic position in a single industry as a rule of
thumb firm should be ahead with horizontal integration if the target firm is more valuable inside
the acquiring firm that as a continuous stand-alone company this in files that the net value
careers of a horizontal acquisition must be positive to aid in gaining and sustaining a competitive
advantage
And industry-wide trend towards horizontal integration leads to industry consolidation. In
particular comparator in the same industry set an Airlines banking telecommunications
pharmaceuticals for healthy in sure frequency much to respond to changes in their external
environment and to change underline industry structure in their favors.
They are three main benefits to a horizontal integration strategy
 Reduction in competitive intensity
 Lower costs
 Increase differentiation
Why do firms acquire other firms?
When first defining the terminology at the beginning of a chapter VII noted that an acquisition
describe the purchases or takeover of one company by another three main reasons 10 out why do
firms make acquisitions

To gain access to New Market and distribution channels

Farms made source to occasion when they need to overcome entry barriers into market they are
currently not competing in order to assess new distribution channels

To gain access to a new capacity and competency

Firms open Resort to merger and acquisition to obtain new capability or competencies. To
straighten it capability in service systems and equipment and to gain access to the capability of
Designing mobile chip for the internet of things Intel acquired Altera 17 billion dollars

To preempt rivals
Sometimes firm may acquire promising startup not only to gain access to a new capability is or
competency but also to preempt Rivals from doing so. Let's look at the acquisition made by two
of the leading internet companies Facebook and Google

Merger and acquisition competitive advantage

Do margin and acquisition create competitive advantage? Despite their popularity answer
surprising is that is most cases they do not in fact the merger and acquisition for formers track
record is rather next many mergers destroy shareholders value and because the anticipated
synergies never material if value is created it generally to the shareholder of the firm that was
taken over because acquires of a premium when by the target company in sometime companies
get involved in a building work for an acquisition the winner may end up with the price but may
have our way for the acquisition does falling with them to the winner curse
Given that mergers and acquisition on average destroy rather than create shareholder value why
do we see so many Merger reasons include
 Principal agent problem
 The desire to overcome competitive disadvantage
 Superior acquisition and integration capability