© 2010 Cengage Learning. All rights reserved. CHAPTER 11 GLOBAL  PENG

© 2010 Cengage Learning. All rights reserved. Chapter 11 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1.Define alliances and acquisitions 2.Articulate how institutions and resources influence alliances and acquisitions 3.Describe how alliances are formed 4.Outline how alliances are dissolved 5.Discuss how alliances perform 6.Explain why firms make acquisitions and what performances problems they tend to encounter 7.Articulate what you can do to make global alliances and acquisitions successful

© 2010 Cengage Learning. All rights reserved. LO1: DEFINE ALLIANCES AND ACQUISITIONS Strategic alliances – voluntary agreements between firms involving exchange, sharing or co-developing products, technologies or services.

© 2010 Cengage Learning. All rights reserved. LO1: DEFINE ALLIANCES AND ACQUISITIONS  Acquisition – transfer of the control of operations and management from one firm (target) to another (acquirer)  Merger – combination of operations and management of two firms to establish a new legal entity

© 2010 Cengage Learning. All rights reserved. LO2: INFLUENCE OF INSTITUTIONS Formal institutions Antitrust concerns – antitrust authorities more likely to approve alliances than acquisitions. Entry requirements – many governments place limitations on foreign firm’s mode of entry

© 2010 Cengage Learning. All rights reserved. LO2: INFLUENCE OF INSTITUTIONS Informal institutions Normative pillar –firms copy other reputable organizations to establish legitimacy. Cognitive pillar – internalized, taken-for- granted values that guide alliances and acquisitions.

© 2010 Cengage Learning. All rights reserved. LO2: INFLUENCE OF RESOURCES Alliances can create or diminish value Reduce costs, risks and uncertainties. Access complementary assets and learning opportunities. Use alliances as real options. Choosing wrong partners. Potential partner opportunism. Risk of helping nurture competitors (learning race).

© 2010 Cengage Learning. All rights reserved. LO2: INFLUENCE OF RESOURCES Resources and Alliances Rarity – relational (collaborative) capabilities, the ability to manage inter-firm relationships, may be rare. Inimitability – alliances may make it easier to observe and imitate firm- specific capabilities. Organization – some successful alliances are organized in a way that is difficult to replicate.

© 2010 Cengage Learning. All rights reserved. LO2: INFLUENCE OF RESOURCES Resources and Acquisitions Do acquisitions create value? Firms involved must supply rarity to the acquisition. Successful post- acquisition integration is hard to imitate. How are the firms organized to benefit from acquisition?

© 2010 Cengage Learning. All rights reserved. LO3: FORMATION OF ALLIANCES

© 2010 Cengage Learning. All rights reserved. LO4: DISSOLUTION OF ALLIANCES

© 2010 Cengage Learning. All rights reserved. LO5: PERFORMANCE OF ALLIANCES  Equity  Learning and experience  Nationality  Relational capabilities It is the combination of these factors that jointly indicates the odds for success of strategic alliances.

© 2010 Cengage Learning. All rights reserved. LO6: ACQUISITIONS

© 2010 Cengage Learning. All rights reserved. LO6: ACQUISITIONS

© 2010 Cengage Learning. All rights reserved. DEBATE: MAJORITY JV vs. MINORITY JV Majority: Implementation is difficult. Partners in emerging economies often resent Western dominance. At times, 50/50 management control is granted, even though MNE has majority equity. Minority: Valuable as real option. Becomes more valuable as conditions become more uncertain. Recommended toehold instruments.

© 2010 Cengage Learning. All rights reserved. LO7: MAKING GLOBAL ALLIANCES AND ACQUISITIONS SUCCEED