Strategic Alliances and Mergers Revision

Questions 1.Define what is a Strategic Alliance? 2.Define what a Merger or and acquisition is? 3.What is organic growth? 4.What are the benefits for firm for engaging in Strategic Alliances? 5.What are the problems associated with engaging in Strategic Alliances?

1. Define what is a Strategic Alliance? A strategic alliance is where two or more organisations share resources and activities to pursue a strategy. There is no takeover or acquisitions Organisations enter into the alliance for mutual benefits. Examples include the Airlines One World Alliance which BA and American Airlines are memebers of.

2.Define what a Merger or and acquisition is? A merger is a mutually agreed decision for joint ownership between organisations An acquisition is where an organisation takes ownership of another organisation Both create a large change in the structure of the two companies involved; often leading to restructuring, potential job losses and other efficiency savings.

3. What is organic development? Organic development is where strategies are developed by building on and developing an organisation’s own capabilities. Suitable when firm may have –Highly technical products –Knowledge and capability development –Spreading investment over time –Minimising disruption –Nature of markets –Example Dyson.

What are the benefits for firm for engaging in Strategic Alliances? Efficiency Savings Co-specialisation Mutual Learning Knowledge sharing Access to new markets (internationally) Access to new industries.

5. What are the problems associated with engaging in Strategic Alliances? Power problems – one dominant firm Cultural problems Competition issues True motivation of alliances? Shareholder/BoD on board? Example of failure Renault/Volvo alliance in 1990s too many cultural problems