1. Global Strategy Mike W. Peng c h a p t e r 99 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global Strategic Management Mike W. Peng Chapter 9 Diversification and Acquisitions

2. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Diversification and Firm Performance Source: Adapted from R. E. Hoskisson, M. A. Hitt, & R. D. Ireland, 2004, Competing for Advantage (p. 228), Cincinnati: Cengage South-Western. Figure 9.1

3. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Geographic Diversification and Firm Performance: An S Curve Source: Adapted from F. Contractor, S. K. Kundu, & C.-C. Hsu, 2003, A three stage theory of international expansion: The link between multinationality and performance in the service sector (p. 7), Journal of International Business Studies, 34: 5–18. Figure 9.2

4. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Combining Product and Geographic Diversification Figure 9.3

5. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Comprehensive Model of Diversification Figure 9.4

6. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product-Related and -Unrelated Diversification PRODUCT-RELATED DIVERSIFICATIONPRODUCT-UNRELATED DIVERSIFICATION SynergyOperational synergyFinancial synergy EconomiesEconomies of scaleEconomies of scope Control emphasisStrategic (behavior) controlFinancial (output) control Organizational structureCentralizationDecentralization Organizational cultureCooperativeCompetitive Information processingIntensive, rich communicationLess intensive communication Table 9.1

7. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What Determines the Scope of the Firm? Figure 9.5

8. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Acquisitions Setting the terms straight  Acquisition  Merger  Three categories of M&As: horizontal, vertical, conglomerate  Friendly and hostile M&A Motives for M&A: Synergistic, hubris, managerial Performance: Pre- and post-acquisition

9. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Variety of Cross-Border Mergers and Acquisitions Source: Adapted from United Nations, 2000, World Investment Report 2000 (p. 100), New York: UN Figure 9.8

10. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Motives Behind Mergers and Acquisitions INDUSTRY-BASED ISSUESRESOURCE-BASED ISSUESINSTITUTION-BASED ISSUES Synergistic motives  Enhance and consolidate market power  Leverage superior managerial capabilities  Respond to formal institutional constraints and transitions  Overcome entry barriers  Access to complementary resources  Take advantage of market opening and globalization  Reduce risk  Scope economies  Learning and developing new skills Hubris motives  Managers’ over-confidence in their capabilities  Herd behavior-following norms and chasing fads of M&As Managerial motives  Self-interested actions such as empire-building guided by informal norms and cognitions Table 9.2

11. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Symptoms of Merger and Acquisition Failures PARTICULAR PROBLEMS FOR CROSS-BORDER M&AsPROBLEMS FOR ALL M&As Pre-acquisition: Overpayment for targets  Managers overestimate their ability to create value  Lack of familiarity with foreign cultures, institutions, and business systems  Inadequate pre-acquisition screening  Inadequate number of worthy targets  Poor strategic fit  Nationalistic concerns against foreign takeovers (political and media levels) Post-acquisition: Failure in integration  Poor organizational fit  Clashes of organizational cultures compounded by clashes of national cultures  Failure to address multiple stakeholder groups’ concerns  Nationalistic concerns against foreign takeovers (firm and employee levels) Table 9.3

12. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stakeholders’ Concerns During Mergers and Acquisitions Figure 9.9

13. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Restructuring Setting the terms straight (Restructuring)  Downsizing  Downscoping  Refocusing Motives for restructuring  Perspectives: Industry, resource, institution Not widely embraced around the world