Corporate Strategy 2 PDF

C O RPO R A T E STRA TE G Y 2 B U S N 481 YEMISI AW O T OY E  Overview 0 0 1 2 Strategic Competing Alliances Globally  Framework Considerations Re l e v a n c y Tradabilit Closenes Integrati...

C O RPO R A T E STRA TE G Y 2 B U S N 481 YEMISI AW O T OY E  Overview 0 0 1 2 Strategic Competing Alliances Globally  Framework Considerations Re l e v a n c y Tradabilit Closenes Integratio y s n Build-Borrow-or-Buy Framework Placehol der  Strategic Alliances A voluntary a rr a n g e m e n t b e t w e e n fi rms Involves the sharing of: Knowledge Re s o u rc e s Capabilities Wi t h the intent of developing: ▪ Pro c e s s e s ▪ Pro d u c t s ▪ Services What Makes An Alliance Strategic? C o m p l e m e n t s value chain E n a b l e fi rms to achieve their g o a l s faster, lower cost, fewer legal repercussions 3 phases of Alliance Management Partner selection a n d alliance formation Alliance d e s i g n a n d g o v e rn a n c e Post-formation alliance m a n a g e m e n t Partner Selection and Alliance Formation B enefi ts costs. Re a s o n s for alliance formation: To s t re n g t h e n c o m p e t i t i v e position To enter n e w m a r ke t s To h e d g e a g a i n s t uncertainty To a c c e s s critical c o m p l e m e n t a r y re s o u rc e s To learn n e w capabilities Partner c o mpa t i bi l i t y & c o m m i t m e n t are n e c e s s a r y.  IBM & Apple A p p l e sold m o s t l y to con su mers, IBM to businesses. P la n n ed to collaborate o n bu siness apps. Desired to stren gthen their c o mp et itiv e position in mobile c o m p u t i n g a n d bu siness p rod u c tiv ity apps Pu t c omp etitiv e pressure o n rivals s u c h a s M S  Alliance Design and Governance N o n - E q u i t y Alliances Partnerships b a s e d o n contracts E x a m p l e s : s u p p l y agreements, distribution agreements, a n d licensing a g re e m e n t s E q u i t y Alliances O n e partner takes partial ownership in the other. J o i n t Ventures A standalone organization create d a n d jointly o w n e d b y t w o or m o re parent c o m p a n i e s Post-Formation Alliance Management To create V R I O resource combinations: Make relation-specifi c investments. Establish k n o w l e d g e - s h a r i n g routines. Build interfi rm trust.  Alliance Matchmaking! Steps: o Round 1: Mingle with other teams, sharing your company’s strengths, weaknesses, and goals. o Round 2: Narrow down to one or two potential partners for a focused discussion about how an alliance could work. o Final Selection: Decide on your top alliance partner and be prepared to explain why you chose them. Questions to Consider: o What unique capabilities does each team bring? o How can this partner help you achieve your goals? o Are there any risks or challenges in working with this team? Mergers and Acquisitions  Mergers and Acquisitions Merger: T h e joining of t w o independent c o m p a n i e s Fo r m s a c o m b i n e d entity Acquisition: Pu rc h a s e of one c o m p a n y b y another C a n b e friendly or unfriendly (hostile t ake o v e r)  Why Do Firms Merge? Horizontal integration: T h e p ro c e s s of m e rg i n g with competitors L e a d s to industry consolidation Three main benefi ts: Re d u c t i o n in competitive intensity L o w e r c o s t s ( E c o n o m i e s of s c a l e) Increased diff erentiation (Fills p ro d u c t gaps) Why Do Firms Acquire Other Firms? ▪Growth/Market share ▪Access new tech ▪New markets ▪Cost reduction ▪Eliminate competition ▪Response to industry/market changes  Strategic Decisions A n e w c o m p e t i t o r e n t e r s y o u r m a r ke t a n d o ff e rs a p r o d u c t v e r y similar t o y o u r s b u t w i t h o n e k e y diff erence: It’s free. D o y o u i g n o re it, h o p i n g t h a t y o u r c u s t o m e r s will n o t d e f e c t o r t h e free p r o d u c t w o n t last? O r d o y o u r a p i d l y i n t ro d u c e a free p r o d u c t o f y o u r o w n in a n a t t e m p t t o q u a s h t h e threat?  Global Strategy: Competing Around the World Advantages of Going Global A c c e s s to larger market E x t e n d e d p ro d u c t lifecycle A c c e s s to l o w - c o s t input factors Disadvantages of Going Global Increased initial c o s t s L o s s of reputation – s w e a t s h o p s a n d scandals L o s s of intellectual pro pert y Challenges in Global Strategy Cultural diff erences E c o n o m i c issues Political risk Walmart in Germany L o s t billions a n d exited G e rm a n y in 2 0 0 6 W h a t wen t w ro n g ? German workers’ s t ro n g resistance to U.S. p ro c e d u re s C o n s u m e r d i ff e re n c e s They couldn’t g e t c o s t s d o w n = prices weren’t low CAGE Distance Framework Porter’s Diamond  D e a l s w i t h t h e p re s s u re s a n M N E f a c e s for c o s t re d u c t i o n s a n d l o c a l re s p o n s i v e n e s s The Integration Responsivene Fo u r global strategies ss Framework International Multidomestic Global- standardization Transnational Global Strategy Positions and Representati ve MNEs  Le v e r a g e s h o m e - b a s e d c o re competencies Sells the s a m e p ro d u c t s or services in b o t h d o m e s t i c a n d foreign markets Internation Ad v a n t a g e o u s L o w pressures for local al w h en : responsiveness A N D cost Strategy reductions Large domestic Us e d successfully markets b y M N E s with: S t ro n g reputations and brand names Li mi ted local responsiveness Multidomestic Strategy oTo m a x i m i z e local responsiveness oMNEs h o p e that local c o n s u m e r s will perceive their p ro d u c t s or services a s local ones. oCan b e c o st ly a n d ineffi cient ◦Duplication of business functions a c ro s s countries Global-Standardization Strategy Attempts to reap signifi cant economies of scale & location economies through global division of labor where capabilities are at the lowest cost Price becomes the main competitive weapon  S t r a t e g y that combine: attempts to Benefi ts of a localization s t r a t e gy H i g h local responsiveness Transnatio Wi t h a global-standardization s t r a t e gy nal Lo w e s t - c o s t position attainable Strategy U s e d b y M N E s that pursue a blue o c e a n s tr a teg y Diffi cult to implement  Special Considerations Liability of newness, smallness, foreignness B o rn Global c o m p a n i e s Ro l e of Te c h n o l o g y / A I Examples S ky p e ( E s t o n i a ) S p o t i fy ( S w e d e n )  Netflix’ Global Expansion O p e r a t e s in o ve r 190 countries International revenue n o w exc e e d s d o m e s t i c Wa s in the U.S only u p until 2010; E x p a n d e d into a few d o z e n countries b y 2015 Fa c e d signifi cant challenges ( C A G E d i st a n c e )/ Ad a p t a t i o n Partnerships Exponential globalization