Module 13: Introduction
Attached Files:
Chapter 14 PowerPoint slides (1.639 MB)

This module continues the discussion of strategy implementation by focusing on the management issues that arise in different types of growth and the optimal mode of growth for a company. Mergers, acquisitions, and alliances are mechanisms by which strategy is implemented, rather than the strategies themselves. The turbulence caused by political uprisings, worldwide economic recessions, and natural disasters all motivate strategy decisions. This module is designed to reinforce the course’s emphasis on thorough analysis and effective strategy implementation.

Learning Outcomes
Analyze the management issues and optimal mode of growth that arise when managing the different types of growth for a firm.
Compare the factors which determine the optimal mode of growth for a firm.

Assess the strategic planning needs and the key changes taking place in a multinational KSA organization.

ReadingsRequired:
Chapter 13 in Contemporary Strategy Analysis: Appendix

Chapter PowerPoint slides in Contemporary Strategy Analysis
Greiner, L. E. (1998, May). Evolution and Revolution as Organizations Grow. Harvard Business Review. https://hbr.org/1998/05/evolution-and-revolution-as-organizations-grow? (seminal)

Recommended:
Babalola, M.T., Bal, M., Cho, C.H., Garcia-Lorenzo, L., Guedhami, O., Liang, H., Shailer, G., & van Gils, S. (2022). Bringing excitement to empirical business ethics research: Thoughts on the future of business ethics. Journal of Business Ethics. https://doi.org/10.1007/s10551-022-05242-7

Module 13: Discussion
External Growth Strategies and Implementation
In this module, we explored the role of the corporate headquarters and its relationship with individual businesses, and how the corporate headquarters creates value by implementing mergers/acquisitions and strategic alliances strategies. Select a Saudi Arabian company. Discuss the decisions and actions that the company took to sustain or create a competitive advantage with international growth.
What method of international growth did the KSA company use? 
What source of competitive advantage does the KSA company have, and how is that position supported by its resources and capabilities? 

How does the KSA Company deal effectively with its external environment?
What recommendations would you make to the KSA company concerning this or future expansion? 
Directions:

Discuss the concepts, principles, and theories from your textbook. Cite your textbooks and cite any other sources if appropriate. 

Your initial post should address all components of the question with a 500 word limit.

Reply to at least two discussion posts with comments that further and advance the discussion topic.
CONTEMPORARY STRATEGY ANALYSIS
tenth edition
Robert M. Grant
John Wiley & Sons Ltd., 2019
Chapter 14
External Growth Strategies:
Mergers, Acquisitions, and
Alliances
1
External Growth Strategies:
Mergers, Acquisitions, and
Alliances
OUTLINE
• Mergers and Acquisitions
• Strategic Alliances
Copyright © 2019 John Wiley & Sons, Inc..
2
Global M&A
1998-2018
MERGERS AND ACQUISITIONS
Are Mergers Successful?
•
Evidence from Shareholder Returns:
– Small increase in the combined value of the 2 companies involved
– Gains flow (almost) entirely to shareholders of acquired companies
– Returns to shareholders of acquiring companies negative on
average
•
Evidence from Accounting Profits
– Diverse findings: “…the results from these accounting-based
studies are all over the map”
– Key problem: separating the effects of the merger from the many
other factors that influence firms’ profitability
•
Diversity of M&A
– Lack of consistent findings reflects the vast diversity in types of
mergers and characteristics of the firms involved
– Even when mergers categorized (e.g. horizontal, vertical,
conglomerate) no consistent performance differences
Copyright © 2019 John Wiley & Sons, Inc.
MERGERS AND ACQUISITIONS
Success and Failure among
Mergers and Acquisitions
Successes
Failures
Exxon – Mobil
Daimler – Chrysler
Procter & Gamble – Gillette
AOL-Time Warner
Walt Disney Co. – Pixar
Royal Bank of Scotland – ABN AMRO
Tata Motor – Jaguar Land Rover
Hewlett Packard – Autonomy
Sirius – XM Radio
Bank of America – Countrywide
Cemex – RMC
Alcatel – Lucent
Bank of America – Merrill Lynch
Sprint – Nextel
Heinz–Kraft Foods
Sears – K Mart
Geely–Volvo
Microsoft–Nokia
Dell–EMC
News Corp.–MySpace
Copyright © 2019 John Wiley & Sons, Inc.
MERGERS AND ACQUISITIONS
Motives for Mergers and Acquisitions
❑ Managerial Motives
–
Top management remuneration depends more on firm size than profitability
–
Psychological rewards–M&As project power, confer CEO celebrity status
–
Imitation: the fear of not participating in an industry’s merger wave
❑ Financial Motives
–
Stock market inefficiencies—acquire undervalued companies (Berkshire
Hathaway-Heinz): use overvalued equity to acquire (AOL-Time Warner)
–
Quest for tax savings—cross-border acquisitions to relocate to lower tax
regime (Burger King-Tim Horton)
–
Financial re-engineering: debt-financed acquisitions that reduce the acquired
company’s cost of capital (KKR-RJR Nabisco)
❑ Strategic Motives
–
Horizontal M&A—economies of scale and market power (A-B Inbev-SAB Miller)
–
Geographical extension M&A—to enter overseas market (Geely-Volvo)
–
Vertical M&A—to acquire supplier or customer (Gencore-Xstrata)
–
Diversifying M&A—to enter a new area of business (Amazon-Whole Foods)
Copyright © 2019 John Wiley & Sons, Inc.
MERGERS AND ACQUISITIONS
Managing Mergers and Acquisitions
❑ Challenges of Pre-merger Planning
–
Careful identification of the goals of M&A
–
Difficulties in estimating the benefits of M&A: on average cost savings
overestimated by 25%, revenue increases by 70%
❑ Challenges of Post-Merger integration
–
Problems of integration: incompatible management systems; clash of
cultures; adjustment difficulties by employees of acquired company
–
Building acquisition capability—managing the learning process to
ensure that acquisition experience builds capability
–
Marching post-merger management to the strategic goals of the
merger: leveraging the firm’s existing business model (e.g. Walt
Disney and Pixar) vs. reinventing the business model (e.g. HP and
Autonomy)
Copyright © 2019 John Wiley & Sons, Inc.
STRATEGIC ALLIANCES
Types of Strategic Alliance
▪ Strategic Alliances:
─ Collaborative arrangements between two or more firms to pursue
common goals
─ Alliance goals: technological, marketing and distribution,
operational, standard setting, lobbying…
─ Formal (contractual agreements, written understandings) or Informal
─ Equity (partners take equity stakes in one another) or non-equity
─ Bilateral alliances (two partners), multilateral alliances (many
partners), networks of alliances (Toyota supplier network; Apple
“ecosystem”)
• Joint Ventures:
– Partners form a jointly-owned enterprise to pursue the goals of the
alliance
Copyright © 2019 John Wiley & Sons, Inc.
STRATEGIC ALLIANCES
Samsung Electronics’ Alliances, 2014
Bglobal PLC
Sala Enterprises
Global Foundries Singapore
ARM Holdings PLC
Uni-Pixel Inc
Kia Motors Corp
SAP AG
IBM Corp
Ube Industries Ltd
Universal Display Corp
Panasonic Corp
Robert Bosch Stiftung GmbH
SiRF Technology Holdings Inc
Fujitsu Ltd
NTT
Samsung
Electronics
NEC Corp
KT Corp
Dreamworks Animation SKG Inc
Reactrix Systems Inc
Intel Corp
Juniper Networks Inc
Infineon Technologies AG
Quintiles Transnational Corp
Sumitomo Chemical Co Ltd
Huawei Technologies Co Ltd
Source: Prof. Andrew Shipilov
Thomson SA
TLC
Corp
Russia
Hynix Semiconductor Inc
Nanosys Inc
Telstra Corp Ltd
Singapore
SIP State Property Holding
STRATEGIC ALLIANCES
General Motors’ International Alliances
PEUGEOT
AVTOVAZ
SAAB
HINDUSTAN MOTORS
Technical collaboration, joint purchasing & 20% ownership, 2000-6
FIAT
GM
SUZUKI
FAW
60%
owned
NISSAN
ISUZU
40% owned IBC (built
TOYOTA
Copyright © 2019 John Wiley & Sons, Inc.
vans in the
UK, 1989-98)
50% owned
50%
owned
NUMMI
(produced cars in
the US, 1984-2009)
SAIC
DAEWOO
STRATEGIC ALLIANCES
Management Issues
❑ Motives:
• To exploit complementarities among the resources and capabilities of
different companies, e.g. airline alliances allow access to members’ route
networks; Bulgari and Marriott combine to operate luxury hotels
• These benefits include: Economizing on investment, Speed, Risk sharing,
Learning (capability acquisition)
❑ Challenges:
• Need for relational capability: building trust, developing knowledgesharing and coordination mechanisms
• Managing the relationship: greatest benefits often involve greatest
management challenges—e.g. cross-border alliances
• Sharing of benefits: determined by
a) strategic intent of the partners (Which partner is clearer about what it
wants from the alliance?)
b) appropriability of the contribution (Which partner’s resources and
capabilities are easier to capture)
c) absorptive capacity (Which partner is the faster learner?
Copyright © 2019 John Wiley & Sons, Inc.
STRATEGIC ALLIANCES
Choosing the Right Growth Path
Do the firm’s resources
and capabilities fit the
needs of the current
strategy?
YES
INTERNAL
DEVELOPMENT
HIGH
CONTRACT
LOW
ALLIANCE
HIGH
ACQUISITION
NO
Contract or inter-firm
combination?
• Parties’ level of
agreement over the
value of the required
resources
LOW
Alliance or acquisition?
• Desired closeness with
resource provider
Copyright © 2019 John Wiley & Sons, Inc.
7/5/23, 11:31 AM
Operations Management
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Expectations
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Some
Expectations
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5 to 6 points
3 to 4 points
1 to 2 points
0 to 0 points
Initial post and
two other posts
of substance.
Initial post and
one other post
of substance.
Initial post only.
Did not
participate.
5 to 6 points
3 to 4 points
1 to 2 points
0 to 0 points
Demonstrates
excellent
knowledge of
concepts, skills,
and theories
relevant to the
topic.
Demonstrates
knowledge of
concepts, skills,
and theories.
Demonstrates
satisfactory
knowledge of
concepts, skills,
and theories.
Did not
participate.
5 to 6 points
3 to 4 points
1 to 2 points
0 to 0 points
Discussion
post(s) exceed
expectations in
terms of support
provided and
extend the
discussion.
Discussion
post(s) meet
expectations in
terms of
support
provided.
Statements are
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support
provided.
Did not
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6 to 7 points
4 to 5 points
1 to 2 points
0 to 0 points
Writing is well
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focused; no
errors.
Some significant
but not major
errors or
omissions in
writing
organization,
focus, and
clarity.
Numerous
significant
errors or
omissions in
writing
organization,
focus, and
clarity.
Did not
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