Strategic Management Chapter 9

Term
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strategic alliance
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Terms in this set (17)
strategic alliance
A voluntary arrangement between firms that involve the sharing of knowledge, resources, and capabilities with the intent to develop processes, products, or services
Why do firms enter strategic alliances?
1. Strengthen competitive position
2. Enter new markets
3. Hedge against uncertainty
4. Access critical complementary assets
5. Learn new capabilities
what are 2 examples of co-branding, which is a new trend in strategic alliances?
Pottery Barn and Sherwin Williams (PB adds value by being an "interior designer" to its customers, Sherwin Williams gets an increase in sales)

Taco Bell and Doritos partner to create Doritos Locos Tacos
which type of strategic alliances is the LEAST common and the MOST integrated?
joint venture
which type of strategic alliances is the MOST common and the LEAST integrated?
non-equity alliances
what are the 3 types of strategic alliances?
non-equity alliances, equity alliances, joint ventures
when a firm enters a non-equity alliance, what is the partnership based on? what are some examples?
contracts; licensing, supply, and distribution agreements
what happens in an equity alliance?
one partner takes partial ownership in the other

since they are based on partial ownership rather than contracts, they signal a stronger commitment than non-equity alliances
what happens in a joint venture?
a standalone organization created and jointly-owned by 2 or more parent companies
what are the 3 steps to management of alliances?
1. Partner selection and alliance formation
2. Alliance Design and Governance
3. Post-Formation Alliances
in the partner selection and alliance formation step to management of alliances, what must happen?expected benefits must exceed costs partner compatibility: cultural fit btw. 2 firms partner commitment: firms are willing to make available necessary resources and to accept short term sacrifices to ensure long term gainsin the Alliance Design and Governance step to management of alliances, what are the formal governance mechanisms? what is necessary in this step?non-equity, equity, JV; "inter-organizational trust" is necessary since all contracts are necessarily incompleteto succeed in the Post-Formation Alliance step to management of alliances, what must the partnership create?VRIO resource combinations: - make relationship specific investments - establish knowledge-sharing routines - build interfirm trust And build capabilities through repeated experience over timewhen 2 companies merge, what happens?two independent companies join to create a combined entity, usually friendlywhat happens in an acquisition?purchase of one company by another, can be either friendly or hostilewhat are the benefits to M&A? (5)reduces competition, increases differentiation, lowers costs, faster access to markets, new capabilitieswhat are the drawbacks to M&A? (4)clash of cultures, lack of realized synergies, greater inefficiencies, job losses