Int. Business Ch. 11
Int. Business Ch. 11 MGMT 4710
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This 3 page Class Notes was uploaded by Anna Notetaker on Thursday October 13, 2016. The Class Notes belongs to MGMT 4710 at Middle Tennessee State University taught by Cheryl Ward in Fall 2016. Since its upload, it has received 10 views. For similar materials see International Business in Management at Middle Tennessee State University.
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Date Created: 10/13/16
IB Chapter 11 Strategic Alliances, also known as Contractual Agreements, are voluntary agreements of cooperation between firms. Contractual Alliances, also known as NonEquity Based, is an association between firms that is based on a contract and does not involve the sharing of ownership. They include comarketing, research and development, and contracts. Mergers are 3%, while Acquisitions are 97% in dominance. An acquisition is a transfer of the control of operations and managements from one firm (target) to another (acquirer), the former becoming a unit of the latter. A merger is the combination of operations and management of two firms to establish a new legal entity. Antitrust authorities suspect at least some tacit collusion when competitors cooperate. However, because integration within alliances is usually not as tight as acquisitions. Governments discourage or simply ban acquisitions to establish wholly owned subsidiaries, thereby leaving some sort of alliances with local firms as the only entry choice for FDI. US regulations limit foreign carriers to a maximum 25% of the equity in any US airline, and EU regulations limit nonEU ownership of EUbased airlines to 49%. Strategic Alliances Advantage: o Reduce costs, risks, and uncertainties o Access complementary assets and learning opportunities o Possibility to use alliances as real options Strategic Alliances Disadvantages: o Choosing wrong partners o Potential partner opportunities o Risk of helping nurturing competitors (learning race) Rarity – the firm must have rare skills to make the acquisition work Imitability – possess hardtoimitate capabilities Organization – firms are organized to take advantage of the benefits while minimizing the costs Nearly all 70% of acquisitions fail. Dissolution of Alliances: o The first phase Initiation, it can go either to reconciliation or going public. The second phase is going public, it can be mediation by 3 parties or by uncoupling. The third phase is uncoupling, it can be lastminute salvage or the aftermath. The final phase is the aftermath, which results in going alone or new relationships.