Chapter 12 Making Alliances Work

a voluntary agreement of cooperation between firms

association between firms that is based on contracts and does not involve the sharing of ownership.

alliance based on ownership or financial interest between the firms

one firm investing in another as a strategic investor

both firms investing in each other to become cross-shareholders

transfer control of operations and management from one firm (target) to another (acquirer) the former becoming a unit of the latter

the combination of operations and management of two firms to establish new legal entity

investigation prior to signing contracts (informal rules of the game, as cultural and more)

an investment in real operations as opposed to financial capital

Alliance partners aim to outrun each other by learning the "tricks" from the other side as fast as possible

the difference between acquisition price and market value of target firms

Ability to manage interfirm relationships

the effective matching of complementary strategic capabilities

the similarity in cultures, systems, and structures

A way of learning not by reading books but by engaging in hands-on activities

overconfidence in one's capabilities

Managers' desire for power, prestige, and money, which may lead to decisions that do not benefit a firm over-all in the long run

Association between firms that is based on contracts and does not involve the sharing of ownership.

Alliance based on ownership or financial interest between firms.

my capabilities with yours- more advantage

over paying, failing to consider strategic fit, and failing to integrate

- managers overestimate ability to create value
- inadequate pre-acquistion screening
- poor strategic fit

- lack of familiarity with foreign cultures, institutions, and business systems
- inadequate number of worthy targets
- nationalistic concerns against foreign takeovers (political and media levels)

- poor organizational fit
- failure to address multiple stakeholder groups' concerns

- clashes of organizational cultures compounded by clashes of national cultures
- nationalistic concerns against foreign takeovers (firm and employee levels)

- contract versus chemistry
- warning signs
- invest in the relationship
- conflict resolution mechanisms

Pre:
- do not overpay for targets, and avoid a bidding war when premiums are too high
- engage in thorough due diligence concerning both strategic and organizational fit

post:
- address the concerns of multiple stakeholders, and try to keep the best talents
- be prepared to deal with roadblocks thrown up by people whose jobs and power may be jeopardized