Marketing & Strategy (6011P 0116/0095) 2011-2012 October 3/4 2011Part 5 Collaborative Strategies & Takeovers Roger Pruppers Amsterdam Business School Universiteit van Amsterdam 1 Midterm • Answers of the midterm exam • See Blackboard Midterm exams available for inspection • This week’s tutorial Problems with midterm registration • Contact the student administration • Visit ‘Open Hours’ (‘Spreekuur’) in room E1.51 • • 2 1 nl • Deadline: • 3 days before exam. Joris Ebbers • J.Attendance • Final rules regarding missing working groups/seminars • Missed 0 or 1 • Safe • Missed 2 • Additional individual assignment to compensate for missed session • Missed 3 • End of story -> Resit Note: only applies to “absence without valid reason” • For all other cases: talk to student counsellor Assignment • Will be posted in Blackboard a. Monday October 24. • To be handed in via email to course coordinator Dr.j.00h • • 3 From competition… 4 2 .a. i.s. before [email protected]. …to acquisition! 5 Remember generic strategies? 6 3 . competitive rivalry as one of Porter’s 5 forces • Competitive advantage • Create value in a way that competitors cannot • Etc. • Part 2. • • • Strategic Alliances Mergers and Acquisitions • Structure by the most basic questions you can think of… 7 Part 1. This week we focus on Collaborative Strategies and Takeovers • Cooperation in stead of competition But still with the objective to create competitive advantage • So many of previous weeks’ theories and models will come back today! Outline • Part 1. RBV • “In order to enhance the competitive advantage of all parties” • So as with all strategies: create competitive advantage… • …and thus achieve goals and objectives. we have focused on competition • Analysis of the competitive environment • E. • 8 4 .etc. Strategic Alliances: WHAT? • What is a Strategic Alliance? • (Part of) a strategy • Week 1: • “Coordinated means by which organization pursues goals & objectives” Definition • “Partnership in which two or more firms” • So it is about cooperation rather than competition • “Combine resources and capabilities” • So focus on internal view.Transition in topics • Up to this point.g. Week 1: Business strategy diamond Staging • • What will be our speed and sequence of moves? • Speed of expansion? • Sequence of initiatives Staging Arenas Arenas • • Where will we be active? (and with how much emphasis?) • Which product categories? • Which channels? • Which market segments? • Which geographic areas? • Which core technologies • Which value-creation strategies? • Differentiators • How to win the marketplace? • Image? • Customization? • Styling? • Product reliability? 9 • Speed to market? How will we get there? • Internal development? • Joint ventures? • Licenses/franchise? • Alliances? • Acquisitions? Economic logic Vehicles Economic logic • Differentiators Vehicles How will returns be obtained? • Lowest costs through scale advantages? • Lowest costs through scope and replication advantages • Premium prices due to unmatchable service? • Premium prices due to proprietary product features? Strategy & Marketing • How is a brand alliance different from/related to a strategic alliance? • And how does that relate to the difference/similarity between strategy and marketing in general? 10 5 . WHY? • Joint investment • Sharing business risk • E.g. between supplier and buyer (Value Chain) Knowledge sharing • Learning from partners Effective management • “Make. buy or ally” decision Complementary resources • Create shared advantage • • • Advanced nutrition research by Nestlé & skin biological research by L’Oréal 11 Alliances & competitive advantage • • • • “If alliances are part of a strategy…” • Vehicle in Business Strategy Diamond (week 1) “…they should contribute to competitive advantage!” “If alliances contribute to competitive advantage… “…they should “pass” the VRINE test (week 2)!” • Internal view of competitive advantage: • Joined resources & capabilities should be:V…R…I…N…E… 12 6 . Alliance-specific approach to VRINE • Tailor VRINE criteria specifically to alliances -> • The alliance generates competitive advantage if: • Rivals cannot ascertain what generates the returns • Rivals can figure out what generates the returns but do not possess those resources • Rivals cannot imitate practices or investments because they are missing complementary resources • Rivals cannot find a partner with the comparable complementary strategic resources • Rivals cannot access potential partners’ resources because they are indivisible 13 HOW? 14 7 . licensing. sole-sourcing • • 15 Multiparty alliances (consortia) 16 8 .Alliance types • Equity alliances • Ownership interest (in alliance/partner) • Often unequal ownership Joint venture • Specific form of equity alliance • Equity investments in third legal entity Non-equity alliances • No equity interest or creation of new organization • Contract-based • Franchising. co-branding. alliance… 17 Benefits of multi-party alliances • Member benefits • Higher seat occupation through seats supplied by alliance members • Less competition by avoiding competitors / alliance members routes • Selling seats for flights that airline does not perform itself • Increased reputation of the airline brand • Higher efficiency through sharing check-in services and lounges • Joint promotions How “VRINE-worthy” is the STAR alliance? • 18 9 .Company vs. • Concept of co-opetition 20 10 . improve efficiency.VRINE? • Which criterion does this refer to? 19 WHO? • • Consider activities in the value chain (week 2) Vertical alliances • With different stage in value chain Vertical • Often supplier or customer • Reduce costs. foster learning etc. reduce risk. improve customer value • Horizontal alliance • With same stage in value chain • Often (potential) competitor Horizontal • Gain access to segments. g. staging • Speeds up processes • E.g.Five forces & alliances • Use Porter’s five forces model (week 2) for partner selection • Any related organisation might be relevant alliance partner… • Even the authors’ 6th force: complementors 21 Part 2. arenas • Entrance into foreign market • E.g. Mergers & Acquisitions: WHAT? • • Not strategies as such! Vehicles of strategy • Elements of sound strategy (strategy diamond) May have major impact on other elements of strategy diamond! • E. economic logic • Low cost due to economies of scope/scale Arenas • Staging Economic logic Vehicles Differentiators Vehicles • How will we get there? 22 11 . Alliances • With alliances. ally” decision • Different strategic options for vehicles in strategy diamond • Outsourcing • Internal development • Non-equity alliances • Equity alliance • Mergers • Acquisitions • Merger • Consolidation or combination of 2 or more firms Acquisition: • One firm acquires another through stock purchase or exchange Vs. acquisitions vs.Mergers vs. hubris Synergy! • Value of firms combined > value of individual firms • Remember reasons for diversification last week? • Threat reduction • Market power & access • Cost savings • Sharing & leveraging capabilities • 24 12 . the original organisations stay intact! • • 23 WHY? • • Motives for M&A “Managerial” motivations • Managerialism. alliances • “Make. buy. All or nothing decision 4. Access to complementary assets & resources 4. Reduced competition 3.g. product & market expansion • Gain access to markets • E. Critical mass & scale 3. Potential cultural conflicts 25 HOW? • Types of M&A’s • Vertical • Horizontal • Complementary relationships • Other classifications • E.M&A’s versus internal development 1. Inherit unnecessary adjunct businesses 1. Speed 2.g. More expensive (premium) 2. geographic roll-up • Change industry structure! 26 13 . negotiation Idea Acquisition integration Integration versus hands-off approach Decision-making process problems Integration process problems 28 14 . multiple strategic considerations The seller’s perspective • The buyer’s perspective 27 Acquisition process Understand conditions for synergy Control timing (internal and external) Establish a walk-away price Results Strategy itself Justification due diligence.Acquisition vs. divestiture • • One transaction. Remember the life cycle Market Size Time Embryonic Niche market – selected products for selected markets Participants emphasize problem solving – product as “solution” Technological uncertainty Growing Market expands beyond niche More competitors enter Mature Proliferation of products and markets served Market volatility and beginnings of industry consolidation Aggressive customers In Decline Product/market contraction Further consolidation and industry regeneration Customers become better informed 29 M&As and industry life cycle • M&A activity differs for industries • E.g. driven by life cycle stage Introduction Growth Maturity M&As tend to be R&D and productrelated M&As tend to be for acquiring products that are proven and gaining acceptance > Industry convergence M&As primarily for dealing with overcapacity in the industry > Consolidation 30 15 . five forces model. Next week • Final topic/part in the book • Overview of core models/theories/concepts and their relationships! • • 31 16 .Recap • Alliances. M&As as PART of strategy • Vehicles • But with impact on other components • And (thus) a potential driver for competitive advantage! Linked to many tools/concepts discussed earlier • E. value chain. RBV. VRINE. strategy diamond.g. life cycle etc.