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AlliancesandAcquisitions&

Strategy formulation tools

and techniques

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Alliances and Acquisition

Alliances(which includes a merger) and acquisition considerations are

important elements of any modern corporate strategy( Almassy and Baatz,

1992 !a"e,199# $uide%ines, 199# &amel et al',199)'

hey *oth ha"e an equal chance of success, which is a*out +- (Blee.e

and /rnst,1991)'

$enerally alliances are more successful if they are used to enter mar.ets in

new geographical areas, or to de"elop products that are not core to either

party0s *usiness strategy ( Blee.e and /rnst, 199+)'

Acquisition should *e in geographical areas where the company already has

a string presence or where the product is core to its operation'

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ig' +' he alliance3acquisition matri4

5rimeBusiness

6ewBusiness

/4isting 6ew

$eography $eography

Acquisition Alliance

(Acquisition)

Alliance (Acquisition)

Alliance

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7easons for Alliances

28 of cross3*order alliances run into serious pro*lems in the first two years

of their e4istence ( Blee.e and /rnst,1991) and 18 result in failure'

:trategic alliances can in"ol"e se"eral groups of companies ( $omes3

!asseres, 199;) and may *e set up to de"elop new products ( Bidault and

!ummings, 199;)

:ometimes a large firm will form an alliance with a much smaller company ,

and tap into the smaller partner0s inno"ati"e and entrepreneural s.ills, while

the smaller company gains access to world mar.ets, "olume manufacturing

and much greater resources ( 5eridis, 199)'

7easons for forming alliances depend largely on the acti"ities of the

partners ( %orange et al',199)'

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ig' +' 7easons for forming alliances

5rime

*usiness

:econdary

*usiness

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:trong Alliances

Alliances formed *etween two partners of equal strength ha"e the

greatest chance of success'

Alliances are formed for the wrong reasons

1' >ea. company will chose a stronger partner in the hope that this

will help it to get out of its pro*lems'

2' :tronger company will accept the wea.er partner, since it *elie"es

that it can then dominate the partnership and get its own way'

An alliance needs to use the s.ills of *oth companies in equal

amounts and *oth must *e willing to share in its in"estment and notlum*er any one company with an unfair share of the *urden ( ?anter,

199;)'

@oint "enture is the ultimate form of alliances'

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Strategy formulation tools and techniques

Ad"antages in the use of formal tools and techniques

hey ensure a systematic thought process and

consideration of the pros and cons and a rigorous

approach towards the pro*lem'

/nsure that the emphasis is placed on facts rather than

on hunches'

/nsure a more detailed analysis of the pro*lem yields to

*etter decision ma.ing'

5ro"ides fall3*ac. strategies'

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5lanning tools and techniques

1' Value Analysis

=ri"ing forces in the *usiness are itemized and analyzed' Acti"ities which

add "alue need to *e itemized and clearly identified'

/4'

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2' Market Analysis

!ompetitor

Analysis

!ompany strengths

and competiti"e

ad"antage

Benchmar.ing

echnological and

mar.et forecasting

5roduct life cycle:ensiti"ity

Analysis

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' Gap Analysis

ig' +'9 $ap analysis

$ap analysis deals with

!orporate aims

/4pected results

:ize of the gap

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;' Financial analysis

his is a well3esta*lished technique and se"eral e4ist ( =ay, 19#) '

ools are also a"aila*le for cost and control mechanisms and to plan

operating *udgets ( aradaraCan, 19;)'

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+' Group decision making

=ecision ma.ing *y groups is often more effecti"e than *y indi"iduals

( =el*eeq et al', 19+ @ohnston