Consolidation occurs when two companies combine to form a new enterprise altogether; neither of the previous companies survives independently.
The logic driving consolidation is the creation of economies of scale, economies of scope, new locations, new technology, or some other form of increased competitive capacity. This activity can help an enterprise grow rapidly in its sector or location of origin or expand into a new field or new location. Generally speaking, a merger is a combination of organizations in which each abandons its previous brand and business models, creating a new organization with the combined capacities of each one.
In an acquisition, one organization buys out another, with the acquired company usually placing its processes under the brand name of the acquirer. Mergers and acquisitions of U. Banks : This diagram of bank mergers in the United States shows how extensive the consolidation of various companies has been. What start as more than 50 distinct companies have eventually consolidated into fewer than In the pure sense of the term, a merger happens when two firms, often about the same size, agree to go forward as a single new company rather than remain separately owned and operated.
For example, in the merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist independently; a new company, GlaxoSmithKline, was created. Not every merger with a new name is successful.
The following motives are considered to improve financial performance: economy of scale, economy of scope, increased revenue or market share, cross-selling, synergy, taxation, geographical or other diversification, resource transfer, vertical integration, and hiring. Other motives for merger and acquisition that may not add shareholder value include diversification, manager overconfidence, empire-building, and management compensation. Because of the costs involved, consolidation is a very high-level strategic decision. All stakeholders in both organizations should be consulted, and agreements will often take many months or years to conclude.
https://ppedmicahimi.tk Cultural conflicts between two different organizations are not uncommon, as the mission, vision, and values of the individuals and groups within them are likely to differ. Managing this type of change strategically is complex and rife with conflict. Mismanagement during these processes can minimize the potential synergistic gains and reduce the efficacy of the new strategic plan.
Explain the concept of global strategy within the context of international business and a globalized economy. How can the organization build the necessary global presence? What are the optimal locations around the world for the various value-chain activities? How can the organization turn a global presence into global competitive advantage? A global strategy may be appropriate in industries where firms face strong pressures to reduce costs but weak pressures to respond locally; globalization therefore allows these firms to sell a standardized product worldwide.
By expanding to a broader consumer base, these firms can take advantage of scale economies cost advantages that an enterprise obtains due to expansion and learning-curve effects because they are able to mass-produce a standard product that can be exported providing that demand is greater than the costs involved.
Globalization is not limited to cost leadership, however. Differentiation strategies also enable economies of scope, either fulfilling different needs in different markets with a similar series of products, or developing new products based upon the needs and consumption habits of a new market.
Differentiation as part of a global strategy will often require localization, as organizations must adapt to consumer tastes better to compete in the new country. For example, Coca Cola tastes different depending on the country where it is bought because of differences in local preferences. Starbucks sources coffee beans from all over the world, as climate dramatically affects the type and quality of the bean.
The globalization strategy of Starbucks—while it includes selling in many countries—is hugely depending on global sourcing, and strategic managers must carefully monitor this process for costs and benefits. Global strategies require firms to coordinate tightly their product and pricing strategies across international markets and locations; therefore, firms that pursue a global strategy are typically highly centralized. With global markets in mind, strategic managers must expand their perspective and use varied models to generate different strategies for different places.
For example, companies must now conduct a PESTEL analysis for each region in which they operate and recognize expense and competition deviations between regions. For example, tariffs in country A may be much higher than country B, but country B has fewer individuals willing to pay a high price for the good the organization is selling.
These analyses are how strategists incorporate global concerns into strategic management. Gross domestic product GDP worldwide : The map identifies GDP nominal in different countries;countries with higher GDPs offer high consumer spending opportunities for multinational enterprises.
The U. A strategic alliance is a cooperation where each member expects the benefit from cooperation will outweigh the cost of individual efforts. A strategic alliance is a relationship between two or more parties to pursue a set of agreed-upon goals or to meet a critical business need while remaining independent organizations. The alliance is a cooperation or collaboration that aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts.
Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property.
The alliance often involves technology transfer access to knowledge and expertise , economic specialization David C. Mowery, Joanne E. Oxley, Brian S. Strategic Alliances and Interfirm Knowledge Transfer. Winter Strategic Management Journal , Vol. Because the number of patents has increased in recent years, technology transfers in strategic alliances have become more common. Cooperative sourcing is a collaboration or negotiation between different companies with similar business processes. To save costs, the competitor with the best production capability can insource the business process of the other competitors.
This practice is especially common in IT-oriented industries as a result of low to no variable costs, e. Since all of the negotiating parties can be outsourcers or insourcers, the main challenge in this collaboration is to find a stable coalition and the company with the best production function.
High switching costs, costs for searching potential cooperative sourcers, and negotiating may result in inefficient solutions. Upper management is tasked with the developing complex interactive strategies when entering a strategic alliance. Aligning stakeholders from different businesses and ensuring the costs do not outweigh the benefits requires careful managerial consideration.
The following steps highlight key aspects of the strategic alliance process:. In the emerging global economy, e-business has become an increasingly necessary component of business strategy. The term electronic business commonly referred to as E-business or e-business is sometimes used interchangeably with e-commerce. In fact, e-business encompasses a broader definition that includes not only e-commerce, but customer relationship management CRM , business partnerships, e-learning, and electronic transactions within an organization.
Automated online assistant : In e-commerce, electronic i. Electronic-business methods enable companies to link their internal and external data-processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of customers.
In practice, e-business is more than just e-commerce. While e-business refers to a strategic focus with an emphasis on the functions that occur using electronic capabilities, e-commerce is a subset of an overall e-business strategy.
E-business involves business processes that span the entire value chain: electronic purchasing and supply-chain management, electronic order processing, customer service, and business partner collaboration. Special technical standards for e-business facilitate the exchange of data between companies. E-business software allows the integration of intrafirm and interfirm business processes. E-business can be conducted using the Internet, intranets, extranets, or some combination of these.
In the emerging global economy, e-commerce and e-business have become increasingly necessary components of business strategy and strong catalysts for economic development. Knovel Full view. More options. Find it at other libraries via WorldCat Limited preview. Bibliography Includes bibliographical references and index. New Product Development is the last frontier in gaining a competitive edge.
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Publication date ISBN electronic bk. Librarian view Catkey: