Strategic Alliances, Mergers and Acquisitions, and Corporate Governance Flashcards

Flashcards based on lecture notes about strategic alliances, mergers, acquisitions, strategic control, and corporate governance.

What are the steps of the Build-Borrow-Buy framework?

Framework that guides resource acquisition strategy: Build (internal), Borrow (strategic alliances), Buy (M&A).

Why did Lyft enter into strategic alliances with GM and Waymo? What were the benefits of these alliances for Lyft? For GM? For Waymo?

To access complementary assets, gain exposure to ride-sharing, and obtain a distribution channel for self-driving technology.

What are the benefits and risks of internal development (Build) versus strategic alliances (Borrow) vs. mergers/acquisitions (Buy)?

Build: Low risk, high control, but slow. Borrow: Medium risk, shared control, faster. Buy: Fastest, full control, but costly and risky.

What are strategic alliances? Why do firms enter into these types of business relationships?

Voluntary partnerships to share resources, knowledge, or capabilities to develop processes, products, or services.

Describe the difference between non-equity alliances, equity alliances, and joint ventures.

Non-equity: Contract-based. Equity: One firm buys ownership in the other. Joint ventures: Jointly owned new firm.

What is tacit knowledge? How does the sharing of tacit knowledge contribute to value creation in equity alliances?

Difficult to codify or communicate. Equity alliances facilitate sharing tacit knowledge via deeper collaboration and ownership ties.

What are the three phases of alliance management? What are the components that lead to success in each phase?

Partner Selection (compatible, committed partners); Alliance Design & Governance (trust, effective structure); Post-Formation (knowledge sharing, relationship investment).

Identify and describe the best practices utilized by firms to maximize value from strategic alliances.

Relation-specific investments, knowledge-sharing routines, interfirm trust, repeated experiences.

Define mergers, acquisitions, and takeovers (including hostile takeovers) and identify the distinctions among them.

Merger: Two firms combine. Acquisition: One firm buys another. Hostile takeover: Target firm resists acquisition.

What is horizontal integration? What are the sources of value creation for this strategy? What are the costs?

Merging with a competitor at the same value chain stage. Benefits: Lower competition, cost savings, differentiation. Costs: Legal scrutiny, integration failure, culture clash.

Why do firms pursue mergers and acquisitions? What are the benefits? What are the risks?

To enter new markets, gain distribution, acquire capabilities, preempt rivals.

How do mergers impact competitive advantage and value creation?

M&A often fail to create competitive advantage due to poor integration, overpaying, or failing to realize synergies.

What principal-agent issues impact the ability of mergers/acquisitions to positively impact shareholder value?

Managers may pursue M&A for personal gain (power, pay), not shareholder value.

What is meant by managerial hubris?

Overconfidence; leads to overestimating ability to manage acquisitions, resulting in bad deals.

Describe how superior acquisition and integration capability can be a source of competitive advantage.

Superior acquisition/integration capability (e.g., cultural fit, process management) helps capture synergies and reduce M&A failure risk.

Identify and describe the differences between the traditional approach and the contemporary approach to strategic control.

Traditional: Sequential, feedback loop, stable environment. Contemporary: Interactive, real-time info & behavioral feedback.

What is the difference between informational control and behavioral control? What is the role of each in implementing strategic control?

Informational: Are we doing the right things? Strategic fit. Behavioral: Are we doing things right? Implementation control.

What are the three essential elements of behavioral control?

Culture, Rewards, Boundaries.

What is organizational culture? How is it built and sustained?

Shared values and norms. Built via leadership, stories, and rituals. Sustained by engagement and communication.

What are the benefits and downsides of using rewards and incentives for behavioral control? What are the characteristics of effective reward and incentive systems?

Benefits: Motivation, focus on goals. Downsides: Misaligned incentives, silos. Effective systems: Clear goals, visible metrics, fair structure, prompt feedback.

How are boundaries and constraints utilized for behavioral control? In what situations are they most effective?

Guide behavior via rules, constraints. Best for: Predictable environments, unskilled roles, ethical risks.

What is corporate governance? Who are the primary participants?

Control system between shareholders, management, and board to align interests.

What is agency theory? Describe the agency problem.

Principal (owner) vs. Agent (manager) conflict. Problems: Misaligned goals, risk tolerance, monitoring costs.

What are the three primary internal governance mechanisms for monitoring and managing the behavior of managers? Identify the strengths and weaknesses of each.

Mechanisms: Board of Directors oversight, Shareholder Activism pressure, Managerial Incentives aligned. Strengths and weaknesses vary.

What are the duties of a board of directors? What are the characteristics of an effective board of directors? What actions might firms take to improve board effectiveness?

Oversee strategy, hire/fire CEO, protect shareholders. Effective boards: Independent, informed, strategic. Improve via diversity, transparency, engagement.

What is shareholder activism? What role does shareholder activism play in corporate governance?

Using voting rights and influence to change company policies/leadership, often via institutional investors.

How do managerial rewards and incentives align the interests of managers and shareholders?

Align interests via: Stock ownership, performance-based pay, threat of dismissal for poor performance.

What is CEO duality? What are the benefits? What are the disadvantages?

CEO is also board chair. Pros: Unified vision, faster decisions. Cons: Conflicts of interest, reduced oversight.

Describe the following external governance control mechanisms and their effect on firm management: the market for corporate control, and the role of auditors, banks and analysis, governmental regulators, and the media in aligning the interests of shareholders and managers.

External controls: Market for corporate control, Auditors, Banks/Analysts, Regulators (e.g., SEC), Media.

Identify and describe the key global differences in corporate governance issues and solutions highlighted in Chapter 7.

Global governance issues: Principal-principal conflicts in family-controlled firms, risk of minority shareholder expropriation, business groups.