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2. What are the differences between business strategy and corporate strategy.
Present 6 primary headings of resource-base view and 2 primary headings
of risk –based view in strategic alliances?
• Business strategy is concerned with how a company should compete
in each of its selected business areas,
• Corporate strategy is concerned with business diversification and
primarily with the selection of businesses in which the company
should be active.
• The Resource-Based View
Finance. The financial heading relates primarily to the
availability of capital.
Technology. This heading refers to the technology inherent in
the operational processes. A typical subset is research and
development and the innovation and development of new
products. It also includes any patents or trade marks that
might apply to the use of specific processes.
People. The people heading includes the competency profile
of the employees. It also includes control over the use of this
competency profile, such as restrictions imposed by
intellectual property rights.
Production. This heading includes production equipment,
supplies, access to raw materials, production and product
secrets and innovations.
Management. This heading includes the management
competency of the organisation. Typical specific examples
include knowledge of the market (local knowledge) and
experience of the product.
Brand. The larger partners are likely to have a unique brand
image. A particularly powerful brand image can be central to
the success of the alliance.
• The Risk-Based View
Partner risk relates to the risk of there being problems in the degree
of cooperation that develops among the various members of the
strategic alliance. In order to succeed, the alliance has to contain a
level of mutual trust and cooperation, especially where high-risk
items such as secret technology or high levels of finance are
involved.
Outcome risk relates to the likelihood of a given strategic objective
or set of objectives not being achieved, or, if they are achieved, that
the outcome will turn out to be less than or different from
expectations.
3. What is strategic fit, give some example of this?
Strategic mergers and acquisitions should generate a new
organisation with a good strategic fit. One of the most important
aspects of strategic fit is that the merger should allow the two
companies involved to use their respective strengths and overcome
their weaknesses. Strategic fit is based on the concept of synergy.
Examples:
Production and technology. A manufacturing company that
acquires one of its own suppliers is an obvious example of a good
technological strategic fit.
An example is that of an entertainment company merging
with an Internet company. The entertainment company may be able
to make use of the Internet company’s technology to market, sell and
distribute its products.
Culture. The issue of cultural fit is often underaddressed.
People tend to become established in their ways of doing
things, and it can be very difficult to make major modifications in
this respect. In considering strategic fit it is very important to
consider the compatibility of the two cultures and to assess the
extent to which they can be integrated.
One obvious example is the acquisition by a highly formal,
functionaly structured organisation of one with an informal project-
based research and development structure.
Customers. Two companies may have similar customer bases,
and by merging they may be able to exploit these bases more
effectively. Two airline companies could merge and as a result
deliver more flights where the joint customer base is expanding.
Support. It is generally possible to improve the efficiency of
support functions by merging, simply as a result of the economies of
scale generated.
Brand. A company brand can sometimes be improved by a
merger or acquisition. A large, lowbrand image organisation could
achieve an excellent strategic fit by acquiring a smaller, highbrand
image target.
Resources. In some cases the resources owned by a potential
target might be seen as an opportunity to achieve a good strategic fit.
A speculative finance or development company might show an
interest in a smaller company that, for example, owns attractive
areas of land in highvalue or potentially highvalue areas.