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MICHAEL PORTERs assumption- companies compete in market for a limited market share. Win-Lose situation Contrary view- competition could co-exist, competition is possible with mutual cooperation and beneficial to all parties concerned i.e. co-opetition co-opetition- simultaneous cooperation and competition among rival firms.
Types of Cooperative Strategies :MERGERS Objectives of buyers and sellers match to a large extent TAKEOVERS Acquisition-usually based on the strong motivation of the buyer firm to acquire
JOINT VENTURES
Independent firm is created by 2 or more firms Invaluable strategy for utilizing global expansion opportunities STRATEGIC ALLIANCE
Resources capabilities & core competencies are combined to pursue mutual interests to develop, manufacture or distribute goods or services.
1.MERGER STRATEGIES
HORIZONTAL
In same business
VERTICAL
Create complementarity in terms of supply(inputs) or marketing of goods & services (outputs)
CONCENTRIC
Related in terms of customer functions customer groups or technology
CONGLOMERATE
2 or more unrelated organizations
To increase the value of the organizations stock To increase the growth rate and make a good investment To improve stability of earnings and sales To balance,complete,or diversify product line To reduce competition To acquire needed resources quickly To avail tax concessions and benefits To take advantages of synergy
2. Takeovers
How takeovers take place : Spell out the objective Indicate how the objective would be achieved Assess managerial quality Check the compatibilty of business styles Anticipate and solve problems early Treat people with dignity and concern
Hostile Takeovers
Where a takeover is resisted or expected to be opposed by the existing management or professionals. Shares are picked from open markets and controlling interests obtained. With help from majority shareholders a bid is made to enter the companys board and to acquire control. Political support believed to be crucial in hostile takeovers.
CONS Ensure management Professionalism gets accountability replaced by money-power Offer easy growth Do not create any real opportunities assets for society and are Create mobility of resources detrimental to national economy Avoid gestation periods and hurdles involved in new Interests of minority projects shareholders is not protected Offer a chance to sick units to survive Open up alternatives for selective divestment
3.Joint ventures
Mergers
Absorption Consolidation
JOINT VENTURES
Joint ventures are a special case of consolidation where two or more companies form a temporary partnership (also called a consortium) for a specified purpose.
Drawbacks
Problems in equity participation Foreign exchange regulations Lack of proper coordination among participating firms Cultural and behavioural differences Possibility of conflict among the partners
Strategic Alliances
Necessary and sufficient characteristics 1. 2 or more firms unite to pursue a set of agreed upon goals but remain independent subsequent to the formation of the alliance 2. The partner firms share the benefits of the alliance and control over the performance of assigned task 3. The partner firms contribute on a continuing basis in one or more key strategic areas for e.g. technology ,product etc
Low
Interaction
Pro-Competitive Alliance
Pre-Competitive Alliance
Low
Conflict
High
Other reasons
Accelerate product introduction Overcome legal and trade barriers expeditiously