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Acquisitions Time Inc. acquires WarnerCommunications, creatinga vertically integratedentertainment business
Phillip Morris buys Kraftand General Foods in aneffort to diversify out ofthe cigarette business
BASF, a Germanchemical producer, buysInmont, a US chemicalscompany, to overcomelimited growthopportunities at home
StrategicAlliances
Cetus, a leading firm in thebiotechnology field, teamsup with larger corporationswhich provide the capitaland marketing needed tointroduce new Cetustechnology
Dow Chemical andCorning Glass join forcesto create a joint venturemore profitable thaneither of its parents.
Fuji Photo Films andXerox, Inc. form a singleimport sales operationthat later grows tobecome one of theworld’s leading producersof photocopiers
InternalDevelopment
Humana develops a full lineof health care services,vertically integrating acrossinsurance, hospitals, andfollow-up treatmentservices
3M consistently getsmore than 25% of itsrevenues from products ithas developed within thelast five years
Anheuser-Busch attemptsto open up new marketsby taking Budweiser, itsflagship product intoBritain
Sales relative to those of other competitors in market (dividing point is usually selected to have only 2-3 largest competitors in any market fall into high market share region)
Growth Rate: Industry growth rate in constant dollars (dividing point is typically GNP’s growth rate)
Industry Attractiveness Industry Attractiveness: Subjective assessment based on broadest possible range of external opportunities and threats beyond control of management
Business Strength: Subject assessment of how strong a competitive advantage is created by a broad range of a firm’s internal strengths and weaknesses
In 1981, John E. Welch Jr., Chairman and CEO of General Electric designed the company’s operations on the basis of three `strategic circles’:
Core manufacturing units such as lighting and locomotives
Technology -intensive businesses services
To achieve the first or second position in the global market for each of its businesses: By 1986, this strategic orientation had taken shape with 14 distinct businesses, including aircraft engines, medical systems, engineering plastics, major appliances, television and financial services.
Jointly own Prodigy, an interactive computer service for consumersJointly built a US $200 million plant in Japan to manufacture high-resolution colour flat screens for laptopsJointly developing future chips and jointly built 16-Mb DRAM memory chips in France Mitsubishi Electric sells IBM mainframes in Japan under its own name
Developing tools to make it easier to create software for the OS/2 systemSells IBM’s PCs and RS/6000 workstations under its own nameIBM sells Novell networking softwareTwo joint ventures: Taligent and KaleidaJointly developing the RISC microprocessorJointly developing a new generation of integrated microprocessor chips
Its main function is marketing with a current staff strength of 35 in India. The other activities are outsourced as given below:
Apparel design National Institute of Fashion Technology Warehouse management Bakshi Associates Logistics Nexus Logistics Retailing Phoenix Advertising Hindustan Thompson Store design and execution Aakar Sports management 21st Century Gymnasium A private firm Manufacturing Shoes: Phoenix, Aero, Lakhani Apparel Viniyoga and six others Selection Prospects
Government and industry partneringInternal spin-offs
Cross-licensing
ExamplesFord and Mazda (design and build similar cards on the same manufacturing/assembly line)Swift Chemical Co., Texasgulf, RTZ and US Borax (Canadian-based mining natural resources venture)DuPont and National Cancer Institute (DuPont worked with NCI in the first phase of the clinical cancer trial on IL)Cummins engine and Toshiba Corporation (created a new company to develop/market silicon nitride products)Hoffman-LaRoche and Glaxo (HL and Glaxo agreed for BHL to sell Zantac, an anti-ulcer drug in the United States)
Different Types of Strategic AlliancesDifferent Types of Strategic Alliances
Strategy development The focus is on development of resource strategies for production, technology and manpower. This has to be aligned to the objectives of corporate strategy alliances.
Partner assessment The attempt to assess the strengths and weaknesses of a partner and understand a partner’s motives for alliance formation.
Contract negotiations It is necessary to have realistic objectives, defining each partner’s contributions and rewards. It is also necessary to incorporation termination clauses, penalties for poor performance and arbitration procedures.
Alliance operations This is concerned with the management’s commitment, and linking of budgets and resources with priorities.
The alliance between British Airways and American Airlines was announced in June 1996. BA and American together control 60 per cent of the flights between the UK and the US, 70 per cent of the traffic between London and New York, 90 per cent between London and Chicago, and all flights between London and Dallas.
Bermuda II, the UK-US aviation agreement, was concluded in 1977 which gives details of which airlines can fly between specified US and UK cities, and the number of flights they can operate. BA was against the scrapping of the agreement till recently.
American Airlines was against the trend towards code-sharing agreements which allows airlines to sell tickets on routes they do not serve. This was considered to be anti-competitive. Now both BA and American have to retreat from their respective positions.
BA has a partnership with US Air in which it has a 24.6 per cent stake. The US government has not granted anti-trust immunity to the alliance to coordinate their operations more closely. Therefore, BA and American are asking for anti-trust immunity and requesting their governments to negotiate a new, liberalized aviation agreement.
Samsung Group A joint venture with Texas Instruments to manufacture semiconductors - they
are building a semiconductor plant in Portugal. Cooperation with General Instrument in developing high definition televisions
(HDTV). The sharing of technology for flash memory devices with Toshiba. Co-developing computer workstations with Hewlett Packard-they have a joint
venture, Samsung -Hewlett Packard-which markets the American company’s products in Korea.
Supply of memory chip technology to Oki Electric. Partnership with General Electric in high-tech medical equipment. Lockheed for F-16 jet fighters (local assembly) Pratt and Whitney for jet engines (supplies components) Amoco for textile raw materials Corning for TV glass and building plants in China and Malaysia Mitsui Petrochemical for petrochemicals
An agreement with Apple Computers for new technology creation for multimedia.
A technology -sharing agreement with IBM to develop new data storage devices using `NAND-flash’ memory chips semiconductor devices; it has developed the world’s smallest 256-Mb D-Ram.
Through an alliance with IBM, Japan, it opened a second large-size thin-film transistor (TFT) LCD plant in 1995.
Alliances with National Semiconductor and Samsung Electronics of Korea to jointly develop and market flash memory chips.
An alliance with Sun Microsystems Inc. of the US in the areas of rightsizing, Internet and interactive technology. They will share product development, marketing and distribution in these fast-growth areas. Toshiba plans to develop and build systems based on Sun’s 64-bit UltraSPARC microprocessor. The rightsizing or integration of in-house information systems is aimed at enhancing the efficiency of the company’s white-collar workers. Toshiba will invest about US $303 million to rightsize its computer systems between 1995 and 1999. Sun Microsystems will bring in the technology for the projects, while Toshiba will provide the hardware to enhance efficiency of information technology.