Advantages and Disadvantages of External Growth Strategies Advantages Disadvantages• Reducing competition • Incompatibility of top management• Vertical or horizontal Integration • Clash of corporate cultures• Gaining access to new products and • Operational problems markets • Increased business complexity• Access to technical expertise • Loss of organizational flexibility• Access to an established brand name• Economies of scale • Antitrust environment• Diversification of business risk
Partnership and strategic alliancing 1+1= +3“Partnership and strategic alliancingleverage the resources, abilities and giftswhile getting around the weaknesses”.Mohamed Essam
PARTNERSHIP & STRATEGIC ALLIANCING FIGURE Potential Partnership Participants - Dr. Syed M. Ahmed, Ph.D. College of Engineering & Computing Florida International University, Miami, Florida
PARTNERSHIP“A partnership is an arrangement where parties agree to cooperate to advance their mutual interests”. - (1000ventures, 2010) “Our success has really been based on partnerships from the very beginning.” Bill Gates (American Entrepreneur and Founder of Microsoft Co., b.1980) 1
Strategic Alliance"A strategic alliance is a partnership between firms whereby resources, capabilities, and core competences are blended to follow mutual interests”. - (Answers.com, 1996) 2/3
Joint ventures“Two or more "parent" financial gatherings accept to share capital, technical knowledge, human supplies, and threats and compensates in a formation of a new entity under divided control”. - (1000ventures, 2010) "If you do not seek out allies and helpers, then you will be isolated and weak.“ Sun Tzu, "The Art of War"
Mergers“A merger occurs when the net assets of two or more cooperatives merge into one surviving cooperative. Mergers usually involve horizontal growth”. - (Institute of Mergers, Acquisitions and Alliances, 2008)
Acquisition - Takeover• “In business, an Acquisition or a takeover is the purchase of one company (the target) by another (the acquirer, or bidder)”. - Investopedia.com 4
Nestlé’s Acquisition StrategyAll acquisitions are measured against a list of key criteria for Nestlé Possible transition into Nutrition, Health and Wellness To be category No. 1 or strong No. 2 Strong brands in leadership positions Focused approach on value-added growth categories Enhancing RIG (Real internal growth), cash flow and earnings Generate value for shareholders Maintain strong credit ratings and financial flexibility High degree of certainty of successful integration
About half of Nestlé’s billionaire brandsIn- come from acquisitions Acquired in 1996 Acquired in 2002 Acquired JV with Acquired LOréal in 1988 in 2002 JV with Acquired Acquired Coke in 1985 Acquired in 2007 in 2002 Acquired in 1998 Acquired Acquired in 1977 Acquired in 2004 in 1985 Acquired Acquired in 1973 in 1986 Acquired “An alliance with a powerful in 1988 person is never safe.” Phaedrus (Roman fabuliste, 15-50 B.C.) 21
WATERS’ BUSINESS IN EGYPT MARKETSHARE Schweppes Siwa Nahl 4% 3% Safi 1% 1% Aqua Hayat 5% Aquafina 5% 26% BarakaBaraka 12% Dasani + 25%Nestle Nestle 30 % 18%
Top 10 M&A deals worldwide by value (in mil. USD) from 2000 to 2010 Transaction value (in mil.Rank Year Purchaser Purchased USD) Fusion: America Online 1 2000 Inc. (AOL) Time Warner 164,747 SmithKline 2 2000 Glaxo Wellcome Plc. Beecham Plc. 75,961 Royal Dutch Petroleum Shell Transport & 3 2004 Co. Trading Co 74,559 4 2006 AT&T Inc. BellSouth Corporation 72,671 AT&T Broadband & 5 2001 Comcast Corporation Internet Svcs 72,041 6 2009 Pfizer Inc. Wyeth 68,000 Spin-off: Nortel 7 2000 Networks Corporation 59,974 8 2002 Pfizer Inc. Pharmacia Corporation 59,515 JP Morgan Chase & 9 2004 Co Banc One Corp 58,761 Anheuser-Busch 10 2008 Inbev Inc. Companies, Inc 52,000 TABLE INSTITUTE OF MERGERS, ACQUISITIONS AND ALLIANCES
Licensing“The granting of permission to use intellectual property rights, such as trademarks, patents, or technology, under defined conditions. Licensing, in the business world, is a contractual agreement to use a brand name, patent or property that is owned by another business entity ”. - (investorwords.com, 2009).
Franchising “A business arrangement which permits for the reputation, (goodwill) breakthrough, scientific experience and technology of the innovator (franchisor) to be blended with the energy, industry and finance of another party (franchisee) to conduct the commerce of supplying and selling of products and services”. - (Wipo.int, 2011)5
Bibliography• 1000ventures. (2010). Joint Venture. Retrieved October 8, 2011, from http://www.1000ventures.com/business_guide/jv_main.html• 1000ventures.com. (2011). Strategic Alliances "Why and How To Build Them". Retrieved Oct 8, 2011, from http://www.1000ventures.com/business_guide/strategic_alliances_main.html• Answers.com. (1996). strategic-alliance. Retrieved Oct 2011, from http://www.answers.com/topic/strategic-alliance• chaurasiya, K. (2010). advantages and disadvantages of acquisition. Retrieved 2011, from businessofaccouting.com: http://businessofaccouting.blogspot.com/2010/04/advantages-and-disadvantages-of.html• Cheryl Munson, eHow Contributor. (2011). Definition-licensing-franchising. Retrieved Oct 2011, from http://www.ehow.com/about_6068927_definition-licensing-franchising.html• Evancarmichael.com. (2011). Franchising--Licensing---What-exactly-are-they--and-why-are-more-and-more-people-looking-at-this-option. Retrieved Oct 2011, from http://www.evancarmichael.com/Branding/508/Franchising--Licensing---What-exactly-are-they--and-why-are- more-and-more-people-looking-at-this-option.html• Hoffman, I. (2007). strategic. Retrieved October 8, 2011, from http://www.ivanhoffman.com/strategic.html• Institute of Mergers, Acquisitions and Alliances. (2008). statistics-mergers-acquisitions. Retrieved Oct 17, 2011, from http://www.imaa- institute.org/statistics-mergers-acquisitions.html#TopMergersAcquisitions_Worldwide• Investopedia.com. (2010). Merger. Retrieved Oct 17, 2011, from http://www.investopedia.com/terms/m/merger.asp#ixzz1b25GYRMl• investorwords.com. (2009). licensing. Retrieved Oct 9, 2011, from http://www.investorwords.com/2799/licensing.html#ixzz1b2P5Mohe• Lenin. (2009, Nov 19). Partnership and Types of Partnerships. Retrieved Oct 8, 2011, from http://www.indiastudychannel.com/resources/95609-Partnership-Types-Partnerships.aspx• MBASkool. (2011, April 17). mergers-vs-strategic-alliances-vs-joint-ventures-the-difference. Retrieved October 10, 2011, from http://www.mbaskool.com/business-articles/finance/94-mergers-vs-strategic-alliances-vs-joint-ventures-the-difference.html• Piperpat.com. (2009). advantages of a franchise. Retrieved Oct 2011, from http://www.piperpat.com/IPManagement/Franchising/tabid/251/Default.aspx• Rahulmbaguy. (2009). distribution-channel. Retrieved Oct 2011, from http://www.slideshare.net/Rahulmbaguy/distribution-channel- 2066149• Scribd.com. (1996). Strategic-Alliance. Retrieved Oct 2011, from http://www.scribd.com/doc/38964984/Strategic-Alliance• Wikipedia. (2011, October 6). Partnership. Retrieved Oct 8, 2011, from http://en.wikipedia.org/wiki/Partnership• Wikipedia. (2011, Aug 24). Strategic alliance. Retrieved Oct 8, 2011, from http://en.wikipedia.org/wiki/Strategic_Alliance• Wipo.int. (2011). Franchising & Licensing - What are they? and how can you benefit from them? Retrieved Oct 9, 2011, from http://www.wipo.int/sme/en/documents/franchising.htm#what• WN.com. (2011). License. Retrieved Oct 2011, from http://wn.com/License•
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