Im 8

Combining Factors of Production to Achieve Growth Objectives:
Land Securities Group Case Study
1
Introduction
Suppose you wanted to start a business. What would you need?
1. You would have to decide what products your business would offer
2. This decision would influence your view on what premises (or land)
you needed
3. the kind of machinery required
4. the type of labor to be employed
5. In addition, you would need to find the money (capital) to pay for
setting up all these things
6. Above all, you would need organizational skills
http://businesscasestudies.co.uk/land-securities-group/combining-factors-of-production-to-achieve-growth-objectives/enterprise-and-risk.html#axzz3TxMOkB5P
Factors of
Production
Product or
Service
Land
Labor
Capital
Enterprise

2
Land Securities:
Co. Profile
- Land Securities has been at the forefront of the UK commercial
property investment and development industry for over 60 years
- It manages property and generates rental income
- It remains market leader by providing commercial accommodation and
property services to more than 2,000 customers
- Land Securities develops large scale building projects such as office
blocks and retail centres
- Land Securities does not actually build properties itself, but contracts
out the building work to other businesses
0.4
3.2
3
1.3
Investment Portfolio in 2004 (in Billion Pounds)
Industrial Premises
Rental
Offices
Retail Warehouse
Land Securities:
Investment
Portfolio

3
Enterprise &
Risk
- Enterprise refers to all the organizational skills that go into creating a
product or service
- It also includes a willingness and ability to take risks in order to gain
rewards and to think up new products or services
- Land Securities manages its risks by making sure it has a balanced
portfolio
- The portfolio will contain some developments that carry a substantial
element of risk but which, if successful, will bring high returns
- It will also contain lower risk activities, which ensure a steady income
stream
Risk
Management &
Land Securities
- Risk management strategy that follows the six steps;
1. Identify the business goals and objectives (the reasons why risks are
taken)
2. Identify the risks
3. Measure the level of risk
4. Develop action plans to manage the risks
5. Assess the risks again after they have been managed
6. Report at each stage

4
Combine Risk
Strategy with
Innovation
Examples of these include:
1. Property outsourcing - Land Securities Trillium is the market leader
here
2. Additional client services - e.g. building maintenance, cleaning,
reception and security.
3. Landflex - this enables clients to change the size of their
accommodation over time and to have flexible leases on property
Land
- When firms use land efficiently, the land rises in value
- Land Securities often puts land to new uses
- If the buildings already on it are no longer serviceable, the company
will demolish them and redevelop the site
- If, however, the buildings still have potential, Land Securities will save
resources by refurbishing them
- Taking care of the environment is a big issue in the case of land use
- Land Securities recycles rubble from old buildings into new projects,
such as Heathrow's new Terminal 5, which was built using recycled
aggregate
- It works with subcontractors to ensure that buildings are as energy
efficient as possible
- Land Securities also develops brownfield sites e.g. the Kent Thameside
Development of mixed housing and commercial property
Land &
Environment

5
Land &
Environment
- As part of its Land Securities Trillium ISO14001 Environmental
Certification, it checks all of its potential suppliers' policies on health,
safety and the environment to ensure that its environmental footprint
is as small as possible
Labor
- Labor is the work done by an economy's workforce
- Different people do different jobs requiring different skills and
attributes
- Labor does not just mean physical effort, refers to all work done,
whether by hand or brain
- Land Securities employs nearly 2,000 people across the UK
- They are responsible for the management of the property portfolio,
development and delivery of all the business property services
- It uses pay, incentives and benefits to help motivate its staff
- The business communicates openly with employees, so that
management and employees can easily exchange ideas or solve
problems. Communication includes:
- an intranet that regularly updates employees
- regular presentations on business activities and future plans -
- management and staff 'away days‘
- email updates
- various magazines, both on paper and online, including a monthly
environmental newsletter

6
Labor
- The Group looks to recruit and develop the best people for its various
business roles
- It offers them ongoing comprehensive training programmes
- It sets targets for internal promotion and constantly monitors staff to
ensure that people maximize their career opportunities
- It runs a 'Values into Action' award programme, which rewards
employees for demonstrating in the workplace the company's core
values;
1. integrity
2. respect for the individual
3. customer service
4. excellence
5. innovation
- The company also encourages its employees to be involved in
community activities in the areas where they are based. This helps to
build good working relationships between the company and local
communities

7
Workplace
Legislation
- Labor is an important factor of production and managing labor
effectively involves understanding workplace legislation
- Land Securities looks to comply with all laws relating to the workplace -
- It ensures nobody is harassed or treated differently because of their
age, race, color, disability, creed, religion, or sexual orientation
- The legislation that Land Securities must follow includes:
1. Health and Safety at Work Act: Both employers and employees have
a duty to work in as safe and healthy a way as possible
2. Equal Pay Act: Men and women should receive equal pay for equal
work
3. Sex Discrimination Act: This extended the law to include such matters
as recruitment, training, and promotion opportunities. Employers may
not discriminate on grounds of an employee's or applicant's gender.
The government set up the Equal Opportunities Commission to
enforce the Act.
4. Race Relations Act: This made it illegal to discriminate between
people on the grounds of race, colour, marital status, nationality or
ethnic group. It also set up the Race Relations Board to investigate
complaints. The Act applies to all aspects of employment including job
advertisements, recruitment processes such as interviews, and
training and promotion opportunities

8
Workplace
Legislation
5. Disability Discrimination Act: Employers with 20 or more staff must
not discriminate against applicants or employees on grounds of
disability, providing that the applicant is capable of doing the job
Capital
- In the context of factors of production, capital refers to the buildings,
machinery, equipment (including vehicles) and tools that businesses
use to create goods and services
- In this context, capital does not mean 'money' but means the real
assets that businesses purchase or hire, using money
- Land Securities operates in the property market, where capital is a key
factor of production
- The company's 2,000 employees manage a portfolio of investment
assets worth around £8 billion
- Businesses like Land Securities have to borrow large amounts of money
because their activities depend so heavily on physical capital, financed
through bank loans, bond sales and share issues
- Land Securities is a public limited company so it has shareholders who
expect a return on their investment. Land Securities' three divisions
compete to see which can generate the best financial performance

9
Capital
The company's three main divisions are:
1. Central London - Its £8.7 billion investment portfolio includes more
than 810,000 m2 of office space in London and substantial retail
holdings in Oxford Street and Tottenham Court Road. The main driver
is to recycle capital in a cyclical market, for example the selective
acquisition of properties with active management opportunities
rather than simple asset accumulation
2. Retail - The Group owns 18 shopping centres and 25 retail parks
located across the UK and its vision is to acquire or develop long-term
assets. Land Securities has been selling high street retail (directly with
the customers), to enable it to drive higher returns through the active
management of larger assets
3. Property Outsourcing - This division manages properties on behalf of
the clients who own them. It offers a complete buildings management
and support service. This leaves the businesses who occupy the
buildings to concentrate on what they are good at. They no longer
have to deal with day-to-day problems such as caretaking, cleaning
and buildings maintenance. Clients for this service include
government departments, the BBC and BT
Land Securities have an Urban Community Development division, which is overseeing and master planning
one of Europe's largest regeneration schemes in Kent Thameside. In such a capital-intensive business, the
company has to ensure that it is managing risk and also working to achieve the best returns for all of its
stakeholder groups

10
Conclusion
- Land Securities' stated aim is to create sustainable shareholder returns
through good financial management
- This relies on careful management of all four factors of Production
(Land, Labor and Capital are all important, but Enterprise is arguably
the most important of all)
- With its sound organizational and entrepreneurial skills, Land Securities
continues to be the market leader in the UK property market

Strategic Alliance
11
http://iveybusinessjournal.com/publication/leveraging-knowledge-management-across-strategic-alliances/
(Harbison J.R., and Pekar P. A Practical Guide to Repeatable Success, Jossey-Bass Publishers, San Francisco,
1998; “Alliance Management,” December 1999/January 2000, CMA Management, 73(10); 14-15)
Doz, Y.L., and Hamel, G., Alliance Advantage, Harvard Business School Press, Boston, 1998
With an annual growth rate of 25 per cent and a projected value of $40 trillion by the year
2004, there is little doubt that alliances will have a major impact on management in the
21st century
 When to partner ?
 With whom to partner
 How to structure the partnership?
 How to manage & sustain the partnership till objectives are met?
Several
Truths
- Companies expect that by 2003, 35 per cent of their revenues will
come from alliances, up from 21 per cent in 1998 and 15 per cent in
1995
- But alliances do more than contribute to a firm’s bottom line. Firms can
no longer develop all the resources, technologies and products to
compete in today’s dynamic marketplace, and so many of those firms
use alliances to acquire the critical skills, knowledge and capabilities
that they lack
- Companies form R&D alliances, not simply to reach short-term
financial milestones, but to observe, learn and internalize the know-
how of their partners. In U.S.-Japanese alliances in the past, for
example, Japanese companies saw these partnerships as a way to learn
from their partner, while their U.S. counterparts used these alliances as
a substitute for more competitive skills, ultimately resulting in an
erosion of their own internal skills

Strategic Alliance
12
Kale,P., and Singh, H., Alliance Capability and Success: A Knowledge Based Approach, Wharton School of
Business WhitePaper, 1999
http://study.com/academy/lesson/strategic-alliance-in-business-definition-advantages-disadvantages.html
Several
Truths
- An alliance knowledge management capability is both an important
component of alliance success and a differentiating factor. Managing
knowledge resources in an alliance is extremely challenging.
This implies that companies should learn from their past and
institutionalize their knowledge. Those companies who employed
standard, effective alliance processes or systematically captured
alliance and partner information were more successful than those
companies that did not have a knowledge management capability
Definition
- A strategic alliance in business is a business relationship between two
or more businesses that enables each to achieve certain strategic
objectives neither would be able to achieve on their own
- The strategic partners maintain their status as independent and
separate entities, share the benefits and control over the partnership,
and continue to make contributions to the alliance until it is
terminated
- Strategic alliances are often formed in the global marketplace between
businesses that are based in different regions of the world
- Culture clashes, procedural differences and even technological
incompatibilities create problems in some strategic alliances. Successful
strategic alliances require ongoing communication between the
businesses at all levels

Strategic Alliance
13
http://smallbusiness.chron.com/strategic-alliances-strategy-81504.html
Example
- The partnership between Nortel Networks and Accenture is one
example of a strategic alliance
- These two independent organizations are co-operating to offer service
providers networking solutions, software, equipment and necessary
skills for building emerging internet protocol networks and service and
business strategies
- Nortel Networks brings a rich portfolio of networking products and
services to the alliance
- Accenture offers business and systems integration consulting services
Using complementary skills and capabilities, both companies benefit by
improving their ability to respond to clients’ needs
- The multi-year alliance between Intel and Hewlett-Packard to develop
a next-generation computer chip, which began in the mid-1990s, is an
example of a very complex alliance
- The two companies had to learn to integrate and coordinate not only
their respective technologies, but also teams of chip designers working
together to develop and validate a very complex product
The strategic alliance is usually a long-term endeavor that consists of multi-projects, is mutually
dependent and beneficial, and integrates people, process, technologies or products. Unlike shorter-
term partnerships or arrangements between companies that are highly contractual, the strategic
alliance provides the companies involved with the opportunity to learn and acquire know-how

Strategic Alliance
14
Considerations
for Establishing
Vision & Goals
- Starting a business with a partner requires agreement on vision and
goals
- Allies start by developing a clear definition of what essential function
the alliance serves, such as sharing risks in research and development,
intended market segments and the anticipated duration of the strategic
alliance
- A clear view of the function, markets and duration improves the odds
of finding viable strategic allies that share a similar perspective
Strategic
Alliances Critical
to Organizations
Today
1. Organic growth alone is insufficient for meeting most organizations’
required rate of growth
2. Complexity is increasing, and no one organization has the required
total expertise to best serve the customer
3. Partnerships can defray rising research and development costs
4. Alliances facilitate access to global markets

Strategic Alliance: Phases
15
- The first phase involves making alliance strategy decisions as well as
screening and selecting potential partners
- At this stage, a record of past and current alliance projects is important
for senior leadership to understand the resource capabilities or gaps
- Corporate strategy documents and vision statements are also useful
for developing alliance goals
- As these internal objectives are developed and evaluated, it is equally
important that they are communicated to the appropriate people in
the organization, such as alliance managers and team members
- Ideal partners have compatible objectives, complementary resources
and skills, organizational fit in terms of culture and processes and a
willingness to ally with each other
- During first phase legal knowledge is needed to understand the
ramifications of aligning with a particular organization.
For instance, in the pharmaceutical arena, where competition is fierce
and R&D costs are high, joining forces with one company may leave
another partner feeling uneasy; it may also breach existing contracts
with that partner
- In the Find phase, industry knowledge is also important when selecting
partners
Find Phase
1

16
For instance, one financial services organization always examines
various industries such as telecommunications and retail to identify key
e-commerce strategies in those areas
- By identifying the key players and strategies in these spaces, the
organization is better able to target compatible and complementary
partners
Find Phase
1
- The Design phase includes structuring and negotiating an agreement
with the partner
- During negotiations, successful partners evaluate and align the
strategic objectives for the alliance
- Knowledge about a partner’s strategic objectives, products and services
is important at this point in the alliance process
- Staffing decisions are usually made during the Design phase
- In successful alliances, partners strive for a reasonable share of control
that encourages equal involvement from both sides
- Another key success factor in the Design phase is to commit the best
personnel to the alliance and to strive for long-term resource
placement rather than high turnover
- Knowledge about your own company’s skills is particularly important
for defining work roles and support requirements with your partner
Design Phase
2

17
- In the Manage phase, organizations develop an effective working
environment with the partner to facilitate the completion of the
actual work
- The types of information and knowledge that are critical at this stage
include;
- performance measures
- feedback from both partners on how they think the alliance is
progressing
- The social aspects of the partnership become important, since team
members from both partners are communicating and interacting with
each other
- Managing relationships and maintaining trust are critical during this
phase. Often associated with alliance success, trust between partners
reduces the need for the strict monitoring of the alliance and time-
consuming contract renegotiations. Many companies involved in
alliances organize non-work-related activities for alliance teams on
both sides
- It is extremely important to promote and maintain open
communication about both organizations’ performance in the alliance
and to incorporate feedback formally
Manage Phase
3
• Maintaining a positive bond with the partner even after the project is complete is useful.
• Also critical is a company’s willingness to capture and disseminate lessons learned after a project is complete

Strategic Alliance
18
http://iveybusinessjournal.com/publication/strategic-alliances-the-right-way-to-compete-in-the-21st-century/
Examples of
Strategic
Alliances
1. In an effort to establish itself as a force in European and Japanese
markets, the Nasdaq formed a joint venture with SSI Technologies of
India to develop an Internet-based trading and market system to
launch Nasdaq Europe and Nasdaq Japan
2. In February 2001, The Coca-Cola Company and Procter & Gamble
announced a $4.2-billion joint venture to use Coca-Cola’s huge
distribution system to increase reach and reduce time to market for
the P&G products Pringles and Sunny Delight
3. EPOST was the world’s first national, secure electronic mail-delivery
system, an alliance between Bank of Montreal and Canada Post
Corp. This partnership connects billers and users in an efficient and
secure environment
4. Star Alliance is the largest partnership in the airline industry; its
reach extends to 130 countries and more than 815 destinations, with
collective revenue for the partnership at more than $63 billion
5. Hewlett-Packard and NTT DoCoMo created a partnership to conduct
joint research on technology for fourth-generation mobile phones,
bringing together HP’s network infrastructure and computer servers
with DoCoMo’s wireless broadband technology

Strategic Alliance
19
Advantages
2. Economic advantages: Strategic alliance could reduce costs and risks
by distributing them across the members of the alliance
Strategic alliance could obtain greater economies of scale in an
alliance, as production volume can increase, causing the cost per
unit to decline
Strategic alliance could take advantage of ‘cospecialization’ where
the specialization of both the partners could be bundled together,
creating additional value - such as when a leading computer
manufacturer bundles its desktop with a leading monitor
manufacturer's monitor
1. Organizational advantages: Strategic Alliances are formed to learn
necessary skills and obtain certain capabilities from the strategic
partner
Strategic partners may help to enhance the productive capacity,
provide a distribution system, or extend the supply chain
The strategic partner may provide a good or service that
complements a good or service the other partner provides, thereby
creating a synergy
If a partner is relatively new or untried in a certain industry, having a
strategic partner who is well-known and respected will help add
legitimacy and creditability to the venture

Strategic Alliance
20
Advantages
4. Political advantages: To form a strategic alliance with a local foreign
business to gain entry into a foreign market either because of local
prejudices or legal barriers to entry
Forming strategic alliances with politically influential partners may
also help improve other partner’s own influence and position
3. Strategic advantages: Strategic alliance could happen with even the
rival to cooperate instead of compete
Alliances are created for vertical integration where the partners are
part of the supply chain
Strategic alliances may also be useful to create a competitive
advantage by the pooling of resources and skills. This may also help
with future business opportunities and the development of new
products and technologies.
Strategic alliances may also be used to get access to new
technologies or to pursue joint research and development

Strategic Alliance
21
http://smallbusiness.chron.com/disadvantages-forming-business-alliances-73390.html
Disadvantages
1. Lack of Control
When you align with another company, you lose some degree of
control over the way your business is perceived
2. Unequal Benefits
Unless you have a carefully vetted contractual agreement, you have
no assurance that your business alliance will be beneficial to you, or
that you'll get as much as you give in terms of referrals
3. Merged Reputation
When you form an alliance, you open yourself up to being judged
based on the actions of your alliance partner
4. Liability
In the event something goes wrong with your business alliance
partner, you can be held liable as well
5. Lack of Trust Among Employees
Lack of trust among employees from both organizations or cultural
differences often create antagonistic relationships that slow or derail
the alliance
6. Operational Inefficiency
Even with apparently ideal strategic partners, agreement in principle
between business owners or upper management does not always
translate into operational success

Strategic Alliance
22
According to a
1999 survey on
global alliances
by Accenture
Consulting
1. Eighty-two percent of executives surveyed believe alliances will be a
prime vehicle for future growth
2. Alliances account for an average of 26 percent of Fortune 500
companies’ revenues, up from 11 percent five years ago
3. Alliances account for six to 15 percent of the market value of the
average company
4. U.S. banks expect to hold a portfolio of more than 50 alliances within
three years, accounting for as much as 50 percent of revenue
5. Within five years, alliances are projected to account for 16 to 25
percent of the average company’s market value
6. Senior management at 25 percent of firms surveyed expects
alliances to contribute more than 40 percent of their company’s
market value within five years
Risks
• As many as 70 percent of alliances fail
• Studies have found that although the 15 most successful alliances
increased shareholder value by $72 billion, the 15 least successful
alliances decreased market capitalization by $43 billion

Strategic Alliance
23
Hewlett Packard and Disney
https://prezi.com/m9dtqz0-hsrk/alliance-of-hewlett-packard-and-disney/

Strategic Alliance
24
http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle&ID=1515804
Starbucks
- Starbucks partnered with Barnes and Nobles bookstores in 1993 to
provide in-house coffee shops, benefiting retailers
- In 1996, Starbucks partnered with Pepsico to bottle, distribute and sell
the popular coffee-based drink, Frappacino
- A Starbucks-United Airlines alliance has resulted in their coffee being
offered on flights with the Starbucks logo on the cups
- A partnership with Kraft foods has resulted in Starbucks coffee being
marketed in grocery stores
- In 2006, Starbucks formed an alliance with the NAACP (National
Association for the Advancement of Colored People), the sole
purpose of which was to advance the company's and the NAACP's goals
of social and economic justice
Starbucks In
India
- In a significant step toward market entry in India, Starbucks Coffee
Company signed an MoU with Tata Coffee Limited, one of the region's
leading providers of premium arabica coffee beans
- The MoU will create avenues of collaboration between the two
companies for sourcing and roasting high-quality green coffee beans in
Tata Coffee's Coorg, India facility
- Tata and Starbucks will jointly explore the development of Starbucks
retail stores in associated retail outlets and hotels
- Building on Tata's commitment to community development, the two
companies also will explore social projects to positively impact
communities in coffee growing regions where Tata operates

Strategic Alliance
25
http://www.apple.com/pr/library/2014/07/15Apple-and-IBM-Forge-Global-Partnership-to-Transform-Enterprise-Mobility.html
Apple
- Apple has partnered with Sony, Motorola, Phillips, and AT&T in the
past
- Apple has also partnered with Clearwell in order to jointly develop
Clearwell's E-Discovery platform for the Apple iPad. E-Discovery is used
by enterprises and legal entities to obtain documents and information
in a "legally defensible" manner, according to a 2010 press release
- In 2014, Apple and IBM announced an exclusive partnership that teams
the market-leading strengths of each company to transform enterprise
mobility through a new class of business apps—bringing IBM’s big data
and analytics capabilities to iPhone and iPad
• a new class of more than 100 industry-specific enterprise solutions
including native apps, developed exclusively from the ground up, for
iPhone and iPad;
• unique IBM cloud services optimized for iOS, including device
management, security, analytics and mobile integration;
• new AppleCare service and support offering tailored to the needs of
the enterprise; and
• new packaged offerings from IBM for device activation, supply and
management
Apple & IBM’s
Strategic
Alliance

Merger & Acquisition
26
http://www.investopedia.com/terms/m/mergersandacquisitions.asp
What
- A merger is a combination of two companies to form a new company
Example: the merging of JDS Fitel Inc. and Uniphase Corp. in 1999 to
form JDS Uniphase (is a company that designs and manufactures products for optical
communications networks, communications test and measurement equipment, lasers, optical solutions for
authentication and decorative applications, and other custom optics)
- An acquisition is the purchase of one company by another in which no
new company is formed
Example: Acquisition by Manulife Financial Corporation in 2004 (is a
Canadian insurance company and financial services provider) of John Hancock Financial
Services Inc
Why Merge?
- The combined entity would be larger, and have corresponding larger
resources for marketing, product expansion, and obtaining financing.
This could help them better compete in the marketplace
- The combined entity could merge similar operations to reduce costs.
Corporate and administrative functions, such as human resources and
marketing, are often targets for combinations. They might also combine
the production areas if the companies produce similar products, and
reduce costs by having fewer plants or facilities in operation
 A.T. Kearney analyzed mergers and acquisitions involving some 25,000 companies
globally, from 1988 to 2001
 These companies accounted for 98 percent of the world’s market capitalization
 As we focused on 1,345 of the largest mergers and acquisitions that involved by 945
companies and had a value of more than US$500 million

Merger & Acquisition
27
http://study.com/academy/lesson/what-are-mergers-and-acquisitions-definition-examples-quiz.html
Why Acquire?
- A company might acquire another company to obtain a specific
product. It can be less expensive to purchase a company offering a
product you'd like to sell than building the product yourself. Software
companies often purchase smaller companies that offer extensions to
their product line if they become popular with customers, so they can
add the functionality to their primary offering
- A company might acquire other companies to increase its size. A larger
company may have more visibility in the marketplace, and also better
access to credit and other resources
- A company might acquire another to obtain control over a critical
resource. For example, a jewelry company might acquire a gold mine,
to ensure they have access to gold without market price fluctuations
Why Merge?
- The combined entity might have less competition in the marketplace.
They could combine their offerings and use resources for improving the
product, rather than marketing against each other
- The combined entity might have synergy in operations. Synergy is
when combined operations show lower costs or higher profits than
would be expected. This could be due to economies of scale, where
costs are lower due to higher volume of production, or due to vertical
integration, where greater control over the production process is
achieved due to owning more steps in the production process

Merger & Acquisition: China’s Move to Acquire Firms in USA
28
China’s Strategic
Investment
Scenario
- As of April 2013, China had about US$3.44 trillion worth of foreign
reserves and approximately US$1 trillion in related sovereign wealth
funds
- But when it comes to how to invest them strategically, China has a
problem
- Significant deal failures have occurred
- China’s investment capital resource base is substantial. And yet,
according to The Economist, the nation owns only six per cent of the
total global investment in international business, leaving a sizable
portion of Chinese funds invested in developed-country government
bonds
China’s
Specialized
Agencies
- The search for global investment opportunities is assigned to
specialized agencies whose sole function is identification of
opportunities with rewarding and strategic investment potential
- The State Administration of Foreign Exchange (SAFE): focuses on
managing China’s foreign exchange reserves
- The China Investment Corporation ( CIC): attends to investment and
management of overseas assets
- The National Social Security Fund (NSSF): invests domestically
(although it is moving towards foreign investments in traditional
capital market instruments)
http://iveybusinessjournal.com/publication/how-china-could-improve-its-global-acquisition-game/

Merger & Acquisition: China
29
Dilemma for
Specialized
Agencies
Contradiction between ;
 Generic capital investment requirements (such as high rate of return
and manageable investment risk)
And
 The specifics of China as an investor
 China is not just an investor. It is also a formidable global market
competitor. Indeed, it seeks strategic supremacy in industries
 China is also a centre of political and economic gravity for many
developing economies, especially in the African continent
 China is a rising military power with ambitions, visions and challenges
Important
Highlights About
China
- China’s favorable export balance, its sizable foreign currency reserves
and its strong business balance sheets have induced a decade of
foreign direct investment (FDI) outflow
- Entry into the foreign asset acquisition arena began around 2001
China’s Foreign
Asset
Acquisition
Performance

Merger & Acquisition: China
30
- In the face of strong political resistance, an attempt by China’s National
Offshore Oil Corp (CNOOC) at acquiring Unocal, an independent U.S. oil
and gas operator, was abandoned in 2005
- The move was followed by a takeover of Unocal by Chevron
- CNOOC’s interest in Unocal was triggered by its strategic Southeast
Asian assets and the enhanced regional profile
- According to Business Week, CNOOC would have paid US$18.5 billion if
the transaction was consummated
- But Washington viewed CNOOC as a Chinese state-run enterprise that
could pose a threat to American national interests
- Statements made in Congress alluded to the fact that CNOOC’s
“Communist government ownership is not consistent with free market
principles.”
Case 1:
CNOOC AND
UNOCAL
- In 2005, Haier Group, China’s largest domestic appliance maker,
expressed interest in buying Maytag, an established American
appliance brand that suffered from structural cost pressures
- Haier was voted China’s most valuable brand name by Forbes in 2004
Maytag could have enhanced the brand, provided a strategically
located manufacturing facility and helped battle possible American
anti-dumping charges
- Haier abandoned the acquisition attempt, when Maytag’s rival
Whirlpool proposed a US$17-per-share deal. Haier, which had been
willing to pay US$14-per-share (about US$ 1.5 billion in total)
Case 2:
HAIER AND
MAYTAG

• http://executive-
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insights/Strategic_Alliances.php
• http://smallbusiness.chron.com/examples-
successful-strategic-alliances-13859.html
• http://iveybusinessjournal.com/publication/strat
egic-alliances-the-right-way-to-compete-in-the-
21st-century/
• http://iveybusinessjournal.com/?s=Case+Study+o
n+Strategic+Alliance
31

Mergers & Acquisitions
• http://iveybusinessjournal.com/publication/m
astering-industry-consolidation-strategies-for-
winning-the-merger/
• http://iveybusinessjournal.com/publication/h
ow-china-could-improve-its-global-
acquisition-game/
• http://iveybusinessjournal.com/publication/re
aping-the-rewards-of-cross-business-
collaboration-in-mergers-and-acquisitions/
32

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