Companies sometimes form strategic alliances or collaborative partnerships to complement their own strategies and strengthen competitiveness. Strategic alliances can help companies face rivals in building market presence globally, compete through advanced technology, and reduce costs through expertise sharing. Success requires a clear strategic purpose, compatible goals between partners, risk identification, specialized task allocation, cooperation incentives, and long-term perspectives. Mergers and acquisitions combine companies, while outsourcing involves relying on external partners for some business activities. The choice depends on factors like improving quality, reducing costs, and focusing internally on core competencies.

1. Strategic Alliance & Collaborative Partnership
Mergers & Acquisition
Out Sourcing Strategy
Unit – 4 Part “C”
MBA Programme – BIET, DavangereProf. Vijay K S

2. Strategic Management
18MBA25
As Per the VTU Syllabus
MBA Programme – BIET, DavangereProf. Vijay K S
Unit – 4 Part “C”

3. Need of Strategic Alliance / Collaborative Partnership
Companies sometimes use strategic alliances
or collaborative partnerships to complement
their own strategic initiatives and strengthen
their competitiveness.

4. What Alliances can do?
• It helps you to face the rivals in building market
presence in many countries.
• Compete against the rivals by seizing the opportunities
on the frontiers of advanced technology.
• Collaborative partnership helps to reduce the cost and
helps to get the needed expertise and capabilities.

5. Why the strategic alliances were formed ?
Strategic
Alliance
Access to markets
Achieve competitive
advantage
Obtain technology
Reduce financial risk
Reduce political risk

6. Cooperative Strategies
Continuum of Strategic Alliances
Mutual Service
Consortia
Joint Venture
Licensing Arrangement
Weak and Distant
Value-Chain
Partnership
Strong and Close

7. Cooperative Strategies
Strategic Alliances Success factors
 Have a clear strategic purpose. Integrate the alliance with each partner’s strategy. Ensure that
mutual value is created for all partners.
 Find a fitting partner with compatible goals and complementary capabilities.
 Identify likely partnering risks and deal with them when the alliance is formed.
 Allocate tasks and responsibilities so that each partner can specialize in what it does best.
 Create incentives for cooperation to minimize differences in corporate culture or organization fit.
 Minimize conflicts among the partners by clarifying objectives and avoiding direct competition in
the market place.
 In an international alliance, ensure that those managing it have comprehensive cross-cultural
knowledge.

8. Cooperative Strategies
Strategic Alliances Success factors
 Exchange human resources to maintain communication and trust. Don’t allow individual egos to
dominate.
 Operate with long-term horizons. The expectation of future gains can minimize short-term
conflicts.
 Develop multiple joint projects so that any failures are counterbalanced by successes.
 Agree on a monitoring process. Share information to build trust and keep projects on target.
Monitor customer responses and service complaints.
 Be flexible in terms of willingness to renegotiate the relationship in terms of environmental
changes and new opportunities.

9. Strategic and Collaborative Partnership
Mutual Service Consortia
Joint Venture
Licensing Arrangements
Value – Chain Partnerships
Prof. Vijay K S, MBA Programme`-BIET, Davangere

10. Strategic and Collaborative Partnership
 Mutual Service Consortia
 Partnership of similar companies in similar industries that pool
their resources to gain a benefit that is too expensive to
develop alone
 Fairly weak and distance alliance
 Wish to work together but not share their core competencies
 Little interaction or communication among the partners
 Joint Venture
 Licensing Arrangements
 Value – Chain Partnerships

11. Strategic and Collaborative Partnership
 Mutual Service Consortia

12. Strategic and Collaborative Partnership
 Mutual Service Consortia
 Joint Venture
 Formed by two or more separate organization for strategic
purpose that creates an independent business entity and
allocates ownership, Operational responsibilities and financial
risks and rewards, while preserving their separate identity.
 Temporary combination of different strengths
 Tata Group andthe American International Group (AIG)
 P&G With Clorox to produce food storage wraps
 Licensing Arrangements
 Value – Chain Partnerships
Prof. Vijay K S, MBA Programme`-BIET, Davangere

13. Strategic and Collaborative Partnership
 Mutual Service Consortia
 Joint Venture
 Licensing Arrangements
 Licensing firm grants rights to another firm in another country
or market to produce and / or sell a product
 Licensee pays compensation to the to the licensing firm
 KFC, Pizza hut, Taco Bell
 Value – Chain Partnerships

14. Strategic and Collaborative Partnership
 Mutual Service Consortia
 Joint Venture
 Licensing Arrangements
 Value – Chain Partnerships
 Strong and close alliance in which one company or unit forms
a long term arrangement with a key supplier or distributer for
mutual advantage.
 Tata Indica
 80% of the components are outsourced to 200 odd
vendors

15. Why Alliances will fail ?
Incompatible objectives and priorities of partners
Partners may fail to work well together
The purpose of the alliance become irrelevant due to change in market condition.
Emergence of more attractive technological paths.
Marketplace rivalry between one or more allies.

16. Mergers and Acquisition

17. Mergers and Acquisition
• Merger – Combination and pooling of equals, with newly
created firm often taking on a new name
• Acquisition – One firm, the acquirer, purchases and
absorbs operations of another, the acquired
• Take-over – By Purchasing the shares in the open market –
Unfriendly acquisition

18. Objectives of Mergers and Acquisition
• To gain more market share and create a more efficient
operation
• To expand a firm’s geographic presence
• To expand their product lines
• To extend a firm’s business into new product categories or
international markets
• To gain quick access to new technologies

19. Types of Mergers and Acquisition
• Horizontal Mergers
• Vertical Mergers
• Backward
• Forward
• Concentric Mergers
• Conglomerate Merger
Firm

20. Types of Mergers and Acquisition
• Horizontal Mergers / Acquisition
• Horizontal mergers happen when a company merges or takes over another
company that offers the same or similar product lines and services to the final
customers.
• This usually happens with the direct competitors. Example – cell phone company
merge with another cell phone company.
• This kind of merger will eliminates competition, which helps the company to
increase its market share, revenues and profits.
• It helps the company to have economies of scale due to increase in size as average
cost decline due to higher production volume.
• These kinds of merger also encourage cost efficiency, since redundant and wasteful
activities are removed from the operations i.e. various administrative departments
or departments such as advertising, purchasing and marketing.

21. Types of Mergers and Acquisition
• Vertical Mergers
• A vertical merger is done with an aim to combine two companies that are in the same
value chain of producing the same good and service, but the only difference is the
stage of production at which they are operating.
• For example, if a PC Manufacturing firm takes over the processor making company,
this would be termed as vertical merger, since the industry is same, i.e. Computer
Hardware, but the stage of production is different:
• These kinds of merger are usually undertaken to secure supply of essential goods, and
avoid disruption in supply. You gain grip on the value chain.
• It is also done to restrict supply to competitors, hence a greater market share,
revenues and profits.
• Vertical mergers also offer cost saving and a higher margin of profit, since
manufacturer’s share is eliminated.

22. Types of Mergers and Acquisition
• Vertical Mergers
• Backward Integration – Strategic Advantages
• Generates cost savings only if volume needed is big enough to capture efficiencies of
suppliers
• Potential to reduce costs exists when
• Suppliers have sizable profit margins
• Item supplied is a major cost component
• Resource requirements are easily met
• Can produce a differentiation-based competitive advantage when it results in a better
quality part
• Reduces risk of depending on suppliers of crucial raw materials / parts / component

23. Types of Mergers and Acquisition
• Vertical Mergers
• Forward Integration – Strategic Advantages
• To gain better access to end users and better market visibility. – Distribution part
• To compensate for undependable distribution channels which undermine steady
operations
• To offset the lack of a broad product line, a firm may sell directly to end users
• To bypass regular distribution channels in favor of direct sales and Internet retailing
which may
• Lower distribution costs
• Produce a relative cost advantage over rivals
• Enable lower selling prices to end users

24. Types of Mergers and Acquisition
• Concentric Mergers / Acquisition
• Concentric mergers take place between firms that serve the same customers in a
particular industry, but they don’t offer the same products and services.
• These are usually undertaken to facilitate consumers, since it would be easier to sell
these products together. Also, this would help the company diversify, hence higher
profits.
• Selling one of the products will also encourage the sale of the other, hence more
revenues for the company if it manages to increase the sale of one of its product.
• This would enable business to offer one-stop shopping, and therefore, convenience
for consumers. The two companies in this case are associated in some way or the
other. Usually they have the production process, business markets or the basic
technology in common.
• It also includes extension of certain product lines. These kinds of mergers offer
opportunities for businesses to venture into other areas of the industry reduce risk
and provide access to resources and markets unavailable previously.

25. Types of Mergers and Acquisition
• Conglomerate / Acquisition
• When two companies that operates in completely different industry, regardless
of the stage of production, a merger between both companies is known as
conglomerate merger.
• This is usually done to diversify into other industries, which helps reduce risks.

26. Why Mergers and Acquisitions fail
• Resistance from rank-and-file employees
• Hard-to-resolve conflicts in management styles and corporate
cultures
• Tough problems of integration of various departments and verticals
• Difficulties in Achieving expected cost-savings, Sharing of expertise
and Achieving enhanced competitive capabilities

27. Outsourcing Strategy

28. Out Sourcing Strategies
Outsourcing involves withdrawing from certain value chain activities
and relying on outsiders to supply needed products, support
services, or functional activities

29. When you will go for Outsourcing
• Activity can be performed better or more cheaply by outside specialists
• Activity is not crucial to achieve a sustainable competitive advantage
• Risk exposure to changing technology and/or changing buyer preferences is reduced
• Operations are streamlined to
• Cut cycle time
• Speed decision-making
• Reduce coordination costs
• Firm can concentrate on “core” value chain activities that best suit its resource
strengths

30. Advantages of Outsourcing
• Improves firm’s ability to obtain high quality and/or cheaper components or
services
• Improves firm’s ability to innovate by interacting with “best-in-world” suppliers
• Enhances firm’s flexibility should customer needs and market conditions
suddenly shift
• Increases firm’s ability to assemble diverse kinds of expertise speedily and
efficiently
• Allows firm to concentrate its resources on performing those activities internally
which it can perform better than outsiders

31. Pitfalls of Outsourcing
• Farming out too many or the wrong activities, thus
• Hollowing out capabilities
• Losing touch with activities and expertise that determine overall long-
term success

32. International Business Level
Strategies

33. Strategy
Formulations
Strategies
International
Business
Strategies
International Business Level Strategies
MICHAEL PORTER'S NATIONAL DIAMOND

34. Strategy
Formulations
Strategies
International
Business
Strategies
MICHAEL PORTER'S NATIONAL DIAMOND
FACTOR OF Factor Condition
 A country creates its own important factors such as skilled
resources and technological base.
 The stock of factors at a given time is less important than the
extent that they are upgraded and deployed.
 Local disadvantages in factors of production force innovation.
Adverse conditions such as labor shortages or scarce raw
materials force firms to develop new methods, and this
innovation often leads to a national comparative advantage.
EXAMPLES:
 Indian BPO sector
 Japan's relative lack of raw materials

35. Strategy
Formulations
Strategies
International
Business
Strategies
MICHAEL PORTER'S NATIONAL DIAMOND
FACTOR OF Demand Condition
 When the market for a particular product is larger locally than
in foreign markets, the local firms devote more attention to
that product than do foreign firms, leading to a competitive
advantage when the local firms begin exporting the product.
 A more demanding local market leads to national advantage.
 A strong, trend-setting local market helps local firms anticipate
global trends.

36. Strategy
Formulations
Strategies
International
Business
Strategies
MICHAEL PORTER'S NATIONAL DIAMOND
FACTOR OF Demand Condition
EXAMPLE:
 we can take the case of Germany which has some of the
world's premier automobile companies like Mercedes, BMW,
Porsche.
 German auto companies have dominated the world when it
comes to the high-performance segment of the world
automobile industry.
 General electric
 In Indian BPO sector

37. Strategy
Formulations
Strategies
International
Business
Strategies
MICHAEL PORTER'S NATIONAL DIAMOND
FACTOR OF Related and Supporting Industries
 When local supporting industries are competitive, firms enjoy
more cost effective and innovative inputs.
 This effect is strengthened when the suppliers themselves are
strong global competitors.
EXAMPLE:
 Silicon Valley in the USA and Silicon Glen in the UK are techno
clusters of high-technology industries which includes individual
computer software & semi-conductor firms.
 In Germany, a similar cluster exists around chemicals, synthetic
dyes, textiles and textile machinery.

38. Strategy
Formulations
Strategies
International
Business
Strategies
MICHAEL PORTER'S NATIONAL DIAMOND
F Firm Strategy Structure & Rivalry
 Local conditions affect firm strategy
 In Porter's Five Forces model, low rivalry made an industry
attractive. While at a single point in time a firm prefers less
rivalry, over the long run more local rivalry is better since it
puts pressure on firms to innovate and improve. In fact, high
local rivalry results in less global rivalry.
 Local rivalry forces firms to move beyond basic advantages that
the home country may enjoy, such as low factor costs.

39. Strategies
International
Business
Strategies
MICHAEL PORTER'S NATIONAL DIAMOND
Firm Strategy Structure & Rivalry
Examples:
As an example, the Japanese automobile industry with 8 major
competitors (Honda, Toyota, Suzuki, Isuzu, Nissan, Mazda,
Mitsubishi, and Subaru) provide intense competition in the
domestic market, as well as the foreign markets in which they
compete.
Local rivalry have forced firms to move beyond basic
advantages.
examples INFOSYS , WIPRO AND TCS [ TATAS]

40. International
Business level
strategies
- Starbucks
■ From launching its operations in 1971 to currently being one of the
world’s most recognized brands, Starbucks has over 17,000
locations in some 50 countries; global growth is paramount
■ This case highlights the increasing importance of international
markets for Starbucks
■ China and India are especially pivotal markets
■ Starbucks uses an international differentiation business-level
strategy and a transnational international corporate-level strategy
in China

41. International
Business level
strategies
- Starbucks
■ Starbucks’ international differentiation strategy underscores
unique products and customer experiences, with a commensurate
premium price.
■ Its transnational strategy leverages Starbucks’ core competencies
to standardize its operations to gain global efficiencies, while
decentralizing decision-making responsibilities in China so that
some products can be customized to meet local consumers’ unique
needs.

42. International
Business level
strategies
Domestic V/S
International
• Stable
• Predictable
• Less complex
• Globalization is reducing
the number of domestic-
only markets
DOMESTIC
MARKETS
• Unstable
• Unpredictable
• Complex and risky
• Globalization is enabling
global markets
GLOBAL
MARKETS

43. International
Business level
strategies
 International licensing
 International franchising
 Exporting
 Foreign Branching
 Wholly Owned Subsidiary
 Joint Venture