Diversifying, Acquiring, in addition to Restructuring Global Strategy Mike W. Peng 9

Diversifying, Acquiring, in addition to Restructuring Global Strategy Mike W. Peng 9 www.phwiki.com

Diversifying, Acquiring, in addition to Restructuring Global Strategy Mike W. Peng 9

Heninger, Sean, Midday Host has reference to this Academic Journal, PHwiki organized this Journal Diversifying, Acquiring, in addition to Restructuring Part III: Corporate-Level Strategies Global Strategy Mike W. Peng chapter 9 Outline Product diversification Geographic diversification Combining product in addition to geographic diversification A comprehensive model of diversification Acquisitions Restructuring Debates in addition to extensions The savvy strategist Product Diversification Product-related diversification Emphasis on operational synergy Product-unrelated diversification Conglomeration Product diversification in addition to firm per as long as mance

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Product Diversification in addition to Firm Per as long as mance Figure 9.1 Source: Adapted from R. E. Hoskisson, M. A. Hitt, & R. D. Irel in addition to , 2004, Competing as long as Advantage (p. 228), Cincinnati: Thomson South-Western. Geographic (International) Diversification Geographic Diversification Geographic Diversification International diversification Limited international scope Geographically in addition to culturally adjacent countries Extensive international scope Beyond geographically in addition to culturally neighboring countries Geographic diversification in addition to firm per as long as mance

Geographic Diversification in addition to Firm Per as long as mance: An S Curve Figure 9.2 Source: Adapted from F. Contractor, S. K. Kundu, & C.-C. Hsu, 2003, A three stage theory of international expansion: The link between multinationality in addition to per as long as mance in the service sector (p. 7), Journal of International Business Studies, 34: 5–18. Combining Product in addition to Geographic Diversification Entertain both dimensions of diversification simultaneously Four possible combinations Anchored replicators Multinational replicators Far-flung conglomerates Classic conglomerates Migrate from one cell to another strategically Combining Product in addition to Geographic Diversification Figure 9.3

A Comprehensive Model of Diversification Industry-based considerations Growth opportunity Structural attractiveness of an industry (Porter’s five as long as ces) Resource-based considerations: VRIO Institution-based considerations: Formal, in as long as mal The evolution of the scope of the firm: Benefits in addition to costs – economic, bureaucratic, marginal A Comprehensive Model of Diversification Figure 9.4 Product-Related in addition to -Unrelated Diversification Table 9.1 PRODUCT-RELATED DIVERSIFICATION PRODUCT-UNRELATED DIVERSIFICATION Synergy Operational synergy Financial synergy Economies Economies of scale Economies of scope Control emphasis Strategic (behavior) control Financial (output) control Organizational structure Centralization Decentralization Organizational culture Cooperative Competitive In as long as mation processing Intensive, rich communication Less intensive communication

Institution-Based Considerations Formal Institutions Promote product unrelated diversification by banning intraindustry mergers Enable or constrain geographic diversification by loosening or tightening FDI policies Internalized, cognitive beliefs guide managerial action (e.g., empire building) Normative pressures to jump on the diversification “b in addition to wagon” In as long as mal Institutions What Determines the Scope of the Firm Figure 9.5 Source: Adapted from G. Jones & C. Hill, 1988, Transaction cost analysis of strategy-structure choices (p. 166), Strategic Management Journal, 9: 159–172. The Evolution of the Scope of the Firm in the United States: 1950–1970 in addition to 1970–1990 Figure 9.6 Source: M. W. Peng, S. H. Lee, & D. Wang, 2005, What determines the scope of the firm over time A focus on institutional relatedness, Academy of Management Review (in press).

The Optimal Scope of the Firm: Developed versus Emerging Economies at the Same Time Figure 9.7 Source: M. W. Peng, S.-H. Lee, & D. Wang, 2005, What determines the scope of the firm over time A focus on institutional relatedness, Academy of Management Review (in press). Acquisitions Setting the terms straight Acquisition Merger Cross-border M&A, three primary categories: merger, vertical, conglomerate Friendly in addition to hostile M&A Motives as long as M&A: Synergistic, hubris, managerial Per as long as mance: Pre- in addition to post-acquisition Underst in addition to ing Cross-Border M&As Figure 9.8 Source: Adapted from United Nations, 2000, World Investment Report 2000 (p. 100), New York: UN

Motives Behind Mergers in addition to Acquisitions Table 9.2 INDUSTRY-BASED ISSUES RESOURCE-BASED ISSUES INSTITUTION-BASED ISSUES Synergistic motives Enhance in addition to consolidate market power Leverage superior managerial capabilities Respond to as long as mal institutional constraints in addition to transitions Overcome entry barriers Access to complementary resources Take advantage of market opening in addition to globalization Reduce risk Scope economies Learning in addition to developing new skills Hubris motives Managers’ over-confidence in their capabilities Herd behavior-following norms in addition to chasing fads of M&As Managerial motives Self-interested actions such as empire-building guided by in as long as mal norms in addition to cognitions Symptoms of Merger in addition to Acquisition Failures Table 9.3 PARTICULAR PROBLEMS FOR CROSS-BORDER M&As PROBLEMS FOR ALL M&As Pre-acquisition: Overpayment as long as targets Managers overestimate their ability to create value Lack of familiarity with as long as eign cultures, institutions, in addition to business systems Inadequate pre-acquisition screening Inadequate number of worthy targets Poor strategic fit Nationalistic concerns against as long as eign takeovers (political in addition to media levels) Post-acquisition: Failure in integration Poor organizational fit Clashes of organizational cultures compounded by clashes of national cultures Failure to address multiple stakeholder groups’ concerns Nationalistic concerns against as long as eign takeovers (firm in addition to employee levels) Stakeholders’ Concerns During Mergers in addition to Acquisitions Figure 9.9

Restructuring Setting the terms straight (Restructuring) Downsizing Down scoping Refocusing Motives as long as restructuring Perspectives: Industry, resource, institution Increasing the odds as long as acquisition success Debates in addition to Extensions Product Relatedness Versus Other Forms of Relatedness Acquisitions Versus Alliances The Savvy Strategist Underst in addition to the nature of your industry that may call as long as diversification, acquisitions, in addition to restructuring. Develop capabilities that facilitate successful acquisitions in addition to restructuring. Master the rules of the game governing acquisitions in addition to restructuring around the world.

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