Cheat Sheet for Strategic Management

M&A & Restructuring Strategies. Merger: Two Firms agree to integrate operations on relatively equal basis(usually 1 dominates another in mkt share/size/asset value) Hostile takeover: (delivers higher shareholder value than friendly acquires)(Preannouncement returns of hostile takeover anticipated with increase in bidder & target's share price). Diversification creates value by using excess resource. Restructuring used to correct with ineffective mergers/acquisitions. M&A used as means of growth to potentially lead to strategic competitiveness. △ing ext env affect type of M&A used. M&A used cuz of uncertainty in competitive l&scape. 1)Increase market power due to competitive threat 2)Spread risk due to uncertainty 3)Shift core biz to diff mkts 4)Manage industry & regulatory △s. --> Increases strategic competitiveness & value. Shareholders of acquired firm earn above avg returns while shareholders of acquiring firm earn ~0 returns. Reflects investors' scepticism of projected synergies. Reasons for Acquisition 1)Increased mkt power(horizontal,vertical,related, sbjct to regulatory review & financial mkt analysis)able to sell good/service above competitive levels/costs of its primary or support activities lower than competitors.Buy competitor/supplier/distributer to Increase size, resource & capabilities. Horizontal Acq helps to exploit cost-based & revenue synergies.Better Most effective when integrate assets with acqed firm.Vertical Acqsitions controls additional parts of value chain.(CVS/Caremark)Related acquisitions(acqing firm in related industry). Create value thru synergy by integrating resource & capabilities. 2)Overcome entry barriers.Help gain immediate access to international markets. Higher the barrier, higher chance firm will acquire. 3)Cross-border acquisitions(made btwn companies with HQs in diff ctys) global M&A declined in financial crisis.Chinese companies seek horizontal cross-border acqtns of natural resource.India seek access to pdt innovation