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Obtaining Technology: Planning, Gabriel Koresy - Coggle Diagram
Obtaining Technology: Planning
Subcontracting
Growing in importance as firms strategically position themselves.
Allows firms to outsource non-core activities or technical services to specialized firms.
Duration of subcontracts can vary, and some may be challenging to terminate.
Outsourcing can provide efficiency, effectiveness, and economies of scale benefits.
Mergers and Acquisitions
Mergers and acquisitions involve permanent changes to the structure of firms.
They can reduce the risk of losing proprietary knowledge compared to alliances.
Economies of scope and scale can be achieved, leading to cost reduction.
Acquisitions can provide necessary innovations for increasing market share.
Managers may be motivated by personal financial gains and enhanced reputation through mergers/acquisitions.
Reasons for changing technology mix
Falling behind competitors' product line.
Entry of a new competitor that changes industry dynamics.
Inefficient or ineffective processes compared to competitors.
Lack of confidence in current products or processes for future success.
Strategic Alliances
Partnerships between corporations or business units to achieve mutually beneficial objectives.
Vary in formality, costs, and commitment compared to mergers and acquisitions.
Monitoring costs are associated with alliances to ensure goals are met and negative consequences are avoided.
Alliances should have strategic advantages that outweigh transaction costs.
Concerns in Allianaces
Finding the right partner is crucial for the success of the alliance
Dealing with unexpected political problems and ambiguities in the relationship
Ensuring a shared vision between partnering firms
Proper timing and responsiveness to fulfill the alliance agreement
Effective and efficient communication between alliance partners
Protecting intellectual property and strategic knowledge
Realistic cost/benefit analysis to measure the actual costs and profits from the alliance
Innovation Types
Internal options
may not be feasible due to time, capabilities, or desire constraints, leading firms to seek external options.
External options
Buying or merging with a firm that possesses the desired technology.
Forming alliances, ranging from informal understandings to formal joint ventures.
Each external option has different benefits and risks that need to be considered.
Types of Mergers and Acquisitions
Related Mergers and Acquisitions
Involves firms with similar businesses or skills.
Matched skills and abilities between acquiring and acquired firms.
Similar critical areas of operation, such as marketing strategies or technological foundations.
Examples include eBay's acquisition of PayPal, where both firms had similar technological foundations and marketing approaches.
Unrelated Mergers and Acquisitions:
Involves firms with dissimilar businesses or skills.
Firms may come from distinct industries but have shared critical skills.
The focus is on whether the key areas critical to both firms are similar.
Examples include mergers or acquisitions between firms operating in different industries but relying on similar skills, like marketing expertise.
Duration of Alliances
Alliances can be short or long term, regardless of formality.
More formal alliances require detailed agreements specifying obligations and benefits, including duration.
Less formal alliances are easier to abandon if costs or circumstances change.
Different Types of Alliances
Formal alliances: Joint ventures, franchise agreements, licensing agreements.
Intermediate alliances: Consortia, subcontracting.
Informal alliances: Support agreements without formal documentation.
Due diligence is a crucial step in the planning process, where the firm conducts a comprehensive investigation of the target firm or technology to ensure it aligns with expectations. Financial and strategic aspects should be examined in-depth to avoid surprises later on.
Organization should integrate the knowledge gained from due diligence into its planning process. If due diligence reveals that the desired results cannot be achieved, the firm should be prepared to reconsider the decision to acquire the innovation or technology.
Organization should assess whether the chosen action will create value for the organization. If not, the planning process should be reevaluated, and alternative options should be considered.
Organization's goals should guide the choice of external method for obtaining technology and innovation. The goals of the firm should shape the method chosen, rather than the method dictating the goals.
Major Mistakes to Avoid:
Insufficient study of existing systems and potential breakdowns or incompatibilities.
Overemphasis on the needs of the larger, stronger partner, neglecting the needs of the smaller or acquired partner.
Unrealistic timetables for the integration of the organizations.
Inadequate allocation of resources for planning and implementation processes.
Focusing more on making the deal work rather than ensuring the success of the alliance for all stakeholders.
Overemphasis on complete integration in all aspects, even when keeping some systems separate may be beneficial, especially in non-ownership situations.
Strategic Reasons for Mergers or Acquisitions
Enter a Market Quickly
Acquiring a business allows quick access to technology, customers, distribution channels, or geographical areas.
Enables circumvention of barriers to entry and gains customer loyalty.
Provides a first-mover advantage in a specific domain.
Avoid the Costs and Risks of New Product Development
:
Acquiring an existing firm or product eliminates the need for costly research and development (R&D).
Reduces expenses and uncertainties associated with developing a new product.
Allows firms to control costs and benefit from previous R&D investments.
Gain Market Power
Achieving a dominant market position through mergers or acquisitions.
Influencing market actions and shaping industry behaviors, such as pricing.
Dictating supplier behavior and maintaining competitiveness
Acquire Knowledge
Obtaining specialized knowledge or expertise in a particular technology or domain.
Enhancing the firm's understanding and capabilities through the acquisition of individuals or firms with valuable knowledge.
Mitigating the risk of lacking essential knowledge by acquiring knowledgeable personnel or intellectual property.
Gabriel Koresy
201225674