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Cooperation among companies? Why, how and in which forms do companies…
Cooperation among companies? Why, how and in which forms do companies cooperate?
Why do companies cooperate?
in order to create VALUE using synergies
Decreasing costs/expenses
decrease fixed costs
decrease variable costs
Capital
reducing fixed assets
improve working capital
Increase on revenue
incresing the volume of selling
increasing the price of the unit
Other financial
reduce taxes
increase debt capacity
Creating value through cooperation: Synergies
Synergy: Any effect that increases the value of firms working together above the combined valued of their independent activities. V(A+B) > V (A) + V (B)
Operating synergies achieved through the improvement of operating activities
Cost-savings synergies
supply chain efficiencies
improved sales and marketing
shared information technology
economies of scale
research and development
Cost-savings & revenue-enhancing synergies
Revenue-enhancing synergies
complementary products
complementary geographies and customers
patents
Financial synergies achieved through the improved efficiency of financing activities and primarily linked to a reduction in the cost of capital
Boston Consulting Group
Relative market share
Market growth
Benefits from mergers
tax benefits
increase in debt capacity
Creating value: Diversification
It implies the collaboration with companies outside one company’s current business environment. Goals:
reducing the cost of capital
Taking advantage of growth opportunities in different product lines or markets related or not to those of the company
Creating value: Strategic realignment
Environmental (regulatory, technological, etc.) changes bring the need to quickly adjust the business.
How should companies cooperate?
avoid dangerous factors of incoherence in the operating strategy.
think about the future situation, not only to exploit current profits opportunities.
Cooperation shall be accurately planned. Profitable and attractive targets shall be selected, which are considered manageable with the available resources.
Five tips for successful collaboration
Choose people carefully
Make sure the whole organization is aligned behind the collaboration
Do your research
Be sensitive to cultural differences if collaborating oversea
Aim for neutrality
In which forms do companies cooperate?
Centralised or parity-based
Equity or non-equity
Formalised or not formalised
Group of companies = Formalized, based on shares. Parts involved are not on the same level: there is
always someone who has more power over the other.