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Lecture 18

MGBU 4441 Lecture 18: Lecture 18

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Fordham University
Management Systems
MGBU 4441
Christopher Meyer

 Corporate-level strategy: selection of which businesses to contain w/in given corporation and/or selection of businesses to partner w/ & managing those businesses so as to create value by capturing synergies o Value & success come from having given business be more valuable as part of larger corporation that it would be on its own  Build vs. buy/ally o Building business organically gives you control & allows you to develop expertise in- house & lets you do things your own way while buying/allying gets you instantly into new lines of business & if there is synergy to be obtained, can get it right away  Corporate-level actions o Mergers—2 firms join o Acquisitions—1 company buys another o Divestiture—1 company sells off 1 business o Joint ventures—shared stock ownership of 3 firm o Minority ownership—firm buys part of another firm o Strategic alliances—2 companies enter into agreement to work together, sharing R&D, distribution, marketing, etc.  Where would added value come from? o Raise prices—merge w/ competitors to increase market power o Add new profitable sales—buy firms in areas not in  New customers/markets/products o Reduce cost of production—merge/buy to create economies of scale and/or capture economies of learning o Perform value chain activities in-house more inexpensively than what you o ‘re currently paying for someone else—buy suppliers, distributors; or outsource/ally o Exercise excellent managerial skill o Invest well—buy businesses for less than they’re worth  Types of diversification o Related—businesses that have similarities/potential business relationship w/to acquiring firm w/ goal of creating synergies across businesses themselves  Horizontal—derives from economies of scope/cross-selling/economies of scale  Acquire firms in order to add related product/services  Move into additional markets  Share aspects of business that relate to products & services themselves  Buying/merging w/ competitors to increase market power, scale, & efficiency  Vertical—company buys supplier/distributors/some part of value chain that not doing themselves  Can save money  Reduces flexibility (no ability to change suppliers, distributors, etc.)  Reduces risk of supply disruption  Reduces risk of negative associations w/ poor service (if acquiring distributor)  Increases control o Unrelated—buy businesses that have no similari
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