Case Analysis: Alliances and Acquisitions - Essay Example

1. According to the article When to Ally and When to Acquire , there are three important factors that must be considered before deciding on a collaborative option. The first factor are the resources that the company possess and synergies that they intend to create (Dyer, Kale, Singh 4 ).The three types of synergies that can be formed when resources are combined are the ff.: modular ,sequential ,and reciprocal . A good case is that of Astra Zeneca and Abgenix that created sequential synergies which is just right since Abgenix focused on its core competence- discovering new drugs while Astra Zeneca took care of the FDA regulations and process.

However, the synergy that can be achieved is very much dependent on the resources a firm posess. Although a firm can be strong on physical resources, the soft resources such as key people in a successful organization may leave the company once acquisition happen such as the case of Bank of America. The company must also carefully evaluate the extent of redundant resources so as to make proper decision whether to cut costs or generate economies of scale which Masco used profitably. The second factor is the marketplace.

It is true that companies tend to be so wrapped in their internal affairs that they fail to scan the market. Thus, this often result to failure since the company becomes dependent on market forces which is very uncertain and consequently lags behind its competitors. Such is the case of technology sector where a product can easily become obsolete and was a costly mistake when it acquired DSP. The third factor to be considered is competencies in collaborating that the companies have gained through experience.

The best example presented is that of Cisco where its exponential growth is a balanced mixture of mergers and acquisitions. It avoided the pitfall of specializing in ones “pet strategy”( Dyer,Kale, Singh 7) even if the results would be negative. Rather , Cisco carefully makes an assessment of the risk of uncertainty before buying out companies.2. A firm should consider an alliance by using the framework that the authors designed. First, if the synergy desired is modular or sequential. Second, if a company’s resources are low or high, though non-equity alliance is more appropriate for low resource companies.

Third, alliance is beneficial when the extent of redundant resources are low to medium extent. As for the degree of market uncertainty, a high uncertainty is good for equity alliance while a low degree is viable for non-equity alliance. Lastly, when the degree of competition for resources is low up to medium, alliances seem to be a viable option.3. Acquisition on the other hand can be decided on using the same framework that the authors made. If the type of synergy is reciprocal, acquisitions are advisable .

Also, when the relative value of soft and hard resources are quite low up to medium. Acquisition is also favorable when there is a high extent of redundant resources. When the degree of market uncertainty is set to low to medium, then acquisitions would work. Definitely, acquisition is the only way to beat the competition when the level of competition is very high.4. Alliance partners ‘fit” when both companies asses their strengths and weaknesses well before jumping into a collaboration.

The companies must have scanned the external environment carefully, studying the competitors and considering factors such as technological, political, social, cultural, legal, etc. as the case of Bristol-Myers Squibb in promoting “Lipitor”. Also, alliance partners “fit “ when they also take into consideration not only hard resources but soft resources as well since human capital is hard to replace. In the case of Cisco, it fits well into its acquisitions and mergers since it “developed processes that helped determine its strategy” (Dyer, Kale, Sing 8 ).

Although there are is no quick and easy formula when making decisions on M and A, still, being guided by the framework presented in the article would be able to contribute in minimizing risks in such momentous decisions.REFERENCEDyer, Jeffrey,,Kale ,Prashant, and Singh, Harbir.“When to Ally and When to Acquire”. Harvard Business Review. July to August (2004):1-8.