Chapter 8

Global and Regional Integration

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 Learning Objectives
By the end of this chapter, you should be able to:

8-1 Make the case for global economic integration.

8-2 Outline the evolution of the GATT and the WTO, including current challenges.

8-3 Make the case for regional economic integration.

8-4 Describe regional economic integration efforts in Europe.

8-5 Describe regional economic integration efforts in the Americas.

8-6 Describe regional economic integration efforts in the Asia Pacific and Africa.

8-7 Participate in two leading debates concerning global and regional economic integration.

8-8 Draw implications for action.

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 8-1
Global Economic Integration

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 8-1 Global Economic Integration (1 of 2)

• Regional economic integration: Efforts to reduce trade and investment

barriers within one region
• Global economic integration: Efforts to reduce trade and investment barriers
around the globe

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 8-1 Global Economic Integration (2 of 2)

• General Agreement on Tariffs and Trade (GATT): A multilateral agreement

governing the international trade of goods (merchandise)
• World Trade Organization (WTO): The official title of the multilateral trading
system and the organization underpinning this system since 1995
• European Union (EU): The official title of European economic integration since
1993

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 Figure 8.1 Down the Tube:
Contraction of World Trade during the
Great Depression 1929–1933 (Millions US$)

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 Table 8.1 Benefits of
Global Economic Integration
Political Benefits Economic Benefits
• Promote peace by promoting trade and • Disputes are handled constructively.
investment.
• Build confidence in a multilateral trading • Rules make life easier and discrimination
system. impossible for all participating countries.
• Free trade and investment raise incomes
and stimulate economic growth.

• Multilateral trading system: The global system that governs international trade
among countries—otherwise known as the GATT/WTO system
• Nondiscrimination: A principle that a country cannot discriminate among its
trading partners
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 8-2
Organizing World Trade

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Figure 8.2 Six Main Areas of the WTO

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 8-2 Organizing World Trade (1 of 2)
• General Agreement on Tariffs and Trade: 1948–1994
− The GATT’s major contribution was to reduce the level of tariffs by sponsoring rounds of
multilateral negotiations.

• World Trade Organization (WTO): 1995–Present

− One of the main objectives for establishing the WTO was to strengthen the trade dispute
settlement mechanisms.
 Sets time limits for peer review panel, which consists of three neutral countries as peers, to reach
a judgment.
 Removes the power of the accused countries to block unfavorable decision; WTO decisions are
final.
 The WTO does not have enforcement capability; WTO simply recommends that losing countries
change their laws or practices and authorizes the winning countries to use tariff retaliation to
compel the offending countries to comply with the WTO rulings.

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 8-2 Organizing World Trade (2 of 2)

• Doha Round: A round of WTO negotiations to reduce agricultural subsidies,

slash tariffs, and strengthen intellectual property protection that started in Doha,
Qatar, in 2001; officially known as the “Doha Development Agenda,” it was
suspended in 2006 due to disagreements.

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 Polling Activity

The WTO is a valuable organization.

Agree
Disagree
Not Sure

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 8-3
Regional Economic Integration

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8-3 Regional Economic Integration (1 of 3)

The Pros for Regional Economic Integration

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8-3 Regional Economic Integration (2 of 3)

The Cons for Regional Economic Integration

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Figure 8.3 Types of Regional Economic
Integration

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 8-3 Regional Economic Integration (3 of 3)
• Free trade area (FTA): A group of countries that remove trade barriers among themselves
• Eurasian Economic Union (EAEU): A free trade area launched by Belarus, Kazakhstan, and
Russia
• Customs union: One step beyond a free trade area, a customs union imposes common
external policies on nonparticipating countries
• Common market: Combining everything a customs union has, a common market, in addition,
permits the free movement of goods and people
• Economic union: Having all the features of a common market, members also coordinate and
harmonize economic policies to blend their economies into a single economic entity
• Monetary union: A group of countries that use a common currency
• Political union: The integration of political and economic affairs of a region

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 8-4
Regional Economic Integration in Europe

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8-4 Regional Economic Integration in Europe
(1 of 3)

Origin and Evolution

• 1951: Belgium, France, Germany, Italy, Luxembourg, and the Netherlands
signed the European Coal and Steel Community (ECSC)
• 1957: Six member countries of the ECSC signed the Treaty of Rome, which
launched the European Economic Community (EEC)—later known as the
European Community (EC)
• 1991: 12 member countries signed the Treaty on European Union to establish
the European Union (EU)

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 Figure 8.4 The European Union

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8-4 Regional Economic Integration in Europe
(2 of 3)
The EU Today
• 27 member countries, 450 million citizens, and US$19 trillion GDP
• The world’s largest economy (26% of world’s GDP)
• The largest exporter and importer of goods and services
• The largest trading partner with the United States, China, and India
• Schengen: A passport-free travel zone within the EU
• Euro: The currency currently used in 19 EU countries
• Euro zone: The 19 EU countries that currently use the euro as the official
currency
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 Table 8.2 Benefits and Costs of
Adopting the Euro

Benefits Costs
• Reduce currency conversion costs • Unable to implement independent monetary policy
• Facilitate direct price comparison • Limit the flexibility in fiscal policy (in areas such as
deficit spending)
• Impose monetary discipline on governments

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8-4 Regional Economic Integration in Europe
(3 of 3)
The EU’s Challenges
• Determining whether to become a political union
• Voting power within the EU
• Growth and expansion
• Internal divisions
• Immigration
• Financial crises and recession
• Brexit: British exit from the EU

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 8-5
Regional Economic Integration in the Americas

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 8-5 Regional Economic Integration
in the Americas (1 of 2)
• North American Free Trade Agreement (NAFTA): A free trade agreement
among Canada, Mexico, and the United States that was in force between 1994
and 2020
• United States–Mexico–Canada Agreement (USMCA): A free trade agreement
that replaced NAFTA
• In two decades, trilateral merchandise trade among three member countries
grew from $290 billion in 1993 to $1.1 trillion in 2016—a nearly fourfold
increase.

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 8-5 Regional Economic Integration
in the Americas (2 of 2)
• Andean Community: A customs union in South America that was launched in
1969
• Mercosur: A customs union in South America that was launched in 1991
• Union of South American Nations (USAN/UNASUR): A regional integration
mechanism integrating two existing customs unions (Andean Community and
Mercosur) in South America
• United States–Dominican Republic–Central America Free Trade
Agreement (CAFTA): A free trade agreement between the United States and
five Central American countries and the Dominican Republic
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 Figure 8.5 Regional Integration
in South America

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 8-6
Regional Economic Integration in the
Asia Pacific and Africa

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 8-6 Regional Economic Integration in the
Asia Pacific and Africa (1 of 3)
• Australia–New Zealand Closer Economic Relations Trade Agreement
(ANZCERTA or CER): A free trade agreement between Australia and New
Zealand
• Association of Southeast Asian Nations (ASEAN): The organization
underpinning regional economic integration in Southeast Asia
• Asia–Pacific Economic Cooperation (APEC): The official title for regional
economic integration involving 21 member economies around the Pacific

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Figure 8.6 Regional Integration in
the Asia Pacific

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 8-6 Regional Economic Integration in the
Asia Pacific and Africa (2 of 3)
• Trans–Pacific Partnership (TPP): A multilateral free trade agreement being
negotiated by 12 Asia Pacific countries
• Comprehensive and Progressive Agreement for Trans–Pacific Partnership
(CPTPP or TPP11): A free trade agreement launched by the 11 remaining
members of TPP after the US withdrew from TPP
• Regional Comprehensive Economic Partnership (RCEP): A free trade
agreement launched by ASEAN 10, CER 2, and East Asia 3 (China, Japan, and
Korea)

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 8-6 Regional Economic Integration in the
Asia Pacific and Africa (3 of 3)
• Belt and Road Initiative (BRI): A global infrastructure investment and
development strategy adopted by the Chinese government to invest in Africa,
Asia, and Europe
• African Continental Free Trade Area (AfCFTA): A free trade area formed by
54 of the 55 African countries to promote Africa-wide economic integration

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 Discussion Activity 1

How may regional integration have a negative effect on global trade and global
integration?

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 8-7
Debates and Extensions

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 8-7 Debates and Extensions
Debate 1: Building Blocks versus Stumbling Blocks
• Proponents argue that regional economic integration is the next best thing to
global economic integration to facilitate free trade.
• Critics argue that regional integration provides preferential treatments to
members and discriminates against non-members, thus acting as a stumbling
block for global integration.
Debate 2: Fair versus Unfair State Aid within a Regional Trade Bloc
• State aid—government assistance to help domestic firms—meant to
discriminate against foreign firms from the same bloc is generally discouraged
and often banned.
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 8-8
Management Savvy

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 Table 8.3 Implications for Action

Implications for Action

• Think regional, downplay global.
• Understand the rules of the game, at both global and regional
levels, and endeavor to positively influence them.

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 Discussion Activity 2

How can economic integration produce the type of political benefits covered in
this chapter?

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 Summary
At the end of this chapter, you should be able to:

8-1 Make the case for global economic integration.

8-2 Outline the evolution of the GATT and the WTO, including current challenges.

8-3 Make the case for regional economic integration.

8-4 Describe regional economic integration efforts in Europe.

8-5 Describe regional economic integration efforts in the Americas.

8-6 Describe regional economic integration efforts in the Asia Pacific and Africa.

8-7 Participate in two leading debates concerning global and regional economic integration.

8-8 Draw implications for action.

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accessible website, in whole or in part. 39
 Chapter 11
Global Competitive Dynamics

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 Learning Objectives
By the end of this chapter, you should be able to:
11-1 Explain the industry conditions conducive to cooperation and collusion.
11-2 Outline how formal institutions affect domestic and international
competition.
11-3 Articulate how resources and capabilities influence competitive dynamics.
11-4 Identify the drivers for attack, counterattack, and signaling.
11-5 Participate in two leading debates concerning competitive dynamics.
11-6 Draw implications for action.

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 11-1
Competition, Cooperation, and Collusion

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11-1 Competition, Cooperation, and Collusion
(1 of 4)
• Competitive dynamics: Actions and responses undertaken by competing firms
• Competitor analysis: The process of anticipating rivals’ actions in order to both
revise a firm’s plan and prepare to deal with rivals’ response

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11-1 Competition, Cooperation, and Collusion
(2 of 4)
• Collusion: Collective attempts between competing firms to reduce competition
• Coordination: Formal or informal cooperation among competitors
• Tacit collusion: Firms indirectly coordinate actions by signaling their intention
to reduce output and maintain pricing above competitive levels
• Explicit collusion: Firms directly negotiate output and pricing and divide
markets
− Cartel (trust): An output-fixing and price-fixing entity involving multiple competitors
− Antitrust laws: Law that makes cartels (trusts) illegal
• Prisoner’s dilemma: In game theory, a type of game in which the outcome
depends on two parties deciding whether to cooperate or to defect
− Game theory: A theory that studies the interactions between two parties that compete
and/or cooperate with each other
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Figure 11.1 A “Prisoner’s Dilemma” for Airlines
and Payoff Structure (assuming a total of 200
passengers in one market consisting of two cities)

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 Table 11.1 Industry Characteristics and
Possibility of Collusion vis-à-vis Competition

Collusion Possible Collusion Difficult (Competition Likely)

• Few firms (high concentration) • Many firms (low concentration)
• Existence of an industry price leader • No industry price leader
• Homogeneous products • Heterogeneous products
• High barriers to entry • Low barriers to entry
• High market commonality (mutual • Lack of market commonality (no mutual
forbearance) forbearance)

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11-1 Competition, Cooperation, and Collusion
(3 of 4)
• Concentration ratio: The percentage of total industry sales accounted for by
the top four firms
• Price leader: A firm that has a dominant market share and sets “acceptable”
prices and margins in the industry
• Capacity to punish: Sufficient resources possessed by a price leader to deter
and combat defection

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11-1 Competition, Cooperation, and Collusion
(4 of 4)
• Market commonality: The overlap between two rivals’ markets
• Multimarket competition: Firms engage the same rivals in multiple markets
• Sphere of influence: Dominance acknowledged by competitors
• Mutual forbearance: Multimarket firms respect their rivals’ spheres of influence
in certain markets and their rivals reciprocate, leading to tacit collusion
• Cross-market retaliation: Retaliatory attacks on a competitor’s other markets if
this competitor attacks a focal firm’s original market

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 Discussion Activity

What are the five factors that make an industry conducive to collusion?

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 11-2
Institutions Governing Domestic and
International Competition

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Figure 11.2 Institutions, Resources,
and Competitive Dynamics

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 11-2 Institutions Governing Domestic and
International Competition (1 of 2)
• Competition policy: Government policy governing the rules of the game in
competition
• Antitrust policy: Government policy designed to combat monopolies and
cartels
− Collusive price setting: Price setting by collusion parties at a level higher than the
competitive level
− Predatory pricing: An attempt to monopolize a market by setting prices below cost and
intending to raise prices to cover losses in the long run after eliminating rivals

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 11-2 Institutions Governing Domestic and
International Competition (2 of 2)
• Dumping: An exporter selling goods below cost
• Antidumping laws: Law that makes it illegal for an exporter to sell goods below
cost with the intent to raise prices after eliminating local rivals

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 11-3
Resources Influencing Competitive Dynamics

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 Figure 11.3 A Framework for Competitor
Analysis Between a Pair of Rivals

• Resource similarity: The extent to which a given competitor possesses strategic endowment
comparable, in terms of both type and amount, to those of the focal firm
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Figure 11.4 Alibaba versus Amazon:
Three Rounds

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 11-4
Attack, Counterattack, and Signaling

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 11-4 Attack, Counterattack, and Signaling
(1 of 2)
• Attack: An initial set of actions to gain competitive advantage
• Counterattack: A set of actions in response to attack
• Awareness-motivation-capability (AMC) framework: A competitive dynamics
framework that suggests that a competitor will not respond to an action unless it
is aware of the action, motivated to react, and capable of responding
• Blue ocean strategy: Strategy that focuses on developing new markets (“blue
ocean”) and avoids attacking core markets defended by rivals, which is likely to
result in a bloody price war (“red ocean”)

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 11-4 Attack, Counterattack, and Signaling
(2 of 2)
• How do firms signal their intention to cooperate in order to reduce competitive
intensity? By sending a “wink.”
− Firms may enter new markets, not necessarily to challenge incumbents but to seek mutual
forbearance by establishing multimarket contact.
− Firms can send an open signal for a truce.
− Firms can send a signal to rivals by enlisting the help of governments.
− Firms can organize strategic alliances with rivals for cost reduction.

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 Knowledge Check
Which of the following is NOT a driver for counterattacks?
1. Capabilities
2. Similarity
3. Motivation
4. Awareness

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 11-5
Debates and Extensions

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 11-5 Debates and Extensions (1 of 2)

Debate 1: Competition versus Antidumping

• Some argue that antidumping laws should be phased out.
• They argue that by legalizing “dumping”:
− Competition can be fostered
− Aggressiveness is rewarded
− Consumer welfare is enhanced

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 11-5 Debates and Extensions (2 of 2)

Debate 2: Competitive Strategy versus Antitrust Policy

• Market power: Ability to raise prices without the fear of losing customers
• Antitrust laws were often created in response to the old realities of mostly
domestic competition and do not take into account global competition.
• The very actions accused of being “anticompetitive” may actually be highly
“competitive” or “hypercompetitive.”
• US antitrust laws create strategic confusion.
• US antitrust laws may be unfair because these laws discriminate against US
firms.
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 Polling Activity

Do you support or oppose antidumping restrictions? Why?

Support
Oppose
Not Sure

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 11-6
Management Savvy

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 Table 11.2 Implications for Action

Implications for Action

• Understand the rules of the game governing domestic and
international competition around the world.
• Strengthen resources and capabilities to compete and/or cooperate
more effectively.
• Develop skills in competitor analysis that guide decision making on
attacks, counterattacks, and cooperation.

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 Table 11.3 Tips on Competitive Intelligence
and Counterintelligence
Tips on Competitive Intelligence and Counterintelligence
• If you are bidding against a major local rival in a foreign country, expect aggressive efforts to
gather your information. If you leave your laptop in a hotel room, expect the hard drive to be
copied.
• Be careful about cell phones because signals can be intercepted. If you lose your cell phone for
30 seconds, your opponents may be able to put in a look-alike battery with a chip that will
record and transmit your calls. This chip can also secretly turn your phone on and use it as a
microphone.
• Be careful about the high-speed Internet service at your hotel. Go to the office of your local
subsidiary. If there isn’t such a safe, local office, a random Wi-Fi spot may be safer than the
hotel Internet service.
• If your negotiation counterparts offer to book you into a luxurious suite or hotel, turn it down.
Book your own.
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 Summary
At the end of this chapter, you should be able to:
11-1 Explain the industry conditions conducive to cooperation and collusion.
11-2 Outline how formal institutions affect domestic and international
competition.
11-3 Articulate how resources and capabilities influence competitive dynamics.
11-4 Identify the drivers for attack, counterattack, and signaling.
11-5 Participate in two leading debates concerning competitive dynamics.
11-6 Draw implications for action.

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accessible website, in whole or in part. 29
 Chapter 12
Alliances and Acquisitions

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 Learning Objectives
By the end of this chapter, you should be able to:
12-1 Define alliances and acquisitions.
12-2 Articulate how institutions and resources influence alliances and acquisitions.
12-3 Describe how alliances are formed.
12-4 Outline how alliances are evolved and dissolved.
12-5 Discuss how alliances perform.
12-6 Explain why firms undertake acquisitions.
12-7 Explain why acquisitions often fail.
12-8 Participate in two leading debates concerning alliances and acquisitions.
12-9 Draw implications for action.
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 12-1
Defining Alliances and Acquisitions

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Figure 12.1 The Variety of Strategic Alliances

• Strategic alliance: A voluntary agreement of cooperation between firms

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 12-1 Defining Alliances and Acquisitions

• Contractual (nonequity-based) alliance: Alliance between firms that is based

on contracts and does not involve the sharing of ownership
− Includes co-marketing, research and development (R&D) contracts, turnkey projects,
strategic suppliers, strategic distributors, and licensing/franchising

• Equity-based alliance: Alliance based on ownership or financial interest

between the firms
− Strategic investment: One firm investing in another as a strategic investor
− Cross-shareholding: Both firms investing in each other to become cross-shareholders

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 Figure 12.2 The Variety of Cross-Border
Mergers and Acquisitions
• Acquisition: A transfer of
the control of operations
and management from
one firm (target) to
another (acquirer), the
former becoming a unit of
the latter

• Merger: The combination

of operations and
management of two firms
to establish a new legal
entity

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 12-2
Institutions, Resources, Alliances, and Acquisitions

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Figure 12.3 Institutions, Resources,
Alliances, and Acquisitions

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 12-2 Institutions, Resources, Alliances,
and Acquisitions (1 of 3)
FORMAL INSTITUTIONS
• Antitrust authorities are more likely to approve alliances than they are
acquisitions.
• Many countries ban acquisitions to establish wholly owned subsidiaries (WOS),
thereby leaving some sort of alliances with local firms to be the only entry
choice for foreign direct investment (FDI).
INFORMAL INSTITUTIONS
• Due diligence: Investigation prior to signing contracts

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 Table 12.1 Strategic Alliances:
Advantages and Disadvantages
Advantages Disadvantages
Reducing costs, risks, and uncertainties Choosing wrong partners
Accessing complementary assets and Potential partner opportunism
learning opportunities
Leveraging alliances as real options Risks of helping nurture competitors
(learning race)

• Real option: An investment in real operations as opposed to financial capital

• Learning race: A race in which partners aim to outrun each other by learning the
“tricks” from the other side as fast as possible

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 12-2 Institutions, Resources, Alliances,
and Acquisitions (2 of 3)
• Relational (collaborative) capability: Ability to manage interfirm relationships
• Alliances without trust and understanding between partners have a hard time
imitating each other’s resources and capabilities.
• Some successful alliance relationships are organized in a way that makes it
difficult to replicate.
• Firms in unsuccessful alliances find it challenging, if not impossible, to
effectively organize and manage their interfirm relationships.

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 12-2 Institutions, Resources, Alliances,
and Acquisitions (3 of 3)
• Acquisition premium: The difference between the acquisition price and the
market value of target firms
• For acquisitions to add value, one or all of the firms involved must have rare and
unique skills that enhance the overall strategy.
• Firms that excel in integration possess hard-to-imitate capabilities that are
advantages in acquisitions.
• Strategic fit: The effective matching of complementary strategic capabilities
• Organizational fit: The similarity in cultures, systems, and structures

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 12-3
Formation of Alliances

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 Figure 12.4 Alliance Formation

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 Table 12.2 Equity-Based versus
Non-Equity-Based Alliances
Driving Forces Equity-Based Alliances Nonequity-Based Alliances
Nature of shared resources and High Low
capabilities (degree of tacitness)
Importance of direct organizational High Low
monitoring and control
Potential as real options High (for possible upgrading High (for possible upgrading
to M&As) to equity-based
relationships)
Influence of formal institutions High (when required or High (when required or
encouraged by encouraged by regulations)
regulations)
• Learning by doing: A way of learning, not by reading books but by engaging in hands-
on activities
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 12-4
Evolution and Dissolution of Alliances

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 12-4 Evolution and Dissolution of Alliances

• Firms can minimize the threat of opportunism in alliances by:

− Walling off critical capabilities
− Swapping critical capabilities through credible commitments

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Figure 12.5 Alliance Dissolution

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 Discussion Activity 1

Of the two methods allied firms can use to combat opportunism, which one do
you think is better? Why?

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 12-5
Performance of Alliances

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 Figure 12.6 What Is Behind
Alliance Performance?

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 Polling Activity

Of the four factors that may influence alliance performance shown in Figure 12.6,
which do you think is the most important?
Equity
Learning and experience
Nationality
Relational capabilities
Not sure

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 12-6
Motives for Acquisitions

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 Table 12.3 Motives for Acquisitions
Motive Institution-Based Issues Resource-Based Issues
Synergistic motives • Respond to formal • Leverage superior managerial capabilities
institutional constraints • Enhance market power and scale
and transitions economies
• Access to complementary resources
Hubristic motives • Herd behavior— • Managers’ overconfidence in their
following norms and capabilities
chasing fads of M&As
Managerial motives • Self-interested actions
such as empire-building
guided by informal
norms and cognitions
• Hubris: Overconfidence in one’s capabilities
• Managerial motive: Managers’ desire for power, prestige, and money, which may lead to
decisions that do not benefit the firm overall in the long run
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 12-7
Performance of Acquisitions

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Table 12.4 Symptoms of Acquisition Failures

Stage Problems for All M&As Particular Problems for Cross-Border M&As
Pre-acquisition: • Managers overestimate • Lack of familiarity with foreign cultures,
Overpayment for their ability to create value institutions, and business systems
targets • Inadequate pre-acquisition • Inadequate number of worthy targets
screening • Nationalistic concerns against foreign
• Poor strategic fit takeovers (political and media levels)
Post-acquisition: • Poor organizational fit • Clashes of organizational cultures
Failure in • Failure to address multiple compounded by clashes of national cultures
integration stakeholder groups’ • Nationalistic concerns against foreign
concerns takeovers (firm and employee levels)

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Figure 12.7 Stakeholder Concerns
during Mergers and Acquisitions

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 12-8
Debates and Extensions

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 12-8 Debates and Extensions (1 of 2)

Debate 1: Alliances versus Acquisitions

• Compared with acquisitions, alliances cost less and allow for opportunities to
learn from working with each other before engaging in full-blown acquisitions.

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 12-8 Debates and Extensions (2 of 2)

Debate 2: High Road versus Low Road in Post-Acquisition Integration

• While the strategic rationale to derive synergies and reduce costs is well known,
the alienation it can cause can be significant.
• Many acquirers from developed economies embark on the “low road,” often
resulting in poor post-acquisition performance.
• The “high road” facilitates more rapport between the two sides.
• Taking the “high road” is one of the most effective ways to overcome target firm
resistance and motivate target firm managers and employees to strive for joint
value creation.

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 12-9
Management Savvy

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 Table 12.5 Implications for Action

Implications for Action

• Understand and master the rules of the game governing alliances and
acquisitions around the world.
• When managing alliances, pay attention to the “soft” relationship aspects.
• When managing acquisitions, do not overpay, focus on both strategic and
organizational fit, and thoroughly address integration concerns.

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 Table 12.6 Improving the Odds
for Alliance Success
Areas Do’s and Don’ts
Contract versus “chemistry” • No contract can cover all elements of the relationship. Relying on a
detailed contract does not guarantee a successful relationship. It may
indicate a lack of trust.
Warning signs • Identify symptoms of frequent criticism, defensiveness (always blaming
others for problems), and stonewalling (withdrawal during a fight).
Invest in the relationship • Like married individuals working hard to strengthen their ties, alliances
require continuous nurturing. Once a party starts to waver, it is difficult
to turn back the dissolution process.
Conflict resolution mechanisms • “Good” married couples also argue. Their secret weapon is to find
mechanisms to avoid unwarranted escalation of conflicts. Managers
need to handle conflicts—inevitable in any alliance—in a credible and
controlled fashion.

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 Table 12.7 Improving the Odds
for Acquisition Success
Areas Do’s and Don’ts
Pre-acquisition • Do not overpay for targets, and avoid a bidding war when premiums
are too high.
• Engage in thorough due diligence concerning both strategic and
organizational fit.
Post-acquisition • Address the concerns of multiple stakeholders, and try to keep the best
talents.
• Be prepared to deal with roadblocks thrown up by people whose jobs
and power may be jeopardized.

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 Discussion Activity 2

How do dissimilarities in national culture affect the performance of alliances?

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 Summary
At the end of this chapter, you should be able to:
12-1 Define alliances and acquisitions.
12-2 Articulate how institutions and resources influence alliances and acquisitions.
12-3 Describe how alliances are formed.
12-4 Outline how alliances are evolved and dissolved.
12-5 Discuss how alliances perform.
12-6 Explain why firms undertake acquisitions.
12-7 Explain why acquisitions often fail.
12-8 Participate in two leading debates concerning alliances and acquisitions.
12-9 Draw implications for action.
Peng, Global Business, 5th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part. 36