Instructor Manual
Chapter 14: Global Strategies and Acquisitions
(Prepared by Klaus E. Meyer, March 2019)
Introduction to the Topic
Learning Objectives
1. Articulate the strategic advantages and types of strategies of globally operating firms.
2. Explain why global firms engage in mergers and acquisitions and alliances.
3. Apply the institution-based view to explain patterns of acquisitions.
4. Apply the resource-based view to explain when acquisitions are likely to succeed
5. Participate in leading debates on global strategies and acquisitions
6. Draw implications for action
General Teaching Suggestions
This chapter integrates two themes, firstly the strategies that allow internationally (or
worldwide) operating firms to use their international scope to attain competitive advantages,
and secondly, the role of acquisitions in the context of building a global company.
Opening Case Discussion Guide
The case of Danisco shows how one company has changes the scope of its activities from
competing in multiple industries in its home country to becoming a specialist in a much more
narrowly defined but global industry. In this process, Danisco has been selling business units
while buying others and creating an entirely new company with a unique and global
organization and value proposition. In 2011, Du Pond of America made a friendly take-over
bid to acquire Danisco at a price that is more than 50% above the average market value of the
company over the preceding twelve months. Now it is called DuPont Nutrition and Health.
As instructor, you may initiate a discussion on these topics by asking, “do you think big
MNEs are at an advantage over local firms? If so why?”
To motivate a discussion, you as instructor may note that investment banks make a lot of
money from advising M&A activity and ask students why they think companies engage in
huge acquisitions and divestments.
Chapter Outline, Section by Section
Section 1: Strategizing Globally
Key Ideas
This section presents some arguments as to strategic advantages of the global firm and types
of strategies of globally operating firms. This section builds on Pankaj Ghemawat’s
distinction of three types of strategy indicated by the AAA terminology (Figure 14.1). Note
that this terminology is an extension of the Bartlett and Ghoshal’s integration-responsiveness
framework.
Key Concepts
global strategies
Strategies that take advantage of operations spread across the world
economies of scale
reduction in unit costs achieved by increasing volume
global sourcing
buying inputs all over the world
centres of excellence
specialized centres for innovation that serve the entire MNE
global key accounts
customers served at multiple sites around the world, but that negotiate centrally
risk diversification
reduction of the risk profile of a company by investing in different countries and industries.
AAA typology
Aggregation, adaptation and arbitrage strategies
aggregation strategy
strategy of realizing synergies between operations at different locations
adaptation strategy
strategy of delivering locally adapted products in each market
arbitrage strategy
strategy of exploiting differences in prices in different markets
overseas listing
Raising capital by listing on a stock exchange aboard
Section 2: Growth by Acquisitions
Key Ideas
This section introduces acquisitions as key path of growth for MNEs on the global stage. It
introduces the M&A terminology and discusses various motives for acquisitions, as well as
key challenges of post-acquisition management. The final part of this section distinguishes
acquisitions from loose collaboration from alliances.
Following instructor feedback, the coverage of acquisitions has been substantially expanded
in the second and third editions, including a new very detailed In Focus 14.1, which explains
the operational challenges Nomura faced after taking over one unit of the defunct Lehman
Brothers. On alliances, a new In Focus explores the collaboration between IBM and Maersk
to develop blockchain technologies to support international trade.
Key Concepts
M&A
Popular shorthand for mergers and acquisitions
acquisition
The 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.
cross-border M&A
M&A involving companies based in different countries
carve-out acquisition
Acquisition of parts of another company that previously were not clearly defined organizational units
synergies
value created by combining two organizations that together are more valuable than the two
organizations separately
hubris
A manager’s overconfidence in his or her capabilities.
due diligence
The assessment of the target firm’s financial status, resources and strategic fit.
strategic fit
The effective matching of complementary strategic capabilities.
organisational fit
The similarity in cultures, systems and structures.
post-acquisition integration
The process that aims to integrate two formerly independent firms after an acquisition.
strategic alliances
Voluntary agreements between firms involving exchange, sharing, or co-developing of products,
technologies, or services.
business unit JV
A JV in which existing business units from two firms are merged.
R&D JV
Joint ventures aiming to develop next-generation technologies
operational collaboration
a form of strategic alliance that includes collaboration in operations, marketing or distribution
Section 3: Institutions Governing Acquisitions
Key Ideas
This section discusses how the institutional framework of countries affects M&A activity.
The main focus is on the regulatory framework of the EU, which presents the main sets of
rules that constrain firms’ ability to acquire or merge if this inhibits competition (Table 14.4).
Key Concepts
input foreclosure
Practice of a vertically integrated firm to cut off a competitor from key suppliers.
output foreclosure
Practice of a vertically integrated firm to cut off a competitor from key customers.
Section 4: Resource-based perspectives on acquisitions
Key Ideas
This section discusses resource dimensions of acquisitions focusing on the resources needed
to make acquisitions successful, especially in terms of managing the process of acquiring and
integrating a firm.
Key Concepts
acquisition premium
The difference between the acquisition price and the market value of target firms.
Section 5: Debates and Extensions
Key Ideas
The first debate introduces the concept of hidden champions, which describes medium size
firms in Germany (and elsewhere in Europe), who compete on the global stage with niche
market strategies while keeping a low profile.
The second debate draws on my own research and introduces the concept of global focusing,
which describes the strategic shift of a company facing increasing competition in its home
market and thus transforming itself into a global specialist. The case of Nokia (In Focus 14.3
and Figure 14.1) illustrates the ideas. Note that Nokia emphasized its focus on network
business by merging with Alcatel in 2015.
Key Concepts
hidden champions
Market leaders in niche markets keeping a low public profile
divestment
The sale or closure of a business unit or asset
globalfocusing
A strategic shift from diversification to specialization which increasing the international profile.
Section 6: Implications for Practice
Key Ideas
This concluding section emphasizes the need to strategize by thinking globally, consider the
costs of acquisitions, and understanding the pertinent regulatory institutions affecting M&A.
Key Concepts
No new concepts.
Review Questions
Review questions are provided to students on the website accompanying the book. They
directly ask to summarize the material provided in the text. Instructors may also use the
questions to structure their lectures or review sessions.
Review Questions
(as provided to students on the website)
Material in the Book
1. How can global strategies help firms to build
competitive advantages?
2. How can MNEs’ aggregation strategies to enhance
their competitiveness?
3. How can MNEs’ adapt their strategies to enhance
their competitiveness?
4. How can MNEs’ arbitrage strategies to enhance
their competitiveness?
5. What are cross-border M&As?
6. Why do MNEs acquire other MNEs?
7. What do companies do during the ‘due diligence’
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8. What are the key challenges acquirers face after
signing a deal to acquire another company?
9. When do MNEs use strategic alliances rather than
acquisitions?
10. What criteria are used by the competition
authorities regulating horizontal M&As?
11. What criteria are used by the competition
authorities regulating vertical M&As?
12. What actions can regulators take when M&As are
deemed a threat to competition?
13. How do the resources of an MNE affect its ability
to manage acquisitions?
14. Why are some European mid-size companies
known as ‘hidden champions’?
15. What is the role of acquisitions and divestment in
corporate strategic repositioning?
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Critical Discussion Questions
At the end the chapter, we provide discussion questions that aim to stimulate students
thinking beyond memorizing the material learned in the chapter. They are designed to be
used at a basis for in-class discussions, group work, or individual assignments. Below,
money in a domestic firm operating in
multiple industries, or in a global company
specialized in a single industry? What are the
risks associated with either type of strategy?
3. As a CEO, you are trying to acquire a foreign
firm. The size of your firm will double, and it
will become the largest in your industry. On
the one hand, you are excited about the
opportunity to be a leading captain of industry
and the associated power, prestige, and
income (you expect your salary, bonus, and
stock option to double next year). On the
other hand, you have just read this chapter and
are troubled by the fact that 70% of M&As
reportedly fail. How would you proceed?
4. During the courtship and negotiation stages of
a merger, managers often emphasize equal
their plans makes a lot of
sense, but so does checking out
outside job opportunities.
2. This question challenges
students to demonstrate their
strategic thinking and
reasoning to explain which
ever solution they favour.
3. This question challenges
students to demonstrate their
strategic thinking and
reasoning to explain which
ever solution they favour.
4. This question challenges
students to demonstrate their
ability to identify ethical
conflicts and to reason which
discussion questions.
Case Discussion Questions
(as provided in the book)
Indicative Responses
1. What are the merits and risks of
converting Daimler into an
integrated technology group like
Siemens or GE?
2. What are the merits and risks of
converting Daimler into a multi-
brand global car maker, like
Unilever or Nestlé in consumer
goods?
3. What are the merits and risks of
Daimler focusing exclusively on
its Mercedes Benz brand for
passenger cars and trucks?
These question challenges students to demonstrate
their strategic thinking and reasoning to explain which
ever solution they favour, using the concepts
introduced in this chapter.
1. The first question explores the risks of a related-
diversification strategy, which did not work on for
Daimler (as it did not work for other companies,
like Siemens).
2. The second question explores the risk of trying to
be a global player by acquiring related businesses
around the world.
3. The third question explores the risks of a narrower
focus than the earlier two question. The risk
highlighted in questions 1 and 2 provide the
rational for the third strategy, which appears to do
well if stock market developments are to be
trusted.
to use any of the following activities to further engage students with the material.
1. The Integrative Case “Bharti Airtel Acquires Resources and Capabilities” has been
(Chapter 4). They can also be used to discuss foreign entry strategies (Chapter 12) and
global mergers and acquisitions (Chapter 14).
discuss different stages of entrepreneurial growth (Chapters 11, 12, 14): from an
entrepreneurial start-up by a Danish entrepreneur to a regional multinational
expanding to Nigeria and other West African countries, and eventually to M&A by
French MNEs Danone who acquired Fan Milk. It can also be used in conjunction with
the Closing Case ‘Coca Cola Dives into Africa’ to discuss the evolution of business
opportunities in Africa (Chapter 1).
3. The Integrative Case ‘McDonald’s Reinvents itself in India’ has been written to
discuss two fundamental challenges of foreign market entry: (1) how to adapt
products and processes to a local contexts, and (2) how to manage a partnership with a
local firm or entrepreneur. The case illustrates many good practices regarding
adaptation, perhaps surprising given McDonald’s image of a global brand. However,
it also highlights problems McDonald’s experienced in the relationship with one of its
local joint venture partners, a conflict that is still ongoing, and among other highlights
challenges of contract enforcement in a ‘weak’ institutional context. The case
discussion thus requires integrating learning from entry strategy (Chapters 11 and 12)
with operational strategy in logistics and marketing (Chapter 17).
4. The Integrative Case ‘Beko Washes Clothes Across Europe’ discusses the
international growth strategy of the Turkish washing machine brand Beko. It covers
initial entry strategies (Chapter 12), development of the brands and its distribution
channels (Chapter 17), mergers and acquisitions (Chapter 14) and eventually
coordination of dispersed units across Europe (Chapter 15).
5. The integrative case “SG Group Manages European Acquisitions” focuses on the
challenges of post-acquisition integration for an emerging economy MNE. It explores
in particular challenges of cross-cultural management (Chapter 3) in the context of
global strategies and mergers and acquisitions (Chapter 14 and 15).
6. Identifying new sources of energy has been an important business opportunity for quite some
time. Given recent growth in Asia, your company is seeking the acquisition of geothermal and
solar energy firms in the region. Based on your firm’s energy and resource development
emphasis, identify three Asian countries in which this is most possible.
One resource which can be used is “EarthTrends”. This website can be found by entering the
search term “energy and resources” at the globalEDGE™ Resource Desk search box located
Further Readings
At the end the chapter, suggested further readings are provided. The primary aim is to
provide students a starting point for further work, for example when preparing a class
assignment or dissertation. These references also are recommended for instructors not
familiar with the topic and wishing to ‘get ahead of the students’ before lecturing on a topic.
P. Ghemawat, 2007, Redefining global strategy, Boston: Harvard Business School Press. – A practitioner
oriented book outlining ideas how companies can develop global strategies.
J. Haleblian, C. Devers, G. McNamara, M. Carpenter & R. Davison, 2009, Taking stock of what we know
about mergers and acquisitions, JM, 35: 469-502 – a review article summarizing current scholarly
thinking on M&As.
P.C. Haspeslagh & D.B. Jemison, 1989, Managing Acquisition, New York: Free Press – a classic book
grounded in the resource-based view on how to manage acquisitions.
K.E. Meyer, 2006, Globalfocusing: From domestic conglomerates to global specialists, JMS, 43: 1109-
1144. – a study following acquisitions and divestments of two companies over time, and interpreting the
process from an resource-based view by introducing the concept of globalfocusing.
A. Verbeke & H. Merchant, 2012, Handbook of Research on International Strategic Management,
Cheltenham: Elgar – a collection of essays reviewing the state of the art of theories linking international
business and strategic management.
G.S. Yip, & G.T.M. Hult, 2012, Total Global Strategy, 3rd ed., Prentice Hall – A textbook targeted at MBA
students with the ambition to lead global firms.