Lecture 1
Course overview
Opportunities vs. Risks
• Alliances, mergers, and inter-organizational networks can drive growth
• However, many initiatives fail
Challenges
• Poor evaluation often results in value destruction and financial setbacks
for the parties
involved
Course objective
• Analyze the strategic rationale for alliances and mergers
• Learn how to initiate, design, implement, and manage inter-
organizational relationship
Definitions
A strategic alliance refers to an agreement between two or more
autonomous and
independent firms designed to achieve mutual and individual objectives by
sharing
and/or creating resources.
they have a common objective to have these types of relationships
A merger refers to an agreement between two independent (typically
similar-sized)
firms to form a single larger one (i.e., merger of equals) designed to
grow through the
access to the resources and infrastructures of each partner.
company A and B together form company C (A and B do not exist
anymore), there is not a huge power difference between the companies.
An acquisition refers to an agreement through which one firm takes over
another
one (or part of it) on which the buyer asserts complete ownership.
company A and B still exist, company A is more powerful than company
B.
A network refers to a set of inter-organizational direct and indirect
linkages between multiple parties.
all relationships a company has.
The Amazon story
offer everything from A-Z, with a smile (arrow)
Phase 1: E-commerce Pioneer (1995-2005)
• Online bookstore → everything store (moved from a product market)
• Infrastructure development
• Marketplace launch
,Selected events:
- Geographic expansion
Acquired Bookpages (UK), Telebook (Germany), Joyo (China)
- Product expansion
Entered the entertainment sector by acquiring IMDb
- E-commerce leadership
Formed a strategic alliance with Borders (traditional book retailer),
powering their website with Amazon's e-commerce platform (new
distribution channel)
Phase 2: Tech Innovation (2006-2015)
• Amazon Web Services (AWS) launch
• Kindle revolutionizing
• Prime ecosystem
Selected events:
- Digital reading
2007 Kindle Launch → 12th Generation (2024)
- Operational excellence
Acquired warehouse robot specialist Kiva (2012, $775M)
- Voice recognition software
Acquired startup Evi (2012, $26M)
Smartphone: partnership with Foxconn to produce Fire Phone
failed
Smart home echo devices: Alexa
no options to download all apps / have all providers
- Watching the video game industry
Acquired Twitch (2014, $970M)
strong innovation strategy
Phase 3: Omnichannel Giant (2016-Present)
• Grocery entry
• Healthcare entry
• AI leadership
Selected events:
- Indian retail industry
Termination of the alliance with Future Group due to a dispute
over product discounts
Lost battle to acquire Flipkart: Walmart deal (2018, $16B)
need local knowledge
- Grocery entry
Acquired Whole Foods Market (2017, $13.7B)
- Healthcare entry
Haven Healthcare (venture formed by Amazon, Berkshire
Hathaway, JPMorgan Chase) failed
Acquired online pharmacy PillPack (2018, $753M)
- Autonomous vehicle
, Acquired driverless car startup Zoox (2020, $1.2M)
What have we learned from this story?
organizations are not able to survive and grow autonomously (only
build), they need others! you cannot grow by yourself; you need to rely on
others and their knowledge.
Why study alliances, mergers, and networks?
Organizations
become increasingly dependent on their external environment
However, organizations cannot depend only on the market because of:
• Higher transaction costs
• Uncertainty
• Opportunistic behavior
• Information asymmetry
• Asset specificity
• Market power
To survive and grow, organizations need to be able to:
- Borrow: an organization form alliances with other independent
organizations to achieve mutual and individual objectives
- Buy: an organization acquire at least controlling interests or
merger with other firms to obtain unrestrained use of their
resources
- Leverage their network of relationships with other organizations
(i.e., inter-organizational relationships)
, Lecture 2
Alliances perhaps the least understood practice in management
SDG 17: partnerships for the goals, it is important to create
partnerships/alliances to create a better world.
Two conclusions of the current environment:
1. No single firm can survive autonomously (to be competitive, have
deep understanding alliances)
2. Alliances fail: on one hand profit take care of people and planet, on
other hand, companies are bad at it.
You need the science (the
knowledge about alliances) and the art (how to create one).
Science:
- Alliance formation
- Alliance management
- Alliance challenges
- Alliance competence
- Alliance attributes
Art:
- Alliance experience
- Alliance creativity
- Alliance leadership
There are many contingencies that impact the steps of science.
It is about experience how to handle them, there is no blueprint
solution to a perfect alliance.
Alliance
Course overview
Opportunities vs. Risks
• Alliances, mergers, and inter-organizational networks can drive growth
• However, many initiatives fail
Challenges
• Poor evaluation often results in value destruction and financial setbacks
for the parties
involved
Course objective
• Analyze the strategic rationale for alliances and mergers
• Learn how to initiate, design, implement, and manage inter-
organizational relationship
Definitions
A strategic alliance refers to an agreement between two or more
autonomous and
independent firms designed to achieve mutual and individual objectives by
sharing
and/or creating resources.
they have a common objective to have these types of relationships
A merger refers to an agreement between two independent (typically
similar-sized)
firms to form a single larger one (i.e., merger of equals) designed to
grow through the
access to the resources and infrastructures of each partner.
company A and B together form company C (A and B do not exist
anymore), there is not a huge power difference between the companies.
An acquisition refers to an agreement through which one firm takes over
another
one (or part of it) on which the buyer asserts complete ownership.
company A and B still exist, company A is more powerful than company
B.
A network refers to a set of inter-organizational direct and indirect
linkages between multiple parties.
all relationships a company has.
The Amazon story
offer everything from A-Z, with a smile (arrow)
Phase 1: E-commerce Pioneer (1995-2005)
• Online bookstore → everything store (moved from a product market)
• Infrastructure development
• Marketplace launch
,Selected events:
- Geographic expansion
Acquired Bookpages (UK), Telebook (Germany), Joyo (China)
- Product expansion
Entered the entertainment sector by acquiring IMDb
- E-commerce leadership
Formed a strategic alliance with Borders (traditional book retailer),
powering their website with Amazon's e-commerce platform (new
distribution channel)
Phase 2: Tech Innovation (2006-2015)
• Amazon Web Services (AWS) launch
• Kindle revolutionizing
• Prime ecosystem
Selected events:
- Digital reading
2007 Kindle Launch → 12th Generation (2024)
- Operational excellence
Acquired warehouse robot specialist Kiva (2012, $775M)
- Voice recognition software
Acquired startup Evi (2012, $26M)
Smartphone: partnership with Foxconn to produce Fire Phone
failed
Smart home echo devices: Alexa
no options to download all apps / have all providers
- Watching the video game industry
Acquired Twitch (2014, $970M)
strong innovation strategy
Phase 3: Omnichannel Giant (2016-Present)
• Grocery entry
• Healthcare entry
• AI leadership
Selected events:
- Indian retail industry
Termination of the alliance with Future Group due to a dispute
over product discounts
Lost battle to acquire Flipkart: Walmart deal (2018, $16B)
need local knowledge
- Grocery entry
Acquired Whole Foods Market (2017, $13.7B)
- Healthcare entry
Haven Healthcare (venture formed by Amazon, Berkshire
Hathaway, JPMorgan Chase) failed
Acquired online pharmacy PillPack (2018, $753M)
- Autonomous vehicle
, Acquired driverless car startup Zoox (2020, $1.2M)
What have we learned from this story?
organizations are not able to survive and grow autonomously (only
build), they need others! you cannot grow by yourself; you need to rely on
others and their knowledge.
Why study alliances, mergers, and networks?
Organizations
become increasingly dependent on their external environment
However, organizations cannot depend only on the market because of:
• Higher transaction costs
• Uncertainty
• Opportunistic behavior
• Information asymmetry
• Asset specificity
• Market power
To survive and grow, organizations need to be able to:
- Borrow: an organization form alliances with other independent
organizations to achieve mutual and individual objectives
- Buy: an organization acquire at least controlling interests or
merger with other firms to obtain unrestrained use of their
resources
- Leverage their network of relationships with other organizations
(i.e., inter-organizational relationships)
, Lecture 2
Alliances perhaps the least understood practice in management
SDG 17: partnerships for the goals, it is important to create
partnerships/alliances to create a better world.
Two conclusions of the current environment:
1. No single firm can survive autonomously (to be competitive, have
deep understanding alliances)
2. Alliances fail: on one hand profit take care of people and planet, on
other hand, companies are bad at it.
You need the science (the
knowledge about alliances) and the art (how to create one).
Science:
- Alliance formation
- Alliance management
- Alliance challenges
- Alliance competence
- Alliance attributes
Art:
- Alliance experience
- Alliance creativity
- Alliance leadership
There are many contingencies that impact the steps of science.
It is about experience how to handle them, there is no blueprint
solution to a perfect alliance.
Alliance
