Ch07_09_combo_present_Cho_Final

Markets reduce the negative effect of an intense

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Unformatted text preview: – E.g., UTC (unrelated diversification) – E.g., Cisco (related diversification) 1–14 FIGURE 6.3 FIGURE The Curvilinear Relationship between Diversification and Performance 1–15 Acquisitions: Reshaping the Firm’s Competitive Scope • Reducing a company’s dependence on specific Reducing markets alters the firm’s competitive scope. markets – Reduce the negative effect of an intense rivalry on a Reduce firm’s financial performance. firm’s – Reduce a firm’s dependence on one or more products Reduce or markets. or – E.g., P&G + Gillette 1–16 Acquisitions: Learning and Developing New Capabilities • An acquiring firm can gain capabilities that the An firm does not currently possess: firm – Special technological capability – A broader knowledge base • Firms should acquire other firms with different Firms but related and complementary capabilities in order to build their own knowledge base. order – E.g., Sanofi-Aventis + Genzyme E.g., 1–17 Reasons for Acquisitions Learning and developing new capabilities Reshaping firm’s competitive scope Increased diversification Increased market power Overcoming entry barriers Making an Acquisition Lower risk than developing new products Avoid cost of new product dev. Increase speed to market 1–18 Problems in Achieving Acquisition Success Integration difficulties Inadequate target evaluation Too large Managers Managers overly focused on overly acquisitions Too much diversification Problems with...
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