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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
markets alters the firm’s competitive scope.
– Reduce the negative effect of an intense rivalry on a
firm’s financial performance.
– Reduce a firm’s dependence on one or more products
– E.g., P&G + Gillette 1–16 Acquisitions: Learning and Developing New Capabilities
• An acquiring firm can gain capabilities that the
firm does not currently possess:
– Special technological capability
– A broader knowledge base • Firms should acquire other firms with different
but related and complementary capabilities in
order to build their own knowledge base.
– E.g., Sanofi-Aventis + Genzyme
E.g., 1–17 Reasons for Acquisitions Learning and
new capabilities Reshaping firm’s
competitive scope Increased
entry barriers Making an
Acquisition Lower risk than
products Avoid cost of new
product dev. Increase speed
to market 1–18 Problems in Achieving Acquisition Success
target evaluation Too large Managers
overly focused on
acquisitions Too much
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- Spring '12