3H Strategy & International Business School
June 2000 Examination
3 Hour Examination
Answer 3 questions from 9
“KPMG, the accountancy and consultancy firm increasingly involved in advising on
mergers, this weekend sought to withdraw a study which concluded that 83 per cent
of cross-border mergers have not delivered shareholder value.
“The study … looked at a sample taken from the top 700 cross border deals by value
between 1996 and 1998.
“In all, 107 companies world-wide participated. Of these, the study found 53 per cent
destroyed shareholder value, while another 30 per cent produced no discernible
difference. The conclusions came after an analysis of share price movements relative
to those of similar competitors in the first year following merger.”
The Guardian, Monday November 29, 1999
Outline and evaluate the reasons why acquisitions and mergers, particularly those
involving companies of differing nationalities, might fail. Given that many
corporations continue to pursue such strategies, what factors need to be considered to
ensure the best chance of successful implementation?
---Consider the following two quotations:
“A powerful force drives the world towards a converging commonality, and that force
is technology… The result is a new commercial reality - the emergence of global
markets for standardized consumer products on a previously unimagined scale of
magnitude.”
T Levitt, “The Globalization of Markets”, HBR, May-June 1983
“… the characteristics of the home nation play a central role in a firm’s international
success. The home base shapes a company’s capacity to innovate rapidly in
technology and methods and to do so in the proper directions.”
M Porter, The Competitive Advantage of Nations, 1990
In the light of their competing views, evaluate the importance of nationality and
location as critical factors in determining the ability of companies to innovate in order
to meet the challenges of global competition.
----
“In response to global competitive forces, business leaders are increasingly turning to
cooperative arrangements to advance their competitive edge internationally.
Popularly called international strategic alliances, it appears that this trend represents a
permanent feature in the portfolio of strategic options available to global managers, as
opposed to what has sometimes been described as a passing fad in the managerial
transition to international maturity.”
S Preece, “Incorporating International Strategic Alliances into Overall Firm
Strategy”,
nd
in B De Wit & R Meyer, Strategy: Process Content Context, 2 ed.1998
Why do “business leaders” now see international strategic alliances as an essential
component of the global strategies of their organisations? Using examples with which
you are familiar, evaluate how such cooperative arrangements can contribute to
competitive advantage.
---“Successful competitors move quickly in and out of products, markets, and
sometimes even entire businesses - a process more akin to an interactive video game
than to chess. In such an environment, the essence of strategy is not the structure of a
company’s products and markets but the dynamics of its behaviour. And the goal is
to identify and develop the hard-to-imitate organizational capabilities that distinguish
a company from its competitors, in the eyes of customers.”
G Stalk, P Evans & L Shulman, “Competing on Capabilities,
HBR, March/April 1992
Outline how an organisation can go about the process of creating these “hard-toimitate organizational capabilities” and assess the need for them to be distinctive in
order to sustain competitive advantage?
---“New approaches to regional strategy have emerged in the context of national and
international policy frameworks which identify the regional level as key to economic
growth at all spatial levels. In the UK the promotion of industrial clusters and
networks has been part of a recent drive to dynamise businesses and promote a
knowledge-based, high technology economic future.”
K Thomas, “Creating Regional Cultures of Innovation? The Regional Innovation
Strategies in England and Scotland”,
Conference Proceedings, Regional Studies Association, November 1999
Why are governments now looking to regions to address the challenges created by
global competition? Are they right to do so? Illustrate your answer with reference to
policy initiatives with which you are familiar.
----
“Many managers misunderstand the nature and importance of mission, while others
fail to consider it at all. As far back as 1973, Peter Drucker observed: ‘That business
purpose and business mission are so rarely given adequate thought is perhaps the most
important cause of business frustration and failure.’ Unfortunately, his comment is as
true today as it was then.”
A Campbell & S Yeung, Creating a Sense of Mission,
Long Range Planning, August 1991
Critically assess the importance of mission in creating business success, as
emphasised by Campbell and Yeung. What factors might an organisation need to
consider in creating and articulating the mission of the organisation?
---“Many corporate parent companies destroy value. Businesses in corporate portfolios
would, often, be better off as independent companies or as part of other corporate
portfolios.”
A Campbell, M Goold & M Alexander, “The Value of the Parent Company”,
in B De Wit & R Meyer, Strategy: Process Content Context, 2nd ed.1998
Given the view expressed by Campbell, Goold and Yeung, what factors and issues do
corporations need to consider in determining the extent of diversification of their
organisation?
---“To compete effectively in international markets a nation’s businesses must
continuously innovate and upgrade their competitive advantages. Innovation and
upgrading come from sustained investment in physical as well as intangible assets things like employee skills and supplier relationships. Today the changing nature of
competition and the increasing pressure of globalization make investment the most
critical determinant of competitive advantage.”
M Porter, “Capital Disadvantage”, HBR, September-October 1992
If we now live in an era of “global finance”, why do Michael Porter and others argue
that national financial systems continue to play a significant role in determining the
competitive advantage of businesses within each country. Do you agree?
---“In positive terms, organisational culture can be thought of as encapsulating
distinctive competences; more dangerously, it can also be a conservative influence,
likely to prevent change, stifle innovation and result in a momentum of strategy which
can lead to strategic drift.”
G Johnson & K Scholes, Exploring Corporate Strategy, 5th ed. 1999
In the light of the quotation from Johnson and Scholes, outline and evaluate the
reasons why corporate culture can both be a source of sustainable competitive
advantage and a reason for its diminution?