Alliances && Acquistions

      Chapter 11 focuses on making alliances and acquisitions between companies that actually work. Unfortunately, many firms find it difficult to evaluate the true intentions and capabilities of their prospective partners until it is too late. Chapter 11 not only introduces equity-based joint ventures but it also illustrates this further depicting alliances as degrees of compromise between pure market transactions and acquisitions. The first alliance that is introduced is contractual (non-equity based) alliances these are associations between firms that are based on contracts and do not involve the sharing of ownership. In contrast equity-based alliances are based on ownership or financial interest between the firms. These include strategic investment and cross-shareholding. Cross shareholding is when each partner invests in the other. I am familiar with cross shareholding, because my father, an entrepreneur, currently practices this alliance within a few of his companies.
       Currently, my father has a business which involves real estate in Florida. He and his partner both invest money in order to flip houses that have been foreclosed on in the real estate market. My father has the background knowledge and connections in order to remodel homes cheap, quick, yet, efficiently. His partner is a previous real estate agent who has the knowledge of what homes are currently on the market and for what price. My father and his partner both invest money in order to purchase the homes and then split the profit right down the middle. However, after being working with this company for a year they both decided to move up on the housing market and begin purchasing larger homes which also cost more money. Therefore, they decided to form alliances with multiple business men but just as investors. They needed more start-up money in order to purchase this higher level of real estate. After forming alliances with several other investors they needed to figure out how the profit would be divided up. Unfortunately, sometimes homes would not sell and therefore they would have to let them go at a lower asking price creating them to lose more money then expected. When these situations would occur, they would then find themselves in deeper debt then where they began owing more alliances money then just themselves.
      Alliances create more opportunities however they do not always play out as planned. I have observed from my father's mistakes and have gathered when I go to start up a service or business I will eventually practice cross-shareholding but make sure to have all possibilities planned out on paper to know how to deal with these issues as they come up. Four factors that may influence alliance performance is (1) equity (2) learning and experience (3) nationality and (4) relational capabilities. Before I experiment with cross-shareholding I will make sure I exhaust all possible outcomes and also perfect the factors that may influence our alliance.

CH 10 Blog

As a Junior in college I have been considering what exactly I want to do with my international business degree. I truly enjoy and am very good at geography and always was curious how I could link the two. I had a professor last semester who gave me the advice on focusing on marketing because geography is correlated with marketing. In Chapter ten the motto for international business is "location, location, location." Spatial perspective is a defining feature of international business. They also say that two sets of considerations drive the location of foreign entries: (1) strategic goals and (2) cultural and institutional distances. Location-Specific advantages are the benefits a firm reaps form features specific to a particular place. Examples that are giving include Singapore is an idea stopping point for air traffic between Europe and Australia and for sea traffic between the Middle East and East Asia. I feel with the issues of inflation and crowded cities location is key. I agree that location is key for a successful international business.

Teach a man to fish, and he'll eat for a lifetime.

       In Chapter nine we are introduced to the concept of microfinance. Microfinance is lending small sums ($50-300) used to start small businesses with the intention of ultimately lifting the entrepreneurs out of poverty. Also, in chapter nine there is an article called "Ethical Dilemma." Within this article it says that in 1976, Muhammad Yunus, an economic professor in Bangladesh lent $27 out of his own pocket to a group of poor craftsmen and helped found a village-based enterprise called the Grameen Project. This project inspired a global movement for entrepreneurial financing and would be awarded the Nobel Peace Prize.
       It is thought that microloans can make a huge difference. I agree that micro loans are a great idea for under developed places such as Bangladesh but I do not agree with interest rates that average to 35%. Unfortunate people would be incapable of moving forward with such a high interest rate with such a small loan. Also, with our modern beliefs today you can only go so long with catering to women instead of men. The fact that they will only loan to women because they are more trusted should be investigated. If I were of the men generation I would fight for this right. What about men who are single fathers, there are plenty of circumstances in which a man should be lended the money just as much as women should. I do not agree with the interest rates or preference of women when it comes to microloans. In the long run I do not think microloans or microfinance for these poor countries will help put these poor people back on top.

Integrating Globally

       I believe that integrating the global economy would be a positive move. Integration has dates back to the 1500s in Europe and 1930s in the United States. Right now I am currently enrolled in a history 112 class which teaches about western civilization since 1500. A big goal of the leading country of France at this time was to nationalize all of the nations. They believed the countries would be more successful as a whole rather than individually. Since World War II globally, General Agreement on Tariffs and Trades (GATT) and the World Trade Organization (WTO) was formed. These are the first steps to integrating the global economy. There are many political benefits for global economic integration. In chapters 4 and 6 we learned that there are economic gains when firms from different countries can freely trade and engage in foreign direct investment (FDI). Unfortunately, these insights were not accepted by our government until post WWII.
     I agree with economists when they say that the general goal to integrating the global economy is to promote world peace. Integrating globally would promote peace because generally people who purchase and sell to each other are usually reluctant to fight or kill each other. Global economic integration also seeks to build confidence. If governments are confident that other countries will not raise trade barriers they will not be tempted to do the same. The three main reasons I think we should integrate global economy includes that we can handle disputes constructively, it makes life easier for all participants, and global economic integration raises incomes, generates jobs, and stimulates economic growth. There are always two viewpoints to every situation. However in this case I am focusing on the advantages of integrating the global economy. I think more good then bad can come of it.