You are the owner of a French-Japanese fusion food truck and mobile catering company. Instead of entering into an alliance or partnership with a local restaurateur to establish a bricks-and-mortar location downtown, you decide to merge with C'est La Sushi, a regional chain of French-Japanese fusion restaurants. What are the reasons for preferring a merger to an alliance or partnership? Explain the other organizational mechanisms that are also preferable to alliances.

Question

What will be an ideal response?

Answer 1

There are circumstances in which horizontal integration via merger and acquisition are preferable to alliances and partnering. Mergers and acquisitions are especially suited for situations in which strategic alliances or partnerships do not go far enough in providing a company with access to needed resources and capabilities. Ownership ties are more permanent than partnership ties, allowing the operations of the merger or acquisition participants to be tightly integrated and creating more in-house control and autonomy. Other organizational mechanisms are also preferable to alliances. When there is limited property rights protection for valuable know-how, companies may fear being taken advantage of by opportunistic partners.