how firms achieve growth - ANSWERBuild: Organic growth through internal development.
Borrow: Fuel external growth through a contract / strategic alliance.
Buy: Focus on external growth through acquiring new resources, capabilities, and competencies (acquisitions)
build-borrow-or-buy framew...
SM Exam 3 Questions &
Answers(GRADED A+)
how firms achieve growth - ANSWERBuild: Organic growth through internal development.
Borrow: Fuel external growth through a contract / strategic alliance.
Buy: Focus on external growth through acquiring new resources, capabilities, and competencies
(acquisitions)
build-borrow-or-buy framework - ANSWERconceptual model that aids firms in deciding whether to
pursue internal development (build), enter a contractual arrangement or strategic alliance (borrow),
or acquire new resources/capabilities/competencies (buy)
Firms that are able to learn how to select the right pathways to obtain new resources are more likely
to gain and sustain a competitive advantage
strategic gap of BBB framework - ANSWERDetermining which corp strategy option to use to respond
to a strategic challenge begins with the identification of a strategic resource gap that will impede
future growth (need to acquire new resources to grow)
-Resource gap is strategic bc closing this gap can lead to comp advantage
-Resources with the potential to lead to comp advantage cannot be simply bought on the open
market because if every firm could buy it, it wouldn't serve a comp. adv (need to VRIN)
The options to close the strategic resource gap are to build (focusing internally on developing these
resources if our current resources are applicable/comparable) or we can move into options of
borrowing resources (using strategic alliances), or buying (acquiring a firm)
-When acquiring a firm, you buy an entire "resource bundle" (not just a specific resource) which has
comp. advantage if obey VRIO
This will move us across the BBB framework and help us make those decisions on how we're going to
acquire those strategic resources
,Main issues in the BBB framework - ANSWERIn the BBB Framework, Strategic leaders must
determine the degree to which certain conditions apply (high or low) by responding to up to 4
questions before finding the best course
1. Relevancy
2. Tradability
3. Closeness
4. Integration
relevancy (main issues of BBB framework) - ANSWERHow relevant are the firm's existing internal
resources to solving the resource gap?
Internal resources are relevant if (both conditions need to be met):
1. They are similar to those the firm needs to develop and
2. They are superior to those of competitors in the targeted market
-Test can be best assessed by applying the VRIO framework
Are the firm's internal resources highly relevant?
-Often difficult for firms to accurately assess
-In the first question/test, strategic leaders are often misled because things that appear similar at
the surface are actually different deep down and they tend to focus on the known similarities rather
than the unknown differences
If we have highly relevant resources that are superior to our competitors, we may focus on a build
strategy (develop internally)
EX: NY Times was exploring moving to online news delivery, their assessment of internal resources
focused on their ability to gather and write the news. They underestimated their resource gap as it
related to managing online communities and online content --> need to think carefully before we
jump to a decision that our resources are relevant
tradability (main issue of BBB framework) - ANSWERHow tradable are the targeted resources that
may be available externally?
-Tradable: implies that a firm is able to source the resource externally through a contract that allows
for the transfer of ownership or use of the resource
,How easily available are they to purchase externally
The firm creates a contract to
-Transfer ownership of resources through partnership with an external firm
-Allow use of the relationship
Contracts support borrowing resources
-EX: Licensing and franchising, or contracts (short-term and long-term) to procure resources
If the resource is tradable, that's a sensible way to pursue having access to that resource and
borrowing it
If the resource isn't easily tradable, then the firm needs to consider either a deeper strategic alliance
through an equity alliance or a joint venture or an outright acquisition
closeness (main issue of BBB framework) - ANSWERHow close do you need to be to your external
resource partner?
How close we need to stay with that resource in order to achieve the value?
Closeness can be achieved through alliances
-Equity alliances
-Joint ventures
-Enables resource borrowing w/out having to acquire them
Borrowing resources makes sense bc mergers/acquisitions are complex, costly, and difficult to
reverse
-Used only when extreme closeness is necessary to understand and obtain its underlying knowledge
EX: Lyft, GM, and Waymo Strategic Alliance
integration (main issue of BBB framework) - ANSWERHow well can you integrate the targeted firm
should you determine to acquire the resource partner?
Moving forward onto buy side of the continuum
, Conditions for integrating the target firm:
-Internal resources have low relevancy
-The resources we need to access have low tradability
-There's a high need for closeness
Consider other options first, but if we get to this stage, we'll going to pursue an acquisition
Where we need to closely consider all the conditions associated with the firm that we're purchasing
and the resources that we're acquiring into our firm
Many examples of post integration failures abroad
Companies were purchased and that value of that asset was written down later
why Lyft entered into GM and Waymo strategic alliance - ANSWER-to strengthen their comp position
against Uber
-enter into new markets,
-hedge against uncertainty
-sustain the business
-learn new capabilities
-get access to critical complimentary assets.
Lyft was able to gain experience/expertise from GM in understanding how to manage large fleets of
vehicles and some of the self-driving tech from Waymo.
GM has upstream capabilities in manufacturing cost-competitive and reliable cars at a large scale
Lyft has downstream capabilities as the 2nd largest mobile transportation network globally, so
Waymo and GM could get a greater understanding of Lyft's vehicle transportation network that they
can leverage into more precise target advertising on Google.
result of Lyft, GM, and Waymo strategic alliance - ANSWERTogether they were able to progress
through a learning situation that required closeness
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