STOÀ e-PRINTS

Indice: La filiera dei prodotti del mare. Dalla produzione al consumo. Il prodotto fresco sbarcato alle criees nel 1999. Produzione totale della pesca e della acquacoltura nel 1998. Il commercio estero nel 1999. I consumi. La distribuzione all'ingrosso di prodotti ittici. La distribuzione organizzata. L'industria della trasformazione del pesce. La distribuzione alimentare in Francia

Esposito, Massimiliano

Italian

Analisi desk della filiera pesca in Francia

Indice: La produzione. Le tendenze del mercato. La distribuzion

Analisi desk della filiera pesca in Spagna

Indice: Analisi generale. Stili d'acquisto / Profilo dei consumatori in Itali

I consumi di prodotti ittici delle famiglie residenti in Italia

Indice: Analisi generale. Stili d'acquisto / Profilo dei consumatori in Spagn

I consumi di prodotti ittici delle famiglie residenti in Spagna

Persico, Pasquale

La valle delle orchidee

Indice: 1. Fattori guida. La situazione dell'offerta. L'alimentazione salutare. I cambiamenti demografici e sociali. Il consumatore sempre piu' esigente. 2. La produzione ittica. I principali risultati del 1998 nel mondo. I principali risultati del 1998 nell'Unione Europea. 3. Le tendenze del mercato. 4. Le categorie merceologiche di prodotti ittic

Il mercato europeo dei prodotti ittici

Indice: Struttura e caratteristiche dell'industria della pesca. Consumi e mercato. Outlook. La distribuzione

Analisi desk della filiera pesca in Germania

Indice: Analisi generale. Stili d'acquisto / Profilo dei consumatori in Germani

I consumi di prodotti ittici delle famiglie residenti in Germania

Indice: Introduzione. La produzione. Tendenze del mercato. La distribuzion

Analisi desk della filiera pesca in Italia

Parente, Roberto

 1
Measuring value creation in the integration process of global  
Merger & Acquisition (M&A) 
 
Prof. Roberto Parente 
 
Director Master Division 
STOA', Istituto di studi  per la direzione e la gestione aziendale 
 
 
 
The international spreading of the company's facilities represents the essential 
condition by which a competitive advantage can be exerted on most economic 
sectors. In these fields  very relevant  technical, technological, social and economic 
factors force the enterprises to define  a strategy of international expansion if they are 
keen to remain into the business. The time to start such a development is shorter and 
shorter, and the margins to correct the course are either absent or very tight. 
 
 
Aereospace companies understand the opportunity of becoming more active on the 
side of M&A, but I'm not sure that they are  aware enough of the difficulties and risks 
related to this new stage of international development. This situation is a  bit 
paradoxical in an industry, like the aereospace one, that for many aspects has been 
really global for long time, but for many other aspects are still rather local based. In 
order to understand what I mean you should focus your attention on the very peculiar 
characteristichs of the globalization process that has been in place in the industry. 
 
(Fig. 1 qui) 
 
Aereospace products are surely global, meaning by this that there are no fundamental 
differencies among the same line of products addressed to the different geographical 
regions. Market structure (at least for civil products) is quite global, I mean that every 
producer is known by the client and viceversa. Nevertheless almost every company is 
deeply embedded in its national environment, in terms of facilities location.  The role 
of Governments has been of utmost importance in determining this situation. Either 
directly or indirectly they have encouraged processes of internal aggregation, with the 
aim of creating a "national champion", discouraging transnational aggregation. 
 At the same time, national champions have been forced to establish co-operative 
relationships with foreign companies in order to share risk,  join technological skills, 
and finally sustain a growing fierce competition. As a result, few industries have ever 
experienced so rich and complex “quasi-integrated” networks of indipendent 
companies, like the aereospace industry. 
 
At the beginning of a new era in  which more integrated network will emerge on a 
global scale is very important to recognize that the kind of knoweldge exchanged 
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inside “quasi integrated” networks is usually different from the kind of knowledge 
that necessarly must flow within fully integrated network. It seems to me that here we 
have a risk: to manage new forms of integration with a managerial approach that has 
been forged in the past experiences of quasi-integration. Definining the very nature of 
knowledge exchanged in the different kinds of networks is therefore really important. 
 
(fig. 2 ) 
 
Roughly speaking we can distinguish three different kind of knowledge exchanged 
among partners: 
-Technical knowledge; 
- knowledge of the Business ; 
-Strategic knowledge. 
 
(fig. 3) 
 
Technical knowledge is exchanged in order to raise production standards. I need 
wings for my aircraft XY and these wings must be produced according to some 
functional standards. 
Business related Knowledge must be exchanged when two or more partners are 
responsible to design and produce a specific product that matches the needs of  some 
specific clients. I mean, we have decided to produce a regional aircraft together, and 
therefore we must exchange information in order to set-up a product  that couples the 
best technologies that each one of us masters. 
Strategic knowledge concerns the assesment of the potential development of its own 
technological and managerial systems. This kind of knowledge is very essential in 
order to merge different value chains with the aim of creating superior competitive 
advantages. 
The first kind of exchange usually takes place in sub-contracting relationships. 
Business related knowledge , instead, is more easily exchanged in a relationship 
organized as a Consortium. Strategic knowledge is quite impossible to exchange 
whitout a M&A  taking place. 
 
Fig. 4 
 
Incidentally, we might observe that technical knowledege if often very well 
artyculate and explicit, while Strategic knowledge is usually highly tacit. Moreover, 
the importance of local contexts is higher and higher  moving from technical 
knowledge towards strategic knowledge.   Strategic knowledge  cannot be 
"communicated" from one organization to another, to let  strategic knowledge flow 
between organizations requires significant efforts in explaining by one side and 
interpreting by the other side the meaning of that knowledge. Culture, values, and 
behaviours, either at a social level or at the organizational level might twarth these 
efforts of explaining and intepreting. 
 3
 
Having discussed various aspects of the different kinds of knowledge that flow inside 
networks, a crucial point remain on the stage. How  should we mesure the 
effectiveness of this exchange? 
 
(Fig. 5) 
 
Obviously the benefits of the knowledge exchange are more and more difficult to 
measure  if the nature of this knowledge is of a strategic kind. 
Technological know how is succesfully exchanged, for example, when certain 
functional properties of some aircraft subcomponents produced by two different 
companies meet specified requirements. 
To measure the effectiveness of  integrating business knowledge pertaining the two 
partners may be a bit more difficult, but there are reliable ratios: that is Market share 
of the product; Backlogs; Breakeven point; Time to market, etc. 
The real problem is how to judge if a strategic integration is going ahead  on the right 
way. Which kind of datas and ratios may let us understand if a global M&A is 
producing value for shareholders and more in general  for all the companies'  
stakeholders? We do must, certanly,  consider classical financial ratios (ROI, ROE, 
etc). Unfortunately financial ratios, despite being quite easy to calculate may be of 
little significance either ex ante or ex post. Ex ante projections of financial ratios, 
especially in the aereospace industry, are too much embedded in  long term  
scenarios. Viceversa, ex post measure of financial ratios could tell us very little about 
competitiveness of the company. 
At this point in time discussion could go far ahed, but I don't think  absolutely that 
financial ratios should be dismissed. They are and will remain of fundamental 
importance in order to evalute managerial action, ever in the meantime of a global 
M&A. What I mean is that other kinds of ratios must be measured also, especially if 
strategic knowledge exchange is involved in the process.  Personally I think that 
research models that set up a direct linkage beetwen organizational learning level and 
value creation process are going in the right direction. 
It would be a little bit complicated here to summarize stepstones of this new 
approach. In few words: if we agree that competitive advantage are based on 
organizational resources and competencies, and that organizational resources and 
competencies can only be built through a learning process, therefore measuring the 
effectiveness of such a learning process will give us a clear idea about the creation, or 
distruction, of value as a result of strategic choices. 
 
An useful model built in order to represent and measure the process of creating 
organizational resources and competencies along the integrating process of global 
M&A may be like this: 
 
Fig. 6 
 
 4
This model shows us that organizational resources and competencies that have been 
choosen to be applied in the global merged company represent the level of energy 
available in the system at moment 0 in time (∑EI0 ). The available energy could be 
applied where and only where it was originated or it might be applied elsewhere. In 
the first case local policies continue to govern local units, in the second case global 
policies will emerge. Anyway, along the time some of these resources and 
competencies will became outdated, easily imitated by the competitors or either 
refused or misapplied by local units. This would be the level of dispersed energy by 
the system ( ∑ ED). 
At the same time new resources and competencies will emerge as a result of the 
learning by doing process and represent the energy level available in the future 
(∑EIl). 
 
Fig 7 
 
What I'm proposing here is to consider the so called  ∆EI ratio as a measure of 
creating value in the integration process of global M&A. I know that precisely 
calculating the ∆EI ratio is of paramount difficulties, but nevertheless I think we 
should try to do that. 
 
Anyway if we believe that this form of measuring value creation is appropriate or at 
least useful, what kind of managerial advice comes out from this model? The most 
important lesson is to pay grat attention on  what is the appropriate mix of globalized 
resources and competencies and localized resources and competencies. 
 
Fig 8 
 
    This recurrent dilemma doesn't admit any simplistic solution. The worst way to 
solve it,  is to make it trivial, opting out for solutions which either prefer the 
extension on a large scale of the strategies, the policies and the management practices 
derived from one company,  or viceversa, prefer the maintenance of the differences 
existing in the single units. "Globalism" and "Localism", where they can be meant as 
alternatives, are quite frequent infant diseases in the process of M&A.  
The experience of successful international companies, shows instead that the secret to 
carry out worldwide M&A, is in the ability to be global and local at the same time, 
that is the ability to make the search for effectiveness on  a global scale compatible 
with the ability to give quick and effective replies to the different needs on local 
scale. That's a hard task, as  the forces which push towards global scale integration 
are often opposite to the ones which push towards flexibility and local organizational 
conditions, even having the same weight. The fascinating and complex solution that 
companies such Ericsson and ABB have given to the problem, has been deeply 
studied and branded time by time as "transnational", " hetherarchical" and 
"multifocal". The experience of  such companies and the modelling drawn up by 
consultants and researchers,  represents, however, a weak reference model for 
 5
management, because its effectiveness neither depends on a specific and easily 
repeatable strategy , nor on a particular design of the organisational structure. It 
depends, instead, on the ability to devise and realise a complex set of managing 
mechanisms and processes directed towards the coordination of  the business 
worldwide. Such managing processes and mechanisms, besides of being coherent 
with the conditions of the specific business, have to be designed starting from a 
careful analysis of the administrative heritage of the companies, which stands for the 
history, the values and the cultures that are visible in the organization.  
 
A  global company, today cannot be managed through the reproduction of 
organizational clones, transferring to them their own management culture and 
technologies. Becoming an effective global player means more and more  growing 
through the aggregation of knots, stores of specific know-how, in a network where 
interdependence is the rule and the power is shared among the different knots 
according to their distinctive competencies. 
 
It should be clear at this point that sailing in the troubled waters of global M&A 
requires clear ideas on the general goals of the company, but above all a great ability 
to drive-at-sight, searching for  our own route and passing safe among the threats met 
along the course. 
 
Fig 9 
 
It is not the time of applying a "swallow enterprise" model, using a metaphore.  That 
stands for an enterprise which draws accurate scenarios on the evolution of the 
business, and  express as one's own dogma the most proper way to solve all 
management problems. In the search for holistic solutions for international business, 
the risk is that such solution, which can appear so fascinating and valid, could turn 
into a disaster if applied in reality. The scope of the problems is global, but there is no 
global solution to the problems. In particular, there is no centre, as strong as it could 
be, which is able to impose a global solution to make differencies homogeneous, even 
when the solution can appear economically "rational" in an abstract sense.     
 
This is the time, instead, of the "beaver enterprise", that  is the time of an enterprise 
that, by pragmatism and realism, succeedes in integrating into the environment in 
which it thrives and adjusting it on its advantage, building and re-building a number 
ofmicro-systems which meet the requirements of the current conditions and of that 
micro-environment. 
From this point of view, we can state that, even though it could seem paradoxical, 
international management is the elective field for micro-organisational designing 
tecniques, more than for macro-structures theories. 
In this perspective, it would be naive to think of international management as a 
problem of more complex economic level,  compared to  the ones faced by a manager 
which operates in the domestic context. It is, above all, a social and cultural problem, 
 6
and then, it is necessary to enlarge the bundle of knowledge and the abilities of 
human resources in the company.  Human resources must be prepared, and supported 
by adequate management policies and practices, to take care of the organizational 
learning process. It has already been said that the organizational learning in a global 
M&A process implies the combination of different competencies directed towards 
complex innovation processes. An exchange of strategic knowledge if you like, 
beetwen two or more "genetically" different subjects.   A fundamental task, for 
whoever deals with human resources, is to focus this diversity, which are a heritage 
to be treasured, on common aims, without allowing these diversities to halt the 
learning process.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Even though we don't have easy prescription, it's anyway clear that we can measure 
the ability  of the management to make a model of transnational development work 
effectively, by a particular point, which is the human resources management 
methodologies. This management sector is vital in the internationalization process, in 
order to save effectiveness, efficiency, and capability to produce innovation, 
considering the strong centripetal forces which arise from a  manifold, and potentially 
diverging, focalisation of the company energies. 
 
Watching at companies internationalization processes, we can clearly pick out three 
trends: 
 
- geographical dispersion, not only of  productive capacity, but more and more 
frequently of the capacities od R&D, marketing, and some other strategic know-
how - intensive functions.  
- Growth of the inter-dipendence within the operational units which run the 
different parts of th evalue chain of the international company 
- Increase of the number of relationships and coordination mechanisms within 
parent company and the single operational units, deriving from a more articulate 
distribution of the decisional power in the interational network company. 
 
It is no longer possible, especially in sectors characterised by a high rate of 
innovation, to be competitive worldwide, counting on internal knowledge only, 
interpreted  in their double meaning:   
 
-internal resources, in the narrow sense, in the company 
 8
- internal resources, in the broadest sense, in the home country system, meant as the  
environment of technological resources and management culture in which the 
company has thriven. 
 
This second aspect gets more and more importance, nowadays. In the current era, 
where the abilities to innovate and to be flexible in organisation  are the key factors 
of success, companies which   participate in many different cultural  and 
technological environments, thanks to their international development, can draw from 
this multiple exposure condition, an extraordinary competitive advantage. 
 
In the international company, the problem of learning  arises in a temporal sense, ( 
accumulation of knowledge in the same operational unit), in a spatial sense ( 
transferring knowledge from a unit to another) and in a dynamic  sense (combination 
of different competencies directed towards complex innovation processes). It has 
been also said  that these two latter organizational learning practices imply the 
exchange with two "genetically" different subjects 
 


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