Business and Marketing

First and second article in:
Forming Strategic Relationships -1
Forming Strategic Relationships -2

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Indeed, acquisition strategies in technology-based industries have a pretty dismal record. Schlumberger, for example, tried to acquire its way into high technology. The company, a leader in the oil-services business, wanted to gain a foothold in new technologies, so it acquired Fairchild Semiconductor, the pioneer of Silicon Valley’s semiconductor industry. But the strategy backfired. Key employees left the company and Schlumberger’s corporate culture did not translate well to Silicon Valley. Schlumberger’s desired foothold has turned into nothing more than a toehold, if that.

Exxon Corporation’s effort to enter the office-automation market through acquisition of small high-technology companies turned into a disaster.

Western Electric acquired robot maker Unimation in 1982, then saw Unimation’s sales drop sharply. And AM International’s high-technology acquisitions drove it into bankruptcy in 1982.

Clearly, acquisitions are filled with pitfalls. In many cases, large companies would be wiser to buy minority interests in small companies, or sign development contracts with them. These approaches allow the small companies to maintain their culture and entrepreneurial zeal. To better understand the growing need for strategic relationships, it is important to understand the product-development cycle in technology-based businesses. There are many steps between the scientist’s workbench and the assembly line, and no company can handle all steps.

Strategic relationships are needed to bridge the gaps.

*the end.